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Retail, One Year Later
Retail, One Year Later 1440 428 ASG

March 13; a Friday the 13th, ironically enough: That’s the day most people point to in 2020 as the moment when everything changed. Up until that day, it was business as usual, with just a few conversations surfacing from the background about a new SARS virus. And then suddenly, the pandemic enveloped us. Schools closed. Retailers put up signs indicating that they were temporarily closed. No one knew then that we would endure 12 full months of turmoil before the light at the end of the tunnel stopped looking like a freight train headed straight for us.


The Biggest Disruption to Retail

We’re always talking about innovation and technology disrupting the status quo – Uber, Netflix, and others are typified as brands that have changed the face of their industries. But the pandemic has been the biggest disruptor to retail ever. The short-term goal to survive this disruption was shoring up liquidity. Then came the realization that there was no quick fix in sight – which forced most retailers to take actions that would have otherwise taken years to implement – curbside pickup, online ordering, app development, and the employing of AR. These measures were the hardest to navigate for those brick-and-mortar retailers that hadn’t at least started building the framework for technology’s role in retail – and many of them did not survive. For a while, there was pure panic – and a lot of number crunching. And we had no one to help us. 


Lack of Representation for Retail

In Episode Four of CBUS Retail’s COVID Chronicles, we reflected on those first few days. We worked with Alvarez & Marsal and put out an invite for retail leaders to jump on a call; overnight we had 100 C-suite retail executives and even some landlords on the phone. It was then that we realized how significant of an event the pandemic really was, and what we heard on that call was that no one could pay rent and still have the cashflow they needed to try to survive. Without a strong, unified, central voice on Capitol Hill to lobby for aid, we decided to use that call to brainstorm–not just for individual retailers but for the retail ecosystem as a whole–what was essential to survive, including relief to landlords. Congress still does not place the importance it should on retail, given the impact it has on the overall US economy.


Take A Breath, but Don’t Stop

A year later, we’ve finally reached a point where we can take a breath. Vaccine rollout is going strong. More than 90 million Americans have received stimulus payments. And those payments were expanded to include all dependents, not just those under age 17. The new administration is pushing for vaccines to be available to all adults by May, and they’ve started testing vaccine safety on teens. By mid-summer, there is an expectation – maybe not for a return to “normal” – but at least for a return to in-person events and experiences.


Where Does Specialty Retail Fit in This Future?

Excitingly enough, the answer is everywhere. Not just physically, although we’ll be talking more about the need to reevaluate the future of retail location strategy. But specialty retail fits everywhere consumers are – in malls, in neighborhoods, in popups at events, in their living rooms, on their phones – everywhere. People have money, they feel safer, and they’re ready to shop. They’re tired of staring at screens; they’re tired of transactional interactions. They want to touch, feel, and experience the inside of a store again.

What we saw during the worst days of the pandemic was that retailers are tough. When things were at their worst, they figured it out. They adapted, pivoted, and quickly implemented the changes that would let them continue to take care of their customers and maintain some source of revenue. And they did it without long-term studies and budget meetings and RFPs. They just took action.

If we take anything from this pandemic, hopefully it’s the knowledge that in a time of crisis, the retail industry can act swiftly, think long-term, and take care of more than just their own bottom line. This is, to us, the greatest source of hope for the future of retail.

Redefining Retail
Redefining Retail 1440 428 ASG

I’ve been spending a lot of time these days thinking about the future of retail. And what I think about most is how much opportunity there is. How much opportunity?  Well, I’m so confident in retail and what retail means to consumers, that even in the midst of a pandemic, we have acquired and merged with one of the most respected retail design organizations.

Even as we grieve the unimaginable losses this country has endured over the last year – and I do grieve – as a business leader, I must recognize that the pandemic has also allowed us to see our world, our roles in it, and the future with new perspective. We have all been changed. And that has a significant impact on redefining retail. 


