The Retail Revival
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The Retail Revival

Reimagining Business for the New Age of Consumerism

Doug Stephens

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eBook - ePub

The Retail Revival

Reimagining Business for the New Age of Consumerism

Doug Stephens

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About This Book

Traditional retail is becoming increasingly volatile and challenged as a business model. Brick-and-mortar has shifted to online, while online is shifting into pop-up storefronts. Virtual stores in subway platforms and airports are offering new levels of convenience for harried commuters. High Street and Main Street are becoming the stuff of nostalgia. The Big Box is losing ground to new models that attract consumers through their most-trusted assistant—the smartphone. What's next? What's the future for you—a retailer—who is witnessing a tsunami of change and not knowing if this means grasping ahold of new opportunity or being swept away?

The Retail Revival answers these questions by looking into the not-so-distant retail past and by looking forward into a future that will continue to redefine retail and its enormous effect on society and our economies. Massive demographic and economic shifts, as well as historic levels of technological and media disruption, are turning this once predictable industry—where "average" was king—into a sea of turbulent change, leaving consumer behavior permanently altered. Doug Stephens, internationally renowned consumer futurist, examines the key seismic shifts in the market that have even companies like Walmart and Procter & Gamble scrambling to cope, and explores the current and future trends that will completely change the way we shop.

The Retail Revival provides no-nonsense clarity on the realities of a completely new retail marketplace— realities that are driving many industry executives to despair. But the future need not be dark. Stephens offers hope and guidance for any businesses eager to capitalize on these historic shifts and thrive.

Entertaining and thought-provoking, The Retail Revival makes sense of a brave new era of consumer behavior in which everything we thought we knew about retail is being completely reimagined.

Praise for The Retail Revival

"It doesn't matter what type of retail you do—if you sell something, somewhere, you need to read Doug Stephens' The Retail Revival. Packed with powerful insights on the changing retail environment and what good retailers should be thinking about now, The Retail Revival is easy to read, well-organized and provides essential food for thought."
— Gregg Saretsky, President and CEO, WestJet

"This book captures in sharp detail the deep and unprecedented changes driving new consumer behaviors and values. More importantly, it offers clear guidance to brands and retailers seeking to adapt and evolve to meet entirely new market imperatives for success."
—John Gerzema, Author of Spend Shift and The Athena Doctrine

" The Retail Revival is a critical read for all marketing professionals who are trying to figure out what's next in retail… Doug Stephens does a great job of explaining why retail has evolved the way it has, and the book serves as an important, trusted guide to where it's headed next. "
—Joe Lampertius SVP, Shopper Marketing, Momentum Worldwide and Owner, La Spezia Flavor Market

"Doug Stephens has proven his right to the moniker 'Retail Prophet.' With careful analysis and ample examples, the author makes a compelling case for retailers to adapt, change and consequently revive their connection with consumers. Stephens presents actionable recommendations with optimism and enthusiasm—just the spoonful of sugar we need to face the necessary changes ahead."
—Kit Yarrow, Ph.D., Consumer Psychologist; Professor, Golden Gate University; Co-Author, Gen BuY: How Tweens, Teens and Twenty-Somethings are Revolutionizing Retail

"Doug Stephens doesn't just tell you why retail is in the doldrums, he tells you why retail is a major signpost for the larger troubles of our culture and provides a compelling, inspiring vision for a future of retail—and business, and society."
—Eric Garland, author of Future Inc.: How Businesses Can Anticipate and Profit from What's Next

