Articles

What the Great Wealth Transfer Means for Retail
What the Great Wealth Transfer Means for Retail 1440 428 ASG

The great wealth transfer is underway. It’s a monumental shift of financial power from the Boomer generation, who, by 2030, will all be over the age of 65, to their children and grandchildren (Millennials and Gen Z). Investopedia estimates the great wealth transfer will result in $59 trillion moving to younger generations. Others estimate that number to be more than $70 trillion. With that, it’s considered the “largest redistribution of wealth in human history.” But it’s not just about the money; it’s the combination of money and the power shift (political, social, and economic) that will follow.


Influential Events

Millennials (born 1981-1995) and Gen Z (born 1996-2009) children lived their youth and early adult lives through tumultuous times. From growing up in wartime to living through economic distress to literally coming of age in the midst of a pandemic, the experiences of these generations are significantly different from the Boomers before them. Gen X, born 1966-1980, while older, still experienced some of the same circumstances as Millennials – crushing student debt, housing inaccessibility, etc. Because these generations have not followed the typical Boomer path of going to college, getting a job, buying a house, and having a family at the same ages and stages, their role as consumers have been different from the start. With their expected inherited wealth, we need to begin mapping their trajectory as consumers to be able to meet their needs.


Frugal and Conscientious

When considering how these consumers came to age, brands will need a different approach from what they used with Boomers or Gen X. Younger generations hold a different position on money, which has changed the dynamics within Millennials and Gen Z. In both cases, they’re more frugal, more cautious with their spending, and more intentional about where and with whom they spend their money.


Millennials as Consumers

Millennials are about to have the most money they’ve ever had, but they grew up in the worst economic conditions since the Great Depression. Most Millennials don’t currently own a home, and 18% believe they will always rent. According to Investopedia, despite being the largest generation by population, only 17% of total homeowners are Millennials, and only 42% of Millennials were homeowners at age 30, compared to 48% of Gen X and 51% of Baby Boomers at the same age. This is a notable shift as brands look to consider redefined needs to support the home environments of these consumers.


Reaching the Millennial Consumer

Because of their life experiences, Millennials make spending choices that feel can feel unpredictable at times to retailers. The generation is also quite diverse – a quarter of Millennials speak a language other than English as their primary language, and more than a third are non-white. The same marketing that was so effective on Boomers will not resonate with Millennials. So how do you reach them?

Deliver a Consistent Experience. If there was ever a time to ensure a consistent brand experience between mobile and in-store, this is the generation that demands it. More than 90% of Millennials own and use smartphones; this is the OG digital native generation. They expect instant information, easy access, and consistency across channels. They value trust indicators and appreciate access to real humans. Personality, transparency, and responsiveness are key.

Engage Authentically. Whether you’re writing content for a blog, posting on social media, or advertising, be authentic. As a whole, this generation wants to know you get them, understand their needs, and contribute to improving their lives and life experiences.

Be Where They Are. The greatest opportunity for brand awareness lies within where Millennials spend their time. From binging Netflix to watching YouTube and scrolling social media the online world is a direct avenue to connect with this audience. 

Tap the Influencers. Virtually all Millennials – 97% – read reviews before making a purchasing decision. They’re more likely to trust a brand that has been recommended by another consumer – even a stranger – over trusting the brand itself. Make sure you make your reviews and recommendations are easy to find online. Even when they shop in your stores, which they love to do, they’ll look first online to see what others say about you.

Focus on Lifestyle Choices. Millennials are not moving through stages of life the same way previous generations. Attract Millennials not by focusing on where they are in life, but instead by how they identify socially or through the causes with which they identify.

Be Transparent. Millennials are paying attention, and looking for brands that show – through action – that they care about the same things they do – and they’ll pay more for it. They want to know if you support important causes, make ethical business decisions, and how you incorporate sustainable practices. 


Reaching the Gen Z Consumer

Gen Z was born into a never-ending war that turned into a never-ending pandemic. The youngest Gen Z consumers, who are now in middle school, to the oldest, who are early-career professionals, have shouldered the worst of the education experience and most of the job loss during the pandemic. Reaching them is a complex and difficult mission, as they’d rather save money than spend it. So how do you connect your brand to Gen Z?

Have Purpose Beyond Profit. CSR might be a nice-to-have with older generations; with Gen Z, it’s your lead. Your purpose needs to be something more than profit. Maybe it’s revolutionizing the way you manufacture something so that it protects the planet, or maybe you donate a portion of what you make to a worthy cause, but it’s the “why,” not the “what,” that will turn Gen Z into loyal consumers.

Foster the Entrepreneurial Spirit. Gen Z has no interest in the typical corporate structure, and they don’t believe in the kind of job security they’ve never seen. That may explain why 72% of teens want to start their own businesses. Showcase your own entrepreneurial spirit and innovation to attract them – and demonstrate your care for your employees.