Covid-19 Forced a Reckoning

The shift in the world has been palpable. People suddenly realized that they could work from home and, despite a few Zoom mishaps, business would go on. People are spending more time with their families, more time on creative pursuits, and more time envisioning a future that embraces humanism and sustainability – and their loyalty will be to those brands that are aligned with this vision of the future. They crave something new – something different – something human. The idea that you wouldn’t know it wasn’t local is the driving force. They care if your products are sustainably and ethically sourced, if your people are paid a living wage, and if you contribute positively to their neighborhoods, towns, and regions. They want a holistic experience in which they can access those brands without regard for where or how the interaction takes place. 


Online Only Still Doesn’t Work

Before we give in to the few short-sighted analysts who point to a perfect future of online-only retail, let me just say right now – online only doesn’t work. It has not worked in the past, and it is especially clear that it won’t work in the future. Amazon and our existing infrastructure offer the best examples of pinch points in an already flawed system which causes deep strains on everything. Yet, shopping malls are still not back to normal and some question whether they ever will be. If anything, consumers are more ready than ever to get back inside the shops. But the look, feel, and delivery will all be different. And if you were on the fence about needing to provide a seamless experience to your consumers, and if you’re still in business, then you can no longer wait.


Huge Opportunity for New Brands

According to the current administration, by this summer, every adult who wants to be vaccinated will have the ability to do so. This means that we should already be knee-deep in planning for the summer, for we are going to see herd immunity, the economy, and that deep pandemic restlessness all converge on retail. There’s a lot up for grabs for new brands that can come into the existing retail landscape with a new approach – one that is wholly focused on consumers and their changing needs. And consumers have changed.


How to Reach Tomorrow’s Consumer

We’ve been talking for a long time about consumer-centric retail strategy. But what does the customer experience mean to the consumer? Technology? Good feelings? Consumers are getting screen fatigue and they’re lonely. They’re ready to shop. But their priorities have changed. They’ve discovered new needs and wants. They’ve realized what they can live without. Consumers know they can place an order from their living room at 3 a.m. and pick it up curbside at 10 a.m. But they still miss the pure tactile pleasure of walking the aisles, trying on clothing, and being cared for. At the same time, they are still hesitant about how safe it is to do any of this.


So, How Do We Redefine Retail for the Consumer?

The obvious answer is that consumers are the ones redefining retail, and we just need to listen. But I think it begins by redefining retail priorities. And this is where the combined power of ASG + Chute really shines. Not only do you need to understand how consumers are shopping more in their own neighborhoods, but you need to understand that the store you design and the holistic experience you deliver can’t be driven off the flagship store you build in NYC. You need flexible store designs that can be modified to meet the local need – sometimes bigger, sometimes smaller, and always with a local feel. And you can’t invest as much in the up-front design process. Instead, you must embrace an iterative process where you get it out there, learn, and refine.

The Landlord-Tenant Partnership to Save Retail
The Landlord-Tenant Partnership to Save Retail 1440 428 ASG

The loss of specialty retailers, such as Jos. A. Bank, J.Crew, Lord & Taylor, and Pier 1, didn’t just impact the companies themselves. The ripple effect ran through the malls in which they were tenants and indirectly impacted the other mall tenants that relied on their presence as a draw. Many tenants had anchor store requirements that allowed them to renegotiate or even cancel their leases. Unfortunately, landlords are often caught in a tough spot, between tenants who are also trying to survive and must use every leverage point they can, and mortgagers, who require a minimum level of revenue to avoid foreclosure.


Landlords and Tenants Can Work Together to Save Retail

The worst situation for all parties involved would be foreclosure. Landlords and tenants are going to need to find ways to work together. The retail real estate industry must assume a collaborative stand with tenants through these unprecedented times. That doesn’t mean just agreeing to what the tenant wants. Understanding how a tenant makes money and what they can afford to pay is incredibly important. So owners, view your tenants’ requests for assistance as opportunities to strengthen the non-financial aspects of a lease. Reduce co-tenancy requirements, shorten terms, and remove exclusives or other cumbersome items that limit a landlord’s flexibility.


Anchor Stores Need to Change

The downfall and demise of the traditional department store means that anchor stores must change. Given the focus on consumer experience, it makes sense that the anchor stores should be experiential. From hotels and restaurants to gyms and theaters, reimagining retail space is a way forward that can benefit both the landlord and the tenants.

