Introduction to Modern Retailers and Consumers

1. Modern Retailers
I n t r o d u c t i o n t o M o d e r n
R e t a i l e r s a n d C o n s u m e r s

2. Retail Formats
A retailer is a person or business that sells goods or
services to the public; there are many types of retail
stores.
Department Stores
Department stores house a wide variety of product
mixes, each of which is contained within a section, or
“department”, of the store. Products might include
hardware, clothing, appliances, and so on.

3. Chain Stores
Chain stores buy a wide variety of merchandise in large
quantities at discounted prices. These discounts lower
their costs and can therefore set lower prices.
Franchises
Franchises allow for individuals or groups to carry out
specific activities as agents for a company’s products.
Franchises are common with restaurants and car
dealerships, such as McDonald’s, Costa, or Ford.

4. Discount Houses
Discount houses are stores that emphasize price over
all else. Merchandise tends to be highly assorted and
highly limited.
Non-Store Retailing
Non-store retailing includes non-traditional retail
stores, such as life insurance, vending machines, or
online retailers.

5. Warehouse Style
Becoming more common are “warehouse-style retail
stores”, The stores tend to have high ceilings and tall
racks that store both ready for sale items and
inventory.
Second-Hand
Second-hand stores retail used goods at deeply
discounted prices.
As seen by websites like eBay, second-hand retail is
not limited to brick-and-mortar stores.

6. The Future of Retail
Formerly, the only way for consumers to buy products was
through a store-based retailer. With the emergence of the
internet, consumers can often go directly to the source.
This change has required traditional retailers to rethink
their business models. This transformation has resulted in
several archetypes that can be operated either by
traditional retailers or by online operators.
Namely these archetypes are: lowest cost, convenience-
location, convenience-pre selection, and platform operator.

7. Lowest Cost
The lowest cost archetype is made up of four features: accurate
forecasting, perfect integration of online and offline channels, small
stores, and lean, scaled-up operations. This archetype appeals to
customers that are on tight budgets and are keen for a bargain.
Demand forecasting refers to forecasting customer demands to drive
operations. Better forecasting could involve:
Coordinating staffing levels with customer traffic
Cutting back on waste of fresh food products and shrinkage
(shrinkage refers to the percent of products lost between the
manufacturer and the point of sale
Reducing stock-outs
Optimizing inventory space

8. Integration of online and offline channels could include:
Pre-ordering
Offering discounts to those who order online and pick up in-
store
Self-checkout
Online payment

9. Convenience-Location
Convenience-location is an archetype that states that due to
the convenience of a store’s location, customers will be more
willing to pay more for particular goods, like snacks,
ingredients for dinner.
The success of stores that follow the convenience-location
model can be seen in small town gas stations or airports.
Stores that follow this type of model should be relatively small
with high visibility of products and fast checkouts.
These types of stores can encourage impulse purchases
through appealing storefronts, signage, and promotional
displays.

10. Convenience-Preselection
Stores that follow a convenience-preselection offer
convenience in the form of choice and promise low prices and
a high level of service. Stores that hope to follow this model
should offer limited choice but choices that are particular to
the needs of the customer.
If customers know that they can trust the store to offer
options that are good for them, they can forgo comparing the
endless options that are offered online. Prices do not need to
be the lowest, but still need to be attractive to the customer.

11. Platform Operator
While some may prefer a convenience - preselection
model as it takes away the stress of choice, a retailer
that offers many options can still do quite well online.
These websites can help customers to find the exact
item they want at a very good price.
An excellent example of a successful platform operator
model is Amazon.

12. Consumer Behavior

13. When discussing the state of retail, it is important to
investigate retail spending trends. Recent research has looked
into how and where consumers in the United States are going
to be spending money over the next 6 or 7 years. This research
reveals that disposable income spent by consumers in the U.S.
for brick-and-mortar retail stores will be $5 trillion by 2020
This proves that online retailing is going to grow and more
than double, but the relative level of money spending in stores
is still many multiples of what is spent online, even when
projected out to 2020. The fact that consumers will be
spending $5 trillion in brick-and-mortar by 2020 means that
retailers have to be prepared to accommodate shoppers and
their changing needs.

14. According to a recent report from 2014, e-commerce
accounted for only 8.3% of total retail sales. In other words,
despite the rapid growth rate of the e-commerce market, the
lion’s share of retail sales is still done within traditional brick-
and-mortar stores.
A recent survey of 1,029 consumers regarding their
perceptions and habits around retail shopping indicates that
more than 87% of respondents plan to shop in stores at least
as often as they did in 2014

15. Disposable Income for U.S. Shoppers
These projections indicate how much money U.S. shoppers are
intending to spend in 2020 compared to 2014.