Engage Authentically. Like Millennials, Gen Z has no time for canned responses or generic marketing. They want authentic engagement and interaction that feels personal. These are purposeful consumers, not accumulators.

Don’t Waste Time. Gen Z is the TikTok generation. They want small, consumable pieces of content, and that translates to marketing, too. What can you do to get their attention in 8 seconds or less? Because that’s all the time you have. According to Kantar, 83% of consumers browsing TikTok say seeing trending content has inspired them to make a purchase.

Be a Brand They Can Believe In. For Gen Z, consumption for consumption’s sake is offensive. Conservation, sustainability, and respecting privacy are extremely important. “When I think “cool” I imagine companies that do great things for customers/employees or beautiful/unusual products.” – Female, 17, UT, Urban

Emphasize Experience. Gen Z seek out meaningful and memorable experiences, not just products. They have a “you only live once” attitude in which they will prioritize fun over sacrifice.

Be Impeccable with Your Brand. Gen Z has a high standard for what they want their personal future to hold. Brands with purpose win in the long run, and we’ve seen the power of consumer resiliency.

Most brands are accustomed to equating spending to the Boomers, who currently control over 60% of the money in this country. As the great wealth transfer begins in earnest, the entire shift and mentality of the receivers will be unlike anything we are familiar with. This shift represents invaluable opportunities for companies to listen and pay attention.

Eager for more insights about retail? Check out how some retailers are Minding the Retail Gap between pandemic and high performance.

Redefining Flagship Retail
Redefining Flagship Retail 1440 428 ASG

Flagship retail stores have historically been the beacon of a brand—an iconic entity with grandiose energy. But as we continue to rethink retail in today’s ever-changing and quickly evolving environment, it presents the opportunity to reevaluate the flagship experience and our approach to store design.

If you think about the essence of a flagship store, it has meant something larger-than-life, experiential, immersive, or even exclusive. Often, we relate this to store sizes like Krispy Kreme in Times Square, Hermès in Paris, Nike in New York, or the glass cube at Apple Fifth Avenue. When you strip away the square footage, it really implies a “special experience,” either with an exclusive, localized product (The Big Apple Doughnut), personalized service, or unique offerings associated with geography. So, if we can let go of this perception of flagship relating primarily to size and connect it more to the unique experience – then we get to the heart of what flagship retail means.


From High Streets to Side Streets

Retail succeeds when it responds to consumer needs, and today’s consumers want to stay closer to home when they shop. They want to be catered to and want anything but homogeny. Gone are the days of being inside any mall in America and finding the same set of stores. Consumers want something that reflects the energy of their neighborhood.

“Consumers want and crave variety, diversity, and choice. You can maintain a national footprint and effectively leverage regional and localized design. Bringing these strategies to scale can be a differentiator for retailers who want to thrive, not just survive.”
– Carrie Barclay, President, ASG

The importance of diverging from homogenized retail is one of the key factors in retail design success today. Consumers have gained a new appreciation of home since the start of the pandemic. Similarly, when retailers begin to understand their own unique importance in the local community, they then become part of the social fabric of the community.


Embracing the Flagship Experience at Scale

Now is the time to refocus the meaning of flagship retail to symbolize a unique and localized experience for the consumer. In other words, we believe that the flagship experience shouldn’t be limited to just the launch of a design as it appears in Times Square, but it can also be a thoughtful, customized, and unique design in every neighborhood.

Your brick-and-mortar locations are not just transactional. They are valuable opportunities to connect with your customers and showcase your brand, values, and commitment. Every store design is an opportunity to provide local customers with an integrated, immersive, and unique experience with your brand.

Eager for more insights about the retail experience? Check out how some retailers are Minding the Retail Gap between pandemic and high performance.

Livestream Retail for the Win
Livestream Retail for the Win 1440 428 ASG

Bloomingdale’s hosted livestream retail events throughout the pandemic, inviting customers to join them on Zoom calls and learn about the latest footwear and fashion trends. Customers were treated to special opportunities to buy merchandise and were incentivized to do so. Post-pandemic, livestream is becoming a more viable option for brands to reach their customers – not to replace the brick-and-mortar experience but to have yet another way to connect. 

At the end of the day, your retail success relies on your ability to connect with your customers. Every channel through which you can connect to your customers is part of your overall retail footprint. Not only is livestream retail a data-rich environment that can help you learn more about your customers, but it is an opportunity to create a unique experience that will keep them connected to your brand. 


SG Deals with Physical Retail Locations – Why Talk Livestream?

ASG does bring location and design expertise to retail. But part of understanding where and how to design and locate stores means understanding all of the paths through which a brand attracts and retains customers, and how virtual experiences impact the in-store experience. So, looking at ecommerce, in-app, and livestream retail is part of having a comprehensive understanding of the entire retail footprint for a brand. As retailers redefine their relationships with their consumers, brick and mortar becomes only one piece of a larger puzzle. 