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Part I
The End
It's Not a “Recession”!
In the Spring of 2006, I was asked to lunch by the president of a major North American paint manufacturing company. The company had done outstandingly well over the last three decades or so, selling its products through independent retail outlets across the United States and Canada. So well, in fact, that many of the dealers had become unimaginably wealthy in the process. You might be dubious that one could get rich selling house paint, but that's exactly what had happened and was still happening with a fair degree of regularity. The owners of these paint stores were buying vacation properties in exclusive 'hoods such as Palm Beach, Florida, Salt Spring Island, B.C., and Scottsdale, Arizona. It seemed that they were all making money faster than they could spend it.
It wasn't unusual for this paint manufacturer to wine and dine its dealers at some of the most exclusive resorts in North America. Dealers were offered five-star meals, Cuban cigars and the finest single-malt Scotches. It was all strangely surreal. On this particular day, the company president had selected a very nice restaurant on New York's Upper East Side. Being a Manhattanite himself, he frequented many of the best restaurants in the city. Over lunch we came to talk about one dealer in particular—a family-owned operation based in Manhattan and Long Island that had done astonishingly well. The dealer, founded in the 1800s, had a long history. What, for most of its existence, had been a grimy little New York paint operation, became a well-oiled money machine by the early 2000s. Indeed, by 2005, with only a handful of often tiny, nondescript stores, the business was closing in on $100 million in sales. Its performance was nothing short of amazing.
The paint company's president was making the point to me that this particular dealer had been especially skillful in developing its business. He pointed to several innovations that he felt had largely fueled the dealer's success: modifications to its stores, new displays and new methods of selling, etcetera. The dealer was, in the president's estimation, a retail genius. At this point I (perhaps wrongly) interjected, countering that in addition to all the sensible and well-executed steps the dealer and his staff had taken with their business, they'd also gotten extremely lucky. I offered that given the unprecedented social and economic conditions of the late twentieth century, it would, in fact, have been very difficult for the dealer not to succeed. Being located in New York, I added, only helped to amplify the dealer's gains. All this was not to say that the dealer couldn't have failed along the way—some of its competitors certainly had. However, all other things being equal, the deck was so tremendously stacked in the paint dealer's favor that, short of doing something really stupid, it couldn't lose. Its success, I maintained, was ultimately as much a product of fortunate circumstance as it was prescience or extraordinary skill.
In that instant, it was as if all the air in the room had been suddenly sucked out. The president was very obviously disturbed that I would suggest that dumb luck and not superior business savvy could be at the heart of his top retailer's outstanding success. “How could you suggest such a thing?” he asked, with a look in his eyes that said, “I hope you choke on your salad!” Clearly he took my comments as an insinuation that the last few decades in business had been some sort of cake-walk! It was as though he believed I was demeaning the business and financial achievements of an entire generation—my own included!
And he was absolutely right.
Fast-forward . . .
In September 2010, the U.S. National Bureau of Economic Research stated that the “recession,” which this august body declared officially over in June of that year, was indeed the longest on record since World War II. Although history books will record its official duration as two years, it has really been almost six years since the show began, and it's clearly not over yet. Let's put that into perspective. If you had a child who was 12 when the shit hit the fan, he or she is now just about old enough to vote. Barack Obama was an Illinois senator when Wall Street crumbled. He's now (as I write this) preparing to begin his second term as president—and still struggling to right the economic situation. Since 2009, the retail industry in particular has been on what has become a week-to-week roller-coaster ride of global economic upset, from anemic domestic consumer demand to the black hole that is the European debt crisis to clear signs that the once-unstoppable economic force of China is now indeed weakening (albeit to what are still enviable levels of growth). Every week it seems that there's a new economic, technological or social headwind pushing retail off course. The consumer economy we knew in North America has become like a patient on life support, with analysts, retailers and brands all gathered at its bedside searching for any sign of life—the blink of an eye, the twitch of a finger, anything! Monthly industry results have become as ominous as an EKG, showing a faint and erratic heartbeat, fluctuating between signs of hope and despair.
Perhaps most troubling is that many in the retail industry still appear to be holding out for a clean recovery—a point at which they can simply dust themselves off and get back to business as usual. In fact, I often hear executives commenting on their business in terms of whether it appears to be “coming back” or “not coming back.” But the question that most seem unable to answer is: Coming back to what? What are we hoping to return to? Far from projecting the future of their businesses, many of the corporate leadership teams that I speak to have yet to even fully come to an agreement on what exactly caused this disaster in the first place. It's as though they were flying along the highway enjoying the scenery, when all of a sudden they crashed into something! The problem is that they had no idea what they hit or how much damage was done; they just knew that now something was terribly wrong. And their real troubles started when, instead of pulling over to properly assess the wreckage, they just carried on, trying to get back up to speed. The trouble being, of course, that they couldn't.
“Study the past, if you would divine the future.”
The unsettling truth is that the comeback, which many are hoping for, will never happen. Just as the Spanish explorer Hernán Cortés scuttled his ships upon arriving in Mexico, we too are stuck in this strange, foreign consumer landscape. There's no going back and we'd better start learning how to deal with it. The economic, social and technological change we're experiencing now is not a mere recession but rather the beginning of something entirely new and uncharted. Call it the new normal, call it, as author Brian Solis put it, “the end of business as usual,” call it whatever you want, but know that it is not going to go away. In fact, the current economic event has only been the catalyst for other, deeper changes in consumer behavior, many of which likely would have occurred anyway, but were hastened along and significantly compounded by the economic downturn. This goes much deeper than being a recession—this is indeed, as General Electric's (GE's) Jeff Immelt said, a complete “emotional, social, economic reset.”1 It is a reset of our entire consumer economy. Perhaps the only way to fully understand this is by trying to answer a few simple questions. They are:
  • How, in less than 34 years, did a local Atlanta lumber store, called the Home Depot become a global chain of over 3,000 locations with an average store size of 100,000 square feet (in total, 300 million square feet of hardware)?
  • How did Best Buy, a Minnesota electronics retailer go from selling one million dollars' worth of goods in 1970 to over a billion in 1992, and then experience a sharp rise in sales to $16.55 billion in 2010?
  • How, in 50 short years, did Sam Walton's five-and-dime store grow to become larger than the economy of Sweden and employ more people than the entire population of Paris?
How was it exactly that these retailers and countless others experienced such unimaginable growth in such a short period of time? How did they grow so exponentially when the overall rate of economic growth in the United States since 1946 has been between 3 percent and 3.5 percent? Perhaps if we understand precisely why that happened in the first place, it will give us some insight into why it's coming to an abrupt end and why it simply can't happen again.
But first, humor me. Take a moment, close your eyes and think about your own business, regardless of what business you're in. What if I told you that I could grant you two things? For starters, I could deliver to you a steady and ever-growing stream of customers, all of whom have better earning potential than your current customers. Secondly, I could promise you that the needs and preferences of these customers would be narrow enough in breadth that you could satisfy them with a fairly tight assortment of goods and services. How would that be? Lots of new customers, all of whom want basically the same narrow selection? Of course, there isn't a business on earth that wouldn't kill for those sorts of optimal conditions. But that's the thing: if you were in retail in the 1960s, you didn't have to kill anyone. You had these exact circumstances delivered to you—by the stork!