As e-commerce continues to grow, retail investors and tenants are being forced to reconsider what consumers gain from the brick-and-mortar shopping experience. Traditionally, landlord and tenant relationships were ultimately transactional. Today, the sides are teaming up, realizing that together, they can achieve a shopping experience worthy of drawing consumers away from their smart phones and devices. – CBRE


The Future of Mall Space Can Be Exciting and Functional

Elizabeth A. Whitman takes a deep dive into what can be done with retail space in malls that is no longer being taken up by department stores. Temporary options include becoming a vaccination site or converting to warehouse space for last-mile delivery. But long-term solutions are even more exciting in the potential they offer. One mall is transforming its now-empty Sears location into a fitness center with a pool. Another has converted boutique shops into micro-apartments for single tenants. The one common element of all of the reimagined uses of the space is that it recenters the mall as the place where people congregate to live, shop, and have fun – and that’s the key.

We use phrases like ‘omnichannel’ to describe scenarios as though every consumer wants to move seamlessly across everything a retailer, for example, has to offer. However, we have to turn that idea inside out and remember that for consumers it’s all about experience, and always has been. A consumer will choose the experience they want, based on the service or goods they are buying, and then the channel. The businesses that will be rewarded with brand loyalty are those delivering great experiences in stores and online.


Where Do We Go from Here?

Two truths on which we need to remain hyper-focused have come out of this year: One, tenant representation is essential – tenants who had someone capable of navigating, renegotiating, and changing lease terms were more capable of being flexible in meeting their customers’ needs; and two, the adversarial nature of the tenant-landlord relationship needs to transform into a partnership that keeps them all in business. If these things are not achieved, then banks are going to end up owning a lot of empty malls.

A Consumer-Centric Retail Strategy
A Consumer-Centric Retail Strategy 1440 428 ASG

We’ve talked before about how the pandemic isn’t to blame for everything going on in retail. A consumer-centric retail strategy has been needed for a long while. A lot of the writing was already on the wall for those brands that were slow to embrace the ever-evolving nature of retail that is required to remain viable. The pandemic simply accelerated the tipping point for many – including department stores like Macy’s, that made the department store loser list.


The Holidays Revealed Retail Strengths and Weaknesses

Overall retail holiday sales were up by 3%, ecommerce was up 49%, according to Mastercard SpendingPulse™. However, even with the slight gain in sales over the holidays, total retail sales in department stores dropped 10%. Yet these weaknesses in department stores sales were only accelerated by – not caused by – COVID-19. Macy’s is representative of dinosaur retail. Evolution was – and is – well underway.


eCommerce and In-Store Were Already Merging

A consumer-centric retail strategy requires a seamless experience. This merge was accelerated rapidly during the pandemic. Customers see ecommerce and instore retail as two sides of the same coin. Any brand that was, in the past, viewing ecommerce as a threat to in-store was forced to quickly realize how integral the two were to each other. This trend shows no signs of slowing. According to destination CRM,

In the modern retail landscape, digital is no longer a threat to the in-store shopping experience. In fact, smart retailers have come to see e-commerce as a tool to boost in-store foot traffic. This represents a new phenomenon called ROPO (research online, purchase offline), where consumers start their shopping journeys online but complete them in-store.


Stop Thinking Omnichannel and Start Thinking Consumer-Centric Retail Strategy

The wake-up call has been issued to retail. Already, those least prepared for change have not survived and more will falter. To survive in 2021 and beyond, decisions about retail strategy must be made through the lens of consumer experience. JRNI CEO John Federman said this:

We use phrases like ‘omnichannel’ to describe scenarios as though every consumer wants to move seamlessly across everything a retailer, for example, has to offer. However, we have to turn that idea inside out and remember that for consumers it’s all about experience, and always has been. A consumer will choose the experience they want, based on the service or goods they are buying, and then the channel. The businesses that will be rewarded with brand loyalty are those delivering great experiences in stores and online.