“Each brand has their interpretation of ‘community’ and what it means to them, which is why we’re seeing new ways to approach community focused experiences. Whether it’s global, digital, or hyper-local, there’s a place for everyone to feel special.” – Chute Gerdeman


What’s the Difference Between Livestream Shopping and QVC?

QVC and other TV shopping channels were precursors to livestream retail. Livestream is much more powerful, in that individual brands and retailers can directly connect with customers on a more personal level – and your customers don’t need to be in front of a TV. They can be watching videos on TikTok or scrolling through Twitter or Facebook. Purchases can be made on the spot, to be delivered or picked up. Walmart recently partnered with TikTok; Facebook and Instagram have both begun rolling out live shopping. 


How to Break into Livestream Retail

Digiday suggests beginning by connecting to influencers and micro-influencers: “To engage with audiences that want livestream shopping and social commerce as part of their consumer journey, brands are building out strategies and partnering with influencers that already have the audiences in order to widen their reach.”

Make sure you can be found by your customers where, how, and when they want to shop. Livestream is just another way to do that. Retail is going to continue changing; to connect with customers at every point on their journeys, traditional brands and retailers will need to remain flexible and willing to meet customers where they are.

Creating Memorable Customer Experiences
Creating Memorable Customer Experiences 1440 428 ASG

Everything about retail has changed, but that’s not a bad thing. The needs and wants of customers have changed dramatically since the onset of the pandemic, and that brings opportunity for retailers. Social media, SMS, chat: all of these communication tools have changed how we interact with customers and how truly connected to them we can be. However, authentic, emotional connections with your brand can only happen when you’re willing to be what you promise your brand is. How do you create a memorable customer experience, and where does ASG and Chute Gerdeman fit into the new retail paradigm?


Connecting with Customer on an Emotional Level

To connect more fully with your customer, you need to know who they are now – because they’re not the same customers you knew before the pandemic. Think about all that your customers have been through – about the life-changing times we’re living in and how your customers have re-evaluated what’s important in their lives. From leaving unfulfilling jobs to recognizing the need for repairing family connections, your customers (like the rest of us) are redefining life on their terms. You have to find a way to be a part of their story going forward, and in order to do that, you need to talk about your brand in ways that connect. 


Quit Trying to be Your Competitor

“Imitation is the sincerest form of flattery,” and while I agree that you should not reinvent the wheel when it comes to retail strategy, you do need to stay true to your brand and your brand’s mission and core beliefs. It is the only way your customers will trust you and continue to remain loyal to you. This often requires getting personal. From showcasing local artisans to seamlessly combining in-store and online experiences, you can personalize the experience for your customers. 


Redefine the Role of the Store

Consumers are buying more online, partly due to the pandemic and partly due to convenience. The pandemic accelerated the adoption of ecommerce, but we were already headed that way (read my articles from 2016-2019). We’ve now reached the point of integrated retail, where – from the customer’s point of view – there is no difference between shopping online, in the store, through social media platforms, or by clicking a button during a TV show. It’s all the same to them, so you have to meet them where they are, meet their needs, and never make it difficult for them to switch from one access point to another. 


So Where Do ASG and Chute Gerdeman Fit In?

Everything about your approach to retail is in need of analysis. You’ll be changing where you locate your stores and how you design them. You’ll need to understand and measure the impact of your ecommerce and social media sales and how that impacts where you’ll locate stores, which ones you’ll close, and which ones you’ll invest in. Most retailers will need to deliver 20-30% improvement in store productivity to compensate for channel shift. Working with ASG and Chute Gerdeman can help you make the most informed strategic decisions.  

Minding the Retail Gap
Minding the Retail Gap 1440 428 ASG

We have been talking about redefining retail for a long time, but some retailers are falling behind. In fact, the retail gap between outperformers and the rest of retail is becoming wider, according to McKinsey, and “those that wish to keep up need to speed up.” The report offers great insight into the state of the post-pandemic retail industry, including the fact that pure grocery retailers were not ready and were outpaced by Walmart, Costco, and others. What did these top 25 retailers do that we need to understand and emulate?


Cater to Consumer Needs

Some retail categories struggled, especially those selling business apparel and cosmetics, as more people worked from home and barely bothered to get dressed, let alone put on a suit. Regardless of type, retailers that achieved the most success were those that had some infrastructure already in place before the pandemic hit and were capable of shifting to meet changes in consumer demand. 

Home improvement, as a category, was dominant. But some retailers seemed prescient in their pre-pandemic strategies and had infrastructure in place that let them quickly shift to meet changing consumer needs as the pandemic wreaked havoc. Walmart, for example, had already launched their curbside pickup service and had a sophisticated ecommerce platform in place. Costco had already established both ecommerce services and two-day deliver for food in many areas. McKinsey identified 25 forward-thinking companies that accounted for 90% of retail gains. What set these retailers apart? They were able to quickly shift more of their services online without having to build the infrastructure in order to do so. 