Where Were You in '62?

In early 2012, I got a call from Advertising Age magazine. The editors were doing a special edition of the magazine commemorating the 50th anniversary of Kmart, Walmart, Kohl's and Target. It seems that each of these brands began life in 1962, and the editor wanted to know if I could contribute a piece projecting what the next 50 years might hold for them and for the big-box retail format in general.
I couldn't help being struck by the fact that four of America's most formidable discount department stores all happened to share a 1962 birth date. Was this just mere coincidence? I wondered. Of course, it was no mystery that the baby boom was a driving force behind retail growth. If these brands had had their respective starts at various points throughout the decade, it wouldn't have been a surprise at all. But they all came about in exactly the same year! I wondered what was so special about that particular year that it spawned these four behemoth retailers—one of whom (Walmart) became the world's largest. What was it exactly about 1962 that was so damn good?
To satisfy my curiosity, I began exploring the date of origin for other brands from the same era. Here's where it gets interesting. My research proceeded like the plot of a detective novel. The more I investigated, the more suspects steadily began surfacing—brands that were also tied to the same 1962 date of origin. The year, it seemed, was significant not only to department stores, but to merchants of all categories and formats. And when I expanded the search to include the period from 1961 to 1969, the list became a veritable who's who of consumer brands and chains across just about every category of goods and services imaginable, and included names from around the world! Here are only some of the more notable brands I found:
  • Arthur Treacher's Fish and Chips (1969)
  • B&Q (UK) (1969)
  • Bank of America Home Loans (1969)
  • Best Buy (1966)
  • Calvin Klein (1968)
  • Crate and Barrel (1962)
  • Frito-Lay (1961)
  • Gap (1969)
  • Home Hardware (1964)
  • Hyundai (1967)
  • JanSport (1967)
  • K-Swiss (1966)
  • K-tel (1968)
  • Lands' End (1963)
  • Limited Brands (1963)
  • Little Tikes (1969)
  • Long John Silver's (1969)
  • Mac's Convenience Stores (1962)
  • Mary Kay (1963)
  • MasterCard (1966)
  • Norwegian Cruise Line (1966)
  • Peet's Coffee & Tea (1966)
  • PepsiCo (1965)
  • Petco (1965)
  • Pier 1 Imports (1962)
  • Princess Cruises (1965)
  • Rite Aid (1962)
  • Roy Rogers Restaurants (1968)
  • Safeway (UK) (1962)
  • Sesame Street (1969)
  • Six Flags Over Texas (1961)
  • The Children's Place (1969)
  • The North Face (1966)
  • Toll Brothers (1967)
  • TOPS Markets (1962)
  • Topshop (1964)
  • Vans (1966)
  • Wendy's Old Fashioned Hamburgers (1969)
  • Woolco (1962)
  • Yves Saint Laurent (1962)
I discovered that even businesses like McDonald's, founded in the late 1940s, experienced their most astonishing growth from 1962 onward. In fact, 1963 saw the chain's inception of clown mascot Ronald McDonald, an idea credited to McDonald's owner Ray Kroc, who had purchased the company one year earlier from the McDonald brothers. You might wonder, why incorporate a clown as your mascot? And why the early 1960s connection again? As I would fin...

Table of contents

  1. Cover
  2. Title Page
  3. Copyright
  4. Dedication
  5. Acknowledgments
  6. Introduction: Revolutions and Revivals
  7. Part I: The End
  8. Part II: The Beginning
  9. About the Author
  10. Endnotes
  11. Index