Future Expectations: It’s All About the Customer

While we’ve been preaching a customer-centric retail strategy for some time (forever), it’s becoming quite clear that 2021 will be another year of refining retail based on meeting consumer expectations. Says Stacey Widlitz for Forbes, citing Target as the successful culmination of this effort:

Consumers also adapted their behavior at an accelerated pace and will be more fluid in their transitions between online and offline in 2021 and beyond. With elevated expectations for a seamless shopping experience, consumers now demand flexible fulfillment, personalization, safety, and sustainability as the price of entry into their wallet.

It’s no longer about having the biggest inventory or the deepest sales. Consumers want to feel safe; they want flexibility about how, when, and where they shop.


The Way Forward

As consumers change, you need to relearn their needs. And as trends shift, everything – from shifts in purchasing to footprint to labor – will need to be analyzed to determine your go-forward strategy.

As the leading provider of outsourced real estate services for wholesalers and retailers, ASG is here to help you. From emerging to established brands, we help our clients optimize their real estate investments through our practices in Analytics and Strategy, Tenant Representation, Store Design and Construction, Lease Administration / Rent Accounting / Audit, and Real Estate Technology. Founded in 2002, we have worked with over 100 brands, and we’re at the forefront of redefining the future of retail in a post-pandemic world.

Reinventing Retail Post-Pandemic
Reinventing Retail Post-Pandemic 1440 428 ASG

The uncertainty of 2020 has resulted in two basic approaches to navigating the ambiguity of retail during the course of the pandemic: the “deer-in-the-headlight” approach – those retailers who panicked, froze in place, and have quietly filed for bankruptcy; and the “what if we try this” approach – those retailers who were able to nimbly adjust how and where they met their customers’ needs, even if those needs changed every week. What has been demonstrated over the past several months is that which we have always known to be true for retail – that agility is key. It’s just that now, instead of measuring business success in terms of profit and rate of growth, business survival becomes the means of determining success. Reinventing retail is the key to success – and survival.


Reinventing the Customer Experience

What happens when your livelihood and your very life are threatened, and you’re forced to live without the comforts to which you’ve become accustomed? First, you must begin to reevaluate what’s important. As time goes on, you become keenly aware of the things you miss most – and you start being willing to make the necessary accommodations (wearing masks, making appointments in advance, scheduling delivery and curbside pickups) to have the things you want. And the retailers who survive are those who are making customers feel safe and are providing them with alternatives for obtaining what they want or need. 


Reinventing the Shopping Experience

There is a significant shift from omnichannel to unified commerce – a seamless experience for your customers regardless of where or how they purchase from you. The flexibility of unified commerce allows retailers to stay as agile as possible, adjusting accordingly to our rapidly changing retail environment. What does this mean for retailers? Take a look at Chute Gerdeman’s excellent insights in the article, “Shopping Goes Automatic,” which explores how brands such as Starbucks, Nike, and even Amazon are making changes to make the shopping experience easier. 


Reinventing Brand Loyalty

Consumers may have been loyal to specific brands in the past, but the pandemic and social crises of 2020 have wiped the slate clean. Building brand loyalty comes down to two things: Do you make your customers feel safe enough that they still want your stuff, and is your brand aligned with their social and political ideologies in sufficient levels to make you worthy of their dollars? According to a study by EY, “Brands must stand for something, have a purpose, and share their expertise with consumers.”


Reinventing Engagement

Retailers are making adjustments to accommodate the ongoing pandemic, but with a vaccine on the horizon, there also needs to be preparation for the return of customers who are eager to be back in stores. Chute Gerdeman explores what that might look like in the months to come. 

The way forward begins with a strong retail strategy, in-depth analytics, and partners with their pulse on the retail industry. We’re here to help.

Post Pandemic Retail Strategies
Post Pandemic Retail Strategies 1440 428 ASG

We’ve been talking recently about department stores – specifically, the incline and change in retail that occurred as a result of department stores, as well as their original purpose. Department stores were the logical evolution of brick and mortar in the late 1800s. Before department stores, there were mom-and-pop shops. Those developed into the mercantile (think Little House on the Prairie). But as people moved out west and our economy shifted from agriculture to commodities, the department store became the mainstay – Macy’s formed in 1858, Bloomingdale’s in 1861, Sears in 1893.


What Made the Department Store more Successful?