Deliver Value

The consumer perspective was forever shifted due to the pandemic, and the retailers that thrived were those that could offer consumers value. Value, of course, means different things to different consumers, but the three shifts I’ve observed are: cost, sustainability, and social. Consumers were laid off and losing income. Consequently, they wanted to know they were getting the biggest bang for each buck. At the same time, consumers began to evaluate purpose and meaning on a more existential level, and there was a seismic shift toward sustainability. And of course, in the midst of the pandemic, we had social justice issues playing out before our eyes that caused a measurable consumer shift in choosing retailers whose values aligned with their own. 


Leverage Technology to Meet Consumers Where They Are

One of the most interesting statistics to come from the McKinsey report had to do with grocery retailers. As an industry, grocery lost one percent of their revenues, which is obscene given the fact that grocers were one of the essential industries that never had to close. During the pandemic, many people began cooking at home more and even embraced cooking as a way to pass the time. So how did grocers not explode during the pandemic?

According to McKinsey:

The shift from in-store shopping to grocery delivery – combined with consumers’ increased price-consciousness, substantially higher store-operating costs due to COVID-19 protocols, and investments to support online fulfillment – created significant pressure on margins. Uncertain longer-term growth prospects, due to meal-delivery companies eating into grocers’ revenues and platform players using food as a source of consumer engagement rather than profit, have also likely played a role in the sector’s mediocre performance.

In other words, because grocers were slow to recognize the need to invest in technology before the pandemic, they were caught facing costly infrastructure investments during the pandemic – all while other retailers were able to use food as an experience.


How to Close the Gap

Whether you’re a grocer or any other retailer who does not want to be left behind in the new retail, closing the gap will require a number of changes in strategy, not the least of which is flexibility.


Be clear in your definition of what and who you are.

Are your operational, organizational, and communication strategies aligned with your mission? Do you know what your brand stands for? Do your consumers? 


Technology

The retail environment is not done changing. And if you’re not keenly aware of the power technology plays to keep you in the game, it’s time for a very rapid education – and a significant financial investment. Everywhere your brand lives – social media, ecommerce, brick and mortar – needs to be treated as one, integrated unit. Believe me, your consumers don’t see these as separate entities.


Consumer-Centric Focus

Walmart and Amazon will not stop investing in technology and infrastructure and they will continue their attempts to peel away consumers by focusing on convenience and price. But consumers are starving for personal touches; so, find where you can make consumers feel good and be there. We know consumers will pay more for experience. Deliver it.


Re-evaluate Everything

From location strategy to brand partnerships, from the retail space you need to the neighborhoods in which you locate your stores, now is the time to re-evaluate everything. If you are struggling, get tough with your business. Where do you cut? Where do you invest? What kind of mission do you have? How are you engaging with consumers and cultivating consumer loyalty? What can you change to better meet your consumers where they need you to be?

As McKinsey suggests, “Those that act boldly to stage a strong exit from this economic crisis can maintain their edge for a decade or more.”

What are you doing to be bold?

Sustainability – The Future of Retail
Sustainability – The Future of Retail 1440 428 ASG

The June 2021 PwC Global Consumer Insights Pulse Survey of more than 8,600 consumers in 22 territories revealed that 59% are more price-oriented and 50% are more eco-friendly. Sustainability can be exemplified in many ways, but retail sits at the juxtaposition between manufacturer and consumer and has a powerful seat at the table when it comes to driving the kind of change consumers expect, making it a perfect time to be a sustainability leader. 

As consumers seek products that cause minimal environmental harm and bring about positive social impact, and as awareness of supply chain impact grows, retailers must embrace sustainability. Given their unique position in the supply chain between upstream suppliers and downstream consumers, retailers are key to a circular economy in which products at the initial end-of-life stage are returned to the supply chain for continued use. By serving as a connection between suppliers and consumers, retail initiatives can help to reduce, reuse, and recycle. –Science Direct

The problem? Less than half of all retailers have sustainability goals, and a full 35% have no supply chain sustainability goals whatsoever according to an MIT study.


Consumers Are Paying Attention

Companies are now evaluated not only by the scope and quality of its products or services, but by how it gives back and what it’s doing to make the world a better place. If your retail or e-commerce business isn’t on board, you’re all but sure to be overshadowed by environmentally conscious competitors. – Inc.com

Documentaries, like The Blue Planet have awakened consumer awareness about plastics, and climate change awareness has escalated the level of concern from consumers to the point where this is no turning back for retailers. Sustainability must be part of your business model going forward. From food to fashion, ecommerce to brick and mortar, consumers are watching you.


You Will Lose Customers If You Don’t Act

In a recent McKinsey survey, 67% of respondents say that sustainability impacts their buying decisions in fashion retail. And in a Kerry survey of more than 14,000 consumers, 49% took sustainability into consideration when buying food and drinks. 