16. The statistics prove that retail brick-and-mortar stores are
still very relevant. Traditional e-retailers are well aware of this
trend as they are now opening their own retail shops. E-tailers
who are known for their online dominance, such as Amazon
and Warby Parker, are opening physical stores, starting in key
markets.
Amazon has opened its first brick-and-mortar store in New
York City, as well as multiple locations in California.
The primary reason these online giants are vertically
integrating stores to the physical realm is that they
understand that the personalized part of shopping (especially
for highly personalized goods such as glasses) is very
important to consumers and the in-store experience allows for
such an opportunity.

17. The main driver for retail convergence is that purchase
behavior has changed. Consumers are now more educated and
now view the in-store experience as the final buying decision
point. When asked if they would shop at an Amazon store, 71%
of survey respondents reported they would prefer to shop in
Amazon’s physical store versus Amazon.com
Would you shop at an Amazon store?

18. Why do you prefer shopping in the store?
This preference is different for different customers, but the
most common reason is that 85% of shoppers like to “touch
and feel” products.

19. Once customers are in the store, retailers must keep in mind
that customer in-store behavior has shifted from “discovery”
to “final purchase decision.” By the time a person walks into a
store they are well versed on what they want to buy, they have
not made a final decision but they need emotional validation
for the purchase. This is why they go into the store and seek
out experts that can help them.
So this modern store behavior is really about buying much
more so than it is about shopping. For this reason, customers
today need prompt service from the right person because they,
for the most part, know what they want, they just need help
with the last steps in buying.

20. When you browse online before making a purchase, how
much do you know about what you want to buy before you go
to the store?

21. In-Store Service

22. The in-store service experience is crucial to the buyer’s path
toward purchase. In fact, surveys have found that 85% of
consumers will go to a different store if they have a poor in-
store experience.
If an item is the exact same price at four different retailers,
how will you decide where to shop?

23. Customers today need a service guarantee that they will have
prompt help from a knowledgeable employee who can provide
them with product expertise. The reason is that the customer is
coming in to buy and they are looking for final validation, for
example, maybe they are narrowing down their purchase choice
to three cameras and want to learn more about each camera’s
reputation, etc.
Fifty-one percent of survey respondents indicate that if a
knowledgeable associate helps them, they are extremely likely
to buy.
When helped by a knowledgeable associate, how likely are you
to buy?

25. Demographics

26. Who are the consumers of today? Consumers can typically be
separated by generations, namely millennials, baby boomers,
and gen x-ers. Let us take a closer look at the choices,
preferences, and buying habits of these groups.
Millenials
Defined as those born between 1980 and 2000, Millennials
will make up one-third of the population by 2020 according to
the U.S. Census. And, Millennials account for more than $1
trillion in U.S. consumer spending according to the Boston
Consulting Group.

27. Like the generations before them, Millennials make purchases
according to the retail and technology environment they are
familiar with. When it comes to retail shopping, it should come
as no surprise that Millennials prefer being able to engage
with brands through digital channels versus traditional
marketing tactics such as print advertising or in-store
promotions.
Retailers also cannot rely on the traditional “quality products
at a good deal” approach, an effective marketing component of
Baby Boomers. Instead, Millennials are forcing brand
marketing strategies to become much more digital and social
savvy and engage them over channels such as Twitter,
Facebook, Instagram, etc.

28. A survey revealed the following statistics about Millennials:
More than 92% of 25-34 year olds plan to shop in stores at least as often
in 2015 as they did in 2014.
Millennials expect more knowledge from sales associates: 74% want to
know the best value, 69% want to know the highest quality, and 62%
want to know which product are most reliable.
Of the 25-34 year olds making $100K or more, 100% will shop at least
as much, if not more, in stores this year versus last.
Millenials are also causing retailers to re-think their distribution
strategy and store locations as this demographic is drawn to non-mall,
mixed-use neighborhood lifestyle shopping areas which are being
developed according to consumer preferences..

29. In general, if the item you want is available online and in a
nearby store, do you prefer shopping in a store, online, or on
your phone? (Respondents Age 55-64)

30. If an item is the exact same price at four different retailers,
how will you decide where to shop? (Respondents Age 35-44).

31. THANK YOU
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