Not only did department stores sell everything people needed to clothe themselves and furnish their homes, but they took advantage of the fact that, for the first time, consumers had disposable income. Department stores provided demos, offered lectures, and hosted entertainment events. Shopping was – get the irony here – an experience. By the 1920s, people were buying on credit, and by the 1950s, they weren’t just headed to a single department store, but instead to shopping malls that had under one roof their favorite department stores, along with a handful or more of specialty shops. Of course, the same thing that brought malls into favor – a fun way to shop at your favorite places while visiting with a few friends, dining in a restaurant, and enjoying a day out – became their downfall as malls across America and the department stores in them became homogenized duplicates. 


Can Department Stores Regain Relevancy Post-Pandemic?

As retailers head into the holiday season (i.e., right now), they will both serve as models, as well as guinea pigs, to determine whether department stores are still relevant. The New York Times predicts a pretty slim likelihood of survival for most department stores. Retail Dive is keeping a running list of those who have already filed for bankruptcy. Several other retailers were already in peril when COVID-19 hit. But when department stores reopen, they need to be ready to offer something different. 


What Are You Doing Now to Be Prepared?

What data are you collecting about your customers so that you can understand how their habits have changed? Are you noticing the shift in population centers that is happening because more people will be permanently working from home so they can live in one city and work for a company in in another city 800 miles away? How are you responding?

Just as the world experienced a sense of exhilaration when emerging from the Spanish Flu, people are going to be starving for places to go, things to do, stuff to buy, and most of all, for the experience of it all. The retail landscape and the overall economy could very well bear a resemblance to the Roaring Twenties next year or the year after. 

The question is: Will your brand be there to take part in it?

The Future of Retail Is Not Pureplay
The Future of Retail Is Not Pureplay 1440 428 ASG

Most of the people predicting pureplay and ecomm as the future of retail could not have foreseen what would really happen to the infrastructure when challenged the way it has been during the pandemic. We now realize that the future of retail is not Amazon (or Target or Walmart), and that Amazon was not the golden child everyone thought it was. They have the largest ecommerce infrastructure in the country, yet when retail closed, they had to curtail Prime shipping because they didn’t have the capacity to keep up with the demand. They were not prepared. No one was. There was no infrastructure in place to handle 100% online consumer demand. From manufacturing to the seamless delivery to consumers, every single point along the way highlighted the problem areas. There is no way everything can move to online only.  Daphne Howland deep dives into the challenges of pureplay – with or without a pandemic. 


Brick and Mortar Is the Future of Retail

If it wasn’t already clear, which it should have been, brick and mortar is the future of retail. But it cannot be the brick and mortar of the past. We need to leverage local, regional, and niche brands. We need to make malls interesting again. We need to focus on the experience. And we’re going to need to get to know customers all over again. Who are they? What do they want? Given our “new normal,” what are their new expectations and how do we help fulfill them?


Changes You’ll See Across Retail

The biggest changes are designed for health and safety compliance. The number of people allowed inside a store will be limited; there will be hand sanitizing stations and plexiglass shields at check-out counters. Many stores are completely closing fitting rooms; those who are leaving them open will quarantine unpurchased clothing that has been worn or modeled. Improved cleaning and screening standards will be essential. All department stores will remove sample makeup counters or move to a single disposable sample standard. 

Leveraging Technology

From thermal scanners to monitoring technology that manages capacity to AI that helps deliver improved customer service, the future of retail will rely more than ever on technology. A recent survey revealed that 87% of consumers “prefer to shop in stores with touchless or robust [items are identified when put in the cart, no scanning required] self-checkout.”


Consumers Have Changed

For retailers, it will be important to remember that the customer whom you knew two months ago and the customer who walks into your store when you reopen are vastly different individuals. Priorities have shifted almost overnight. What you do now – how you adjust both your in-store approach and your omnichannel experience – will be critical. You should already be working on and implementing your post-pandemic strategy. Not sure where to begin? CBUS Retail hosted a virtual roundtable in May featuring Amy McCormick, Corporate Affairs Manager for The Kroger Company. Kroger has made their entire retail blueprint available for download here.