Sustainability in retail is here to stay, but such a commitment must be more than just words on a page. A genuine commitment to the environment needs to be reflected in every part of your supply chain and the decisions you make regarding how and from where you are sourcing ingredients, who you’re hiring to make your clothing, and how you’re treating people and the environment along the way. Consumers want to see not just a goal to be carbon neutral by 2035 but the steps you’re taking to ensure you can achieve that.


Tips for Improving Sustainability in Retail

Improving sustainability requires a willingness to do business differently. You need to examine every business element, from where you’re locating your brick-and-mortar stores to green shipping options. Eradicate plastic. Reward consumers for ‘going green’ (pick-up vs. shipping; digital receipt vs. printed). Use raw materials whenever possible. Partner with recycling companies to eliminate food and product waste. And embrace the longstanding mantra to recycle, reuse, and repurpose as much as you can. 


5 Retailers Getting it Right

Consumers are looking for measurable changes. Some retailers are ahead of the game and others are starting to see the light. These retailers are delivering:

  • PriceChopper has partnered with Invafresh to prevent 20 tons of fresh food from being wasted each week.
  • Levi’s is a leader in reducing chemical and water use in products – and they’re sharing those techniques with others in the industry. (Forbes)
  • Rothy’s is a retailer designed with sustainability and equity in mind. They say business “starts by putting the planet and its people first.”
  • Tentree plants ten trees for every item purchased. “Tentree’s clothing is made from ethically sourced and sustainable materials including cork, coconut, and recycled polyester and produced in ethical factories.”  (Forbes)

True sustainability practices are not just about sourced materials but rather a dedication to an initiative that goes beyond business objectives. There’s no time to delay in establishing your sustainability objectives and taking action to achieve them.


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.

Retail Location Strategy & Consumer Connection
Retail Location Strategy & Consumer Connection 1440 428 ASG

I have talked about the importance of retailers connecting with their customers – meeting them where they are, understanding how they’ve changed, and refining what is offered to better serve them. But this idea of connection goes further. Retailers are finding new ways to engage authentically with their customers, and there is an opportunity for retailers to provide space, purpose, and reason for people to reconnect with each other. But even as retailers seek to reengage with consumers, many people are finding that – for at least a couple of reasons – reconnecting isn’t as easy as they thought it would be.


They Don’t Remember How

As areas of the world come out of the most stringent lockdowns of the pandemic, many people have been saying the same thing: they don’t remember how to relate to other people. It’s become an almost-painful joke that underscores the extreme isolation of the last year. People are struggling with figuring out how to reconnect and be with others. 


Many are Experiencing Profound Loneliness

In and among all the parents struggling to work from home while supporting their children doing online school while never having a moment of quiet, there have been even more people struggling to simply survive the loneliness of the pandemic. Self-isolating and social distancing as a family is much different than self-isolating and social distancing for someone who lives alone. 


Retail Provides Opportunities – and Excuses – to Connect Again

I think this is one of the most understated purposes of brick-and-mortar retail. Beyond ordering something online, which is a one-to-one experience rather than an immersive experience, retail becomes part of the social fabric. I believe that this affords many opportunities for retail to explore different dimensions to socialization.  Whether it’s connecting with a friend in a newly re-opened café, shopping with friends for wardrobe updates, or enjoying a mani-pedi session with a family member that you haven’t seen in six months, retail of all kinds opens doors to connecting people. And as retailers consider the consumer desire to connect, it will impact the way they locate and design their stores.

As we observed in a recent Chute Gerdeman article:

People are actively seeking out communities to find support and belonging. Consumers are finding strength in numbers, and it’s clear that it’s impacting retail. No matter how big or small, brands are re-assessing their efforts to bring a sense of community into their offering. For some it’s sparked an entirely new format strategy, while others have created outlets that bring communities together.


Retail Location Strategies that Bring Communities Together

Retailers should meet and connect with consumers where they want to be. These days, it’s more than just at a mall. A great example of the future of retail location strategy is the opening of Bloomie’s in Fairfax, Virginia, this summer. The store will be roughly 10% the size of a traditional Bloomingdale’s department store. The store will “serve as a hub for experiences, with a focus on fashion, and feature Colada Shop, a restaurant serving coffee, Caribbean-inspired small bites and cocktails into the evening.”

Rather than locating in a shopping mall, Bloomie’s will be located in the Mosaic District shopping center – a mixed-use development with retailers, apartments, offices, town homes, a grocery store, and a movie theater. 

This approach by Macy’s (owner of Bloomingdale’s and Bloomie’s) is precisely where retail location strategy and consumer-centric retail converge: in the neighborhood, in a more focused space, with the goal of giving people a place not just to shop but to gather, socialize, and connect.

