Traditional retail from high end to low is struggling. That includes department stores, single brand outposts, outlets, big boxes, and malls. Spending on traditional categories like apparel is down. The proliferation of online buying options means it’s harder to figure out how bricks and mortar should work.
Observers always pay attention to changing consumer demand period to period. But beyond the seasonal and cyclical numbers, we wonder if bigger forces aren’t at work. Here are our notes on how changing consumer tastes and behavior are challenging retailers:
Handbag fatigue: Last fall, The Wall Street Journal ran an article about premium handbag and accessory sales growth slowing to 3% in 2015 versus 8% in 2014, 11% in 2013, and 16% in 2012. It wasn’t a case of economic uncertainty curtailing spending. It was a question of how many handbags do you really need? The average American woman already owned 11 handbags in 2013 and was buying two new bags a year.
Now, however, it seems enough is enough. According to the article, women are saying no to handbags and yes to travel, dining out, Broadway tickets, and services that save time or boost quality of life like lawn mowing or salon visits.
That’s exactly what Mastercard executive Sarah Quinlan has seen in spending patterns. Consumers are spending less on clothing and shopping less frequently, but spending noticeably more on leisure and experiences.
Big brands are out . . . Small and one-of-a kind is in: In the same WSJ article cited above, a Nomura analyst noted that, “The notion of having big companies dictate what you wear is no longer cool.” In other words, today’s aspiration isn’t a must-have brand – it’s cultivating individualistic style. Quinlan of Mastercard noted that consumers today value a “unique, curated, special experience.” That’s why small business sales have been outpacing total retail growth. Craft beer trumps mega-brewery. Specialty coffee trumps mainstream.
For big companies, this is a challenge. Remember how Kashi cereal faced a backlash when Kellogg bought it? And note that when Peet’s Coffee, majority-owned by JAB, bought Stumptown Coffee, it carefully emphasized how Stumptown would not change.
We already have too much stuff: The Financial Times recently wrote that the average German household owns 10,000 objects and that in the UK, 350,000 tons of used clothing go into landfills each year. As unbelievable as that sounds, it is waking up more people to the question of why we have so much stuff. This is a perfect time for the world conquest of Mari Kondo’s best-selling book about decluttering, The Life-Changing Magic of Tidying Up. Kondo tells us of clients throwing out eight garbage bags of clothing and hundreds of books, carefully curating a reduced number of possessions, and then finding renewed creative energy and joy. That’s an idea retailers will need to grapple with.
The Amazon effect: We have to mention how big online shopping is getting. According to the National Retail Federation, online buying was up 9% during the 2015 holiday season versus 3% for all holiday sales. And one analyst estimated that Amazon alone accounted for a quarter of all U.S. retail sales growth last year.
It’s not that stores don’t matter (after all, why would Amazon be considering opening hundreds of book stores now?). It’s that figuring out how to use online presence to generate in-store sales, and vice verse, is getting complicated. Keeping all that physical square footage relevant is hard, and it may just be that there’s too much store — or too much of the wrong kind of store — out there.
And finally . . . ah, millennials! Okay, the world is still trying to figure out millennials. But it’s been observed more than once that relative to previous generations, millennials don’t spend money (except on electronics), don’t buy houses, don’t buy cars, and don’t get drivers licenses. It looks like the millennial’s most prized possession is the smartphone. After all, who needs a car or the mall as long as you’re connected to your network and world 24 hours a day?