Moving Forward

For everyone in retail – from grocers who struggled in the beginning but have adapted remarkably well, to the fashion industry, which experienced perhaps the biggest decline – the future is anything but certain. What we know:

  • From Zoom calls for work to ordering groceries online, consumers adapted very well to digital. There will continue to be a shift. This means your retail locations and your ecommerce solutions need to work together to present a seamless brand experience (yes, we’ve been telling you this for a long time; now it’s not an option).
  • This may only be the first of many coronavirus pandemic waves, especially since social distancing protocols were largely ignored for the sake of the protests. Retailers need to anticipate at least a second wave. This means better data, less reliance on just-in-time inventory, more cash reserves, and better planning.
  • You’ll need to plan how you’ll maintain social distancing, what your cleaning protocols will be, and who will be responsible for monitoring and enforcing those protocols. Customers will not frequent your business if they are not convinced that you – and they – are safe. Your locations must be meeting and exceeding minimum CDC standards. This means installing handwashing and sanitizing stations, reducing the number of occupants in your store, providing clear signage, and establishing policies to deal with everything from sick employees to what you’ll do after someone tries on clothes but doesn’t buy them.


Small Changes Won’t Be Enough to Retain Customers

For the retail industry, emerging from this pandemic may be comparable to the post-9/11 era in terms of how consumers responded to the uncharacteristic environment. When consumers finally started to recover from the shock and fear of 9/11, they sought out ways to be inspired, to forget, and to help. Post-pandemic, consumers are going to be seeking out those retailers that are committed to health, safety, and wellness – the ones that authentically commit to a higher standard and demonstrate that they are concerned more about protecting consumers and employees than making a profit. Consumers will also expect you to meet them where they are – both emotionally and physically. This means being able to provide online shopping with curbside delivery, even if you never have before. It means understanding that no matter when you reopen, people will be more sensitive about personal space and they’ll be looking for experiences that help them escape. And no matter what your brand, consumers better see you cleaning – often and efficiently.

Huge Opportunity for Wholesale Brands and DTC
Huge Opportunity for Wholesale Brands and DTC 1440 428 ASG

There are a billion or more retail dollars up for grabs for the retailers that figure out how to navigate the future of retail. But in my mind, the bigger opportunity is in the ripe pickings available for wholesalers making the leap into retail for the first time. Whatever disadvantages these players may have had prior to the pandemic have now been leveled. There is going to be a continued hesitation to step inside any store that isn’t making it clear that safety is their top priority. But similar to the period of the Roaring Twenties that occurred on the heels of the Spanish flu pandemic, people are going to be ready to do, go, spend, and experience. 


Consumer Behavior Has Changed in Surprising Ways

The disadvantage that wholesale brands have always had is that department stores have held all the customer data. For a given wholesale brand that might have been sold at Macy’s, Macy’s would retain that customer data. Macy’s would become familiar with the customers’ habits and trends; the brand, however, would know little or nothing about the end consumer. 

Well guess what? Nobody has a lock on customer data now.


Wholesale Brands Have a Level Playing Field

If you’re a wholesaler, the playing field has been leveled. You no longer need to simply operate a department store or an outlet. You don’t have to depend on the dwindling number of department stores in order to thrive. In fact, if you do, you may struggle. While virtually everyone is in the midst of redefining who their customers are, wholesale brands from Calvin Klein to Dyson have the opportunity to pivot during the transformation of retail, whether by opening their own retail stores or by creating popups to test out new markets. 


Maximize Existing Opportunities

Before wholesalers can determine the best path forward, they need to assess where they stand now. The picture likely isn’t very pretty, given the number of department store closings and bankruptcies we are seeing and will continue to see. This is also a good time to look at what wholesale competitors are doing – there’s no need to reinvent the wheel if someone has already paved the way for you. Some wholesalers may have an opportunity to partner with retailers, such as L.L. Bean. Others may find that cutting out the retailer and opening their own stores makes more sense. Take a look at what Levi’s and Nike are doing to transform where and how they meet the consumer.


Get to Know Your Customers

Consumer data is a gold mine. By understanding your customers better, you can customize what, how, and where you do business in ways you’ve never been able to before. Yes, it’s taking longer to reopen and stabilize than any of us ever predicted, but there are opportunities to be had if you’re willing to take the chance.