The Golden Opportunity for Retail
The Golden Opportunity for Retail 1440 428 ASG

Over the last 10-12 years, DTC brands became a force to be reckoned with, as more customers turned to the convenience and cost-effectiveness of try-before-you-buy and automated subscription models. Traditional retailers and brands that were already shifting their retail strategies to compete with digitally native DTCs ramped it up during the pandemic. And consumers, seeking comfort in a time of uncertainty, sought out familiarity with the brands they already knew and loved. 


Consumer Trust in Traditional Retailers and Brands Increased During the Past Year

According to a Scalefast report, consumers ranked digitally native DTC brands as the most reliable category of retailers prior to 2020; 15 months later, traditional retailers and brands have taken a lesson from the DTC playbook, and 41% of consumers now consider traditional retailers most reliable. In fact, digitally native DTC brands are losing favor with consumers because of their inability to deliver on the consumer expectation of fast deliveries and a seamless experience.


Where Digitally Native DTC Went Wrong

Digitally native DTC brands were singularly focused on acquiring customers. As disruptors to the market, the focus was on peeling customers away from traditional retail and brands. They spent all their VC funding on ads to attract new consumers. And it worked. But along the way, the digitally native DTC market became saturated. To be heard and seen in a way that would attract a new customer required more and more money pouring into digital advertising, which drove up the cost of ads and visibility.

This was summed up nicely in an article about the fall of the DTC on Marker at the beginning of the pandemic: 

The investors bankrolling these companies are discovering one thing in common — that most of their money is going to expensive and ever-rising customer acquisition costs (CAC) via Google, Facebook, and Instagram. As one DTC investor has put it starkly before: ‘CAC is the new rent.’ And even after these startups get on the treadmill of paying digital rent, they are then finding themselves also paying actual rent. After all, the most effective billboard is an outdoor L.A. luxury mall or an expensive SoHo storefront, which can cost some $60,000 a month.


Growing a Customer Base from Scratch Is Costly and Difficult

Digitally native DTCs drove up the cost of customer acquisition without investing in any way to retain the customers they acquired, or to meet the needs they promised their customers and their VCs. DTCs were great at landing customers onto their websites to make a single purchase, but retention rates were so low that the cost of CAC became astronomical – and only grew higher due to the increasing costs of digital advertising. More and more money was required to get the same number of eyes on an ad – to the point where CAC was costing more than the LTV of each customer. In fact, that seemed to be the entire focus of some DTCs: Buy up enough media ads to divert people to the website for a quick sale with no plan for how to keep them. And for some DTCs, retention wasn’t even a solution. How often do consumers replace their mattresses or their luggage, for example?


Traditional Retailers and Brands Have Lower Customer Acquisition Costs

As the pandemic drove consumers back into the arms of recognized and cherished brands, and just as traditional retailers and brands were kicking omnichannel and integrated retail into high gear, the opportunity became clear. Adding DTC doesn’t require the same type of investment from an existing brand or retailer as it does from a digitally native DTC. And consumers don’t care where you started. A third of American consumers see no difference between digitally native DTCs and traditional retailers. All they want is to get what they want, where they want it, when they want it.


Digitally Native DTCs Are Not Sustainable without Brick-and-Mortar Locations

Digitally native DTCs are struggling, more so since the pandemic. The ones that are surviving are partnering with traditional retailers (becoming brand manufacturers or wholesalers) or are opening locations (becoming traditional retailers). This substantiates what I’ve always said: pureplay is not sustainable. Digitally native DTCs are opening retail shops and pop-ups or are getting placed on the shelves of traditional retailers. Omnichannel, or more accurately, integrated retail, is the only cost-effective business model for the long run in most cases. Retail Dive outlined the major movements in these two directions, all driven by the difficulty in acquiring new customers in an affordable way: 

Target brought in brands ranging from Casper to beauty brand Versed. Nordstrom formed partnerships with Glossier, Away, Bonobos and Kim Kardashian West’s Skims shapewear brand, among others. And Crate and Barrel launched an exclusive, limited-run collection with Parachute to sell online and in 65 of its retail stores.

Other brands opted for pop-ups or permanent locations of their own. In 2018, Casper announced plans to open 200 stores across North America, while Adore Me around the same time said it had plans to open 200 to 300 locations over the next five years. Commercial real estate firm JLL previously anticipated digitally native brands could open some 850 stores by 2023.


Why Traditional Retailers and Brands Should Consider DTC

Consumers expect to be able to find the products they want and need anywhere they happen to be shopping, whether that’s online, on their phones, in an app, or in your store. Moving into DTC only makes sense for traditional retailers, especially given the past year in which most retailers survived by already taking those first steps. A comment from Peter Smith on Retail Wire reminds us (the emphasis is mine):

What can sometimes get lost in the DTC conversation is the need for an integrated and seamless experience for the customer. They shop where and when they want – and that clearly works both online to bricks and bricks to online. So the only thing better than a great online experience is a consistent online and bricks experience. What should never get lost, however, is the significant advantage for brands executing DTC to control the brand experience for the end-consumer. It is no accident that more brands are reclaiming that right (critical to survival) in the face of indifferent end-user experiences with many bricks partners.