Consumer Packaged Goods Need a New Plan
Consumer Packaged Goods Need a New Plan 1440 428 ASG

When it comes to surviving the evolution of retail, it’s not just retail brands who are having to reinvent themselves and find new, customer-centric avenues to survive. The future of wholesale is in the same boat and so are consumer packaged goods (CPG). According to McKinsey, CPG losses over the last decade ranged from 7% (food) to 18% (household products and beverages), and disruption in the CPG market is coming from everywhere:

  • Ecommerce has leveled the playing field to a degree, allowing unknown startups to compete effectively against well-known brands.
  • Younger consumers are not as brand loyal.
  • A consumer shift toward healthier products has left some brands lagging far behind the trends.
  • Amazon.
  • Increase in local competitors.
  • Private label brands are taking a significant share of the market.

Costco introduced the Kirkland brand in 1992, 27 years ago, and that brand did $39 billion last year, whereas all the Kraft and Heinz brands did $26 or $27 billion. So here they are, a hundred years plus, tons of advertising, built into people’s habits and everything else, and now Kirkland, a private label brand, comes along and with only 750 or so outlets does 50% more business than all of Kraft-Heinz brands.
– Warren Buffet, Forbes


How Do Traditional CPG Brands Compete? D2C Is the Answer

Just as wholesalers have been discovering, many CPG brands have sensed a change in the market and are likewise making the move to direct-to-consumer models – and if they’re not, they should. Startups are agile enough that this shift is easy for them; traditional CPG brands, however, struggle to adjust to the shift. Unfortunately, those that don’t adjust will struggle more so. There are benefits to D2C for CPG brands:

  • Direct communication with their customers.
  • More control over their brand presence, instead of being at the whim of the retailer’s shelf space and competing brands.
  • More control over the price, making the brands better able to compete. 
  • Total control over brand image.
  • Deeper understanding of data about, and engagement with, their consumers.
  • New opportunities for strategic growth.


Overcoming the Challenges to D2C

It’s crucial to understand the difference in strategy and execution for digital brands, wholesale brands, and CPG brands versus traditional retailers. The strategy and approach are different for the execution of a DTC model for those not traditionally involved in retail. The biggest challenge CPG brands have to overcome is much the same as wholesale: Well-established brands often get stuck doing the same thing because that’s what they’ve always done – but they have different stakeholders to please, too. 

Most large CPG companies still have a 1980s view of private label. They are not aware of how much the industry has changed or how much it is driving and impacting retailer activity. A lot of marketers overestimate the importance of their own brands and underestimate the importance of the retailer’s brands to the retailer. Others don’t understand the private label threat well enough to take it as seriously as they should.
– Jim Wisner, former Jewel-Osco executive who runs a marketing consultancy in Libertyville, Illinois. (PPIQ)

Will private-label CPGs put big brands like Kraft Heinz and Proctor & Gamble out of business? Unlikely. But these legacy brands are having to justify slower growth, lower profits, and in some cases, product line losses to their shareholders. At the end of the day, CPG brands that don’t consider D2C may not survive.


D2C: A Roadmap to Success and Survival for Wholesale and CPG

Before a wholesale or CPG brand can shift to D2C , they must first shift their mindset. These brands have been insulated from direct contact with – and in many cases data from – the consumers who enjoy their brands. To succeed in a D2C world, that has to change. Marketing, branding, market position, and location decisions must be based on a deep understanding of the consumer and their relationship to the CPG brand. The talent shortage in the CPG industry is a big hurdle to accomplishing this.

Challenger brands and private label brands have a lot of the same appeal. Private brands provide value and a lower price with the perception of similar quality. Challenger brands may be priced higher, but they offer a tangible benefit to justify the premium. Big brands are stuck in the unenviable middle. They’re not telling their story in a compelling enough way about why shoppers should be willing to choose them.
– Timothy Campbell, senior analyst at Kantar Consulting (PPIQ)

Then, CPGs must create a relationship with the consumer. How? It starts with data. Where are your customers? Who is loyal to your brand? Why? Do you have the insight you need to open flagship stores?

D2C data is a gold mine for any business and this is even truer for the CPG industry. If you think about it, there are no other data sources within the four walls of a CPG or FMCG organization that afford the richness and ‘always on’ feedback loop to demand and supply metrics. This is a dream come true for those tasked with advanced analytics and measurement as it is the cleanest way you can stimulate and measure consumer loyalty and then develop robust data-based decision behaviors around demand sensing and forecasting.” – Vidyotham Reddi, Global Director of Advanced Analytics & Measurement at Mars Inc. (LeadsRX)

Finally, you need to use the data to make strategic decisions about your brand. Do you build out your own retail shops across the country or test pop-ups in certain high-traffic areas? Do you sever ties altogether with the retailers who carry your brands or focus on some kind of hybrid that allows your brand to remain on retail shelves even as you build your own branded stores? How do you keep your brand-loyal consumers engaged?


The Way Forward for CPG Brands

So many CPG brands have no visibility beyond the retail space they occupy. That space is quickly shrinking, especially as retailers compete with their own labels. The CPG industry needs to embrace communication, branding, and risk taking. To have the ability to understand consumers, CPG brands must learn to take calculated, educated risks to discover what works and what doesn’t, incrementally expanding into direct-to-consumer markets as they refine their testing. Pick a market. Do a test. Refine and do a bigger test. But DO something.

Outsourcing Retail Strategy and Lease Administration
Outsourcing Retail Strategy and Lease Administration 1440 428 ASG

There are 10,000 Boomers retiring every day, and they are taking an enormous amount of institutional knowledge with them. This has been most noticeable in the healthcare and insurance industries, but in the next decade, we’re going to feel it in every industry. 


The Generational Divide

Because Boomers have worked longer and are retiring later, Gen X and Millennial employees, in many cases, have not had the opportunity to rise through the ranks as quickly. As Boomers now begin to disappear at an alarming rate, they are leaving behind very inexperienced replacements who have had much less time and opportunity to enter leadership positions.  Consequently, these replacements have limited high-level work experience, creating a giant skills gap. And as these succeeding generations aren’t having kids quickly enough to create future replacements, the gap and skills shortage will continue to widen.


What does this have to do with retail?

Retailers often benefit from younger generations working in their stores. Digitally native brands inherently understand what traditional brick -and-mortar brands often fail to realize: The brand is the brand, regardless of how or where the shopper engages with the brand.  While operations and other aspects are feeling the pinch on the front end of the talent pool – on the corporate side of retail – I’m seeing this painful loss of institutional knowledge on a regular basis in lease administration – and it is a costly and painful deficit. 


Lease Administration Is a Negotiation Game that Requires Expertise and Finesse

As experienced lease administrators retire and take with them their considerable understanding of leases, settlement negotiations, and relationship building, their younger replacements simply are not armed with the information and knowledge needed to properly defend contracts and protect their companies. For example, in one instance affecting a national retail brand, the lease administrator retired. When the new administrator started, he immediately invested in a new system that included a lot of promised bells and whistles. They spent a ton of money on it – and promptly missed a kickout, costing them over $300,000. When we audited the system after taking over, 82% of their expiration dates were wrong.


The Case for Outsourcing Lease Administration

It’s not just the constant back and forth with ASC 842 updates or even lease negotiation; at the end of the day, outsourcing lease administration ensures that you have the best experts handling the second-largest expense item for many retailers. Relying on experts can help transform a game-changing expense item into a hidden profit center. ASG saved its clients $5 million last year.

ASG manages leases effectively, ultimately serving as a profit center for many of our clients. An investment made with us results in measurable savings – without the headache of arguing over every dollar saved, because we don’t charge an additional contingency fee on the recoveries we generate.  You keep every dollar. For one client last year, that amounted to $1.1 million.  We will do the heavy lifting for your implementation of ASC 842 reporting capability on our lease management platform, many times at no additional cost over the base service fee, saving you thousands in accounting consulting fees and headaches. Your experienced lease administration executives are going to retire. Now is the time to outsource that function to a highly skilled and effective organization who lives and breathes leases.

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