Benefits Beyond Brand Control

For traditional retailers and brands, there are major advantages of going direct to consumers, beyond just controlling the brands from start to finish. These benefits include:


Consumer Data

We all agree that staying in business requires delivering an exceptional customer experience every time. While having integrated retail solutions makes that more likely, knowing your customer better does, too – and DTC lets you learn things about your customers that you wouldn’t learn otherwise.


CAC and Other Cost Reductions

Controlling the entire supply chain process can allow you to achieve economic factors not otherwise available and gives you more control over the kind of service your customers get.


Personalization

Success in retail today requires a degree of personalization you can’t offer without incorporating DTC.


Customer Satisfaction

It’s a numbers game you can’t afford not to play. Eighty-four percent of consumers say they won’t go back to a brand after a bad delivery experience. Forty-two percent of Americans would purchase directly from a branded manufacturer over a third-party seller if they promised free and fast shipping.


It’s About the Customer

To achieve sustainable customer acquisition costs, traditional retailers and brands will have to adapt and restructure. DTC will help traditional retailers and brands deliver value to the customer at every touchpoint along the customer’s journey. 

The Convenience Store Playbook
The Convenience Store Playbook 1440 428 ASG

Convenience stores (C-stores) have always held space in retail, but today’s convenience store is almost nothing like its predecessors. A place that was once known for questionable hot dogs, 32-ounce cups of soda, and burned coffee is now a leader in delivering the experiences sought after by today’s consumers. 

How C-Stores Met Consumer Need During the Pandemic

Throughout the pandemic, the convenience store became a source of connection. C-stores are local; the people who work in them are often the familiar faces of neighbors. C-stores became even more important during the pandemic because of several things:

  1. They are neighborhood stores. Conveniently located, C-stores kept people from having to wander too far from home or step foot inside large, crowded supermarkets. 
  2. They carry all the basics, from hot dogs, soda, and coffee to toilet paper and other essentials.
  3. C-store chains operate with a relatively low overhead, and because they are located within neighborhoods, with their pulse on local needs, they’ve been able to quickly respond to the changing demands of their local consumers.


C-Store Success Stores

C-stores are everywhere, in every neighborhood. The design, story, and experience of the new C-store is elevating the industry and bringing dignity back to a commodity. It’s no longer just a place to shop because it’s convenient – it’s a place that consumers are choosing to go.


C-Store Success Stores

7-Eleven is transforming their locations from simple convenience stores to neighborhood experiences. Locations around the country are offering restaurant experiences with Raise the Roost® Chicken and Biscuits or Parlor Pizza restaurants. The newest location in Manassas, Virginia has both. In addition, certain 7-Eleven locations feature customized drinks, wine cellars, and a store brand called Sips + Snacks.

7-Eleven Executive Vice President and COO Chris Tanco said in a recent press release, “Today’s opportunity is in the QSR space, and we are responding by aggressively rolling out our restaurants across the country – both in Evolution Stores and beyond. Our plan is to open nearly 150 restaurants in 2021.”

7-Eleven is betting on the C-store evolution in a serious way, having just completed the purchase of 3,800 Speedway stores. 


MAPCO

MAPCO Express is one of the largest C-store chains in the United States, headquartered in Franklin, Tennessee. They turned to Chute Gerdeman and worked with them for over a year to develop a refreshing new store design that communicated not only convenience and freshness but also a modernized C-store experience. What does that look like? Free Wi-Fi, fresh food and grocery items, smoothies, bean-to-cup coffee, and a beer cave were all part of the new store design. Have a look.


Choice Market

“We’re entering an era where C-stores are a choice not just a convenient option,” explains Chute Gerdeman. Choice Market, with the help of Chute Gerdeman, designed the C-store of the future, combining grocery and restaurant services in a C-store format. At Choice Market, you can grab groceries, order meals made to order from locally sourced foods, and relax.


C-Stores: Right Place, Right Time

Being close to home gave convenience stores a leg up during the pandemic, but to remain relevant, as vaccine rates increase and more people step out of their homes, this focus on delivering customers an experience and providing higher-quality merchandise in a clean, safe, and consumer-oriented environment is what will keep them returning.

For the future of C-stores, shopping will be about accessibility, product offer, and personalization. The door is open for disruption, but a one-size-fits-all approach won’t satisfy demands. Forward-thinking strategies will help retailers gain an edge against competition and beyond traditional norms of convenience. – Chute Gerdeman

Around the world, C-store leaders are making pivotal changes to increase their relevancy, from loyalty programs to free coffee for healthcare workers.

No, It’s STILL Not a Retail Apocalypse
No, It’s STILL Not a Retail Apocalypse 1440 428 ASG

I become frustrated with the persistent notion that the sky is falling and that retail has reached its endgame. Yes, the pandemic exacerbated a situation that was largely already in progress – consumer habits were changing, some brands weren’t paying attention to shifts in consumer behavior, and everyone had too little cash and too much inventory. Not enough effort was being made on a regular basis to evaluate locations and location strategy. For those brands and retailers that had not been future proofing with scalable technology and total integration among all channels, the pandemic was even more painful. 


The Changes Forced by the Pandemic Were Already Coming

There was already competition to own the last mile in ecommerce. There was already a shift away from homogenous, flagship-driven store designs that looked the same whether you were in Santa Fe or Boise or Albany. This has all been accelerated as a result of the pandemic, but it was coming anyway. So, I disagree with all the apocalyptic naysayers who claim that retail is dead. As I did before the pandemic, I’m seeing hope for a more mindful, more strategic, and more localized retail strategy going forward. The pandemic just forced everyone’s hand. The three trends in retail that I’m watching are DTC, DEI, and Experience.

The retail industry was struggling even pre-Covid. It was homogenized, and often, clients had no clue how many stores they actually needed and where they should go and what to present. For a company to be connected strategically – it’s more iterative and flexible than ever before. – from my interview with Chute Gerdeman


DTC

There is enormous opportunity in brick and mortar – and many retailers who were solely ecommerce are now opening stores. According to Chute Gerdeman, 

Although we live in a world infatuated with digital, consumers still crave activity. An online presence can help brands establish themselves, but it’s the experience that builds relationships. 81% of Gen Z consumers state that they’d rather shop in-store than interact with brands digitally. As we brace for a world with no restrictions once again, brands are seizing the opportunity and going directly to the consumer.

The shift to DTC was already well under way when the pandemic started. That it’s more accelerated now just means that the opportunity we predicted would exist is here. And the truth is, consumers don’t care. One in three see no difference between buying from a DTC company versus a traditional retailer – a number that doubled from just a year ago. Big brands are making the transition:

  • Adidas plans for DTC to make up 50% of sales by 2025
  • Thirty-five percent of Nike’s revenue now comes from DTC sales

Accounting for 40% of its sales, Levi’s is now considered a DTC powerhouse


DEI

Consumers are paying attention, not just to whether or not your company embraces sustainability practices but also where you stand socially and civically. Diversity, equity, and inclusion – DEI – aren’t just terms for HR anymore. Consumers want their brands to demonstrate that same inclusion in an authentic way, beyond their hiring practices. Representation matters. Social justice, diversity, and inclusion are more than just buzz words. 

You can’t just rename your brand or add diverse people to your advertising images if you aren’t following through in systemic ways. Consumers are paying attention to where your brand is putting its political dollars, how you’re working in your community to improve lives, and what you stand for. And there’s no remaining above the fray and not taking a stand. Silence is a stance, too. ImpactPlus sites the 11 most effective inclusive marketing campaigns by brands – but the marketing only works when the philosophy of the company matches the message.


Experience

The future of retail is experience. Consumers are ready to shop. Thirty-three percent of consumers expect to do more in-store shopping. The fear that was keeping shoppers at home is subsiding as vaccine rates increase. But consumers will not let go of the convenience they’ve enjoyed with transactional shopping, either. If it’s a practical, repeated, or mundane item, it may always be something they order online and have delivered. So, if you’re trying to pull people into your store, what are you going to do to get them there, keep them there, and get them to spend? Here are some thoughts I have about how every retailer can do this: 

  1. Recognize that even your most loyal customers have gone through a significant, and likely permanent, change in priorities. You need to get to know them all over again. Your old data is useless. Consumers as a whole are leaning local, and they are keenly aware of not only your social impact but your efforts at safety. Make changes to your retail locations to better meet your customers’ needs – and redesign your locations to allow for more personalization, improved safety, and product showcasing. Combine that with more choice – from how to buy to how to get the product home.
  2. Shoppers do not differentiate between your app, your store, your website, or your social media platforms – and you shouldn’t either. Information about your customer’s journey, their ability to contact you regardless of platform, and your access to information about what they want and what they’ve already communicated should be transparent across every system.
  3. Listen to your customers and to your employees on the floor. They’ll often tell you what they need and how they need you to meet their needs, if you will provide them with the means to do so. From self-checkout options to personal shoppers, listen first, then act.
  4. Flexibility is key. The agility the retail industry embraced during the pandemic must continue. Needs will continue to change. Technology will continue to accelerate. Responsiveness will be critical. 

For all that’s changed, so much is still the same. Care for your customers and make sure they know that you do care. Provide quality products. Be consistent and be authentic. Meet your customers where they are. And develop a retail strategy that embraces these goals.

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