ByThe specialty retail market experienced unprecedented exponential growth in 2011, driven by various factors that transformed the industry landscape. As a result, the retail market in North America looks different than it did 10 years ago. Speedier communication channels and widespread use of social media have drastically altered consumer behavior. These shifts will alter the retail industry and might lead to the extinction of brick-and-mortar stores.
Big changes are inevitable in the coming years! To survive in this dynamic specialty retail industry, retailers must act now and jump on the latest trends to sustain business operations. Before diving into suggestions and measures to consider, learning about the prevalent trends is imperative to navigate these turbulent times better.
Emerging from the aftermath of the 2008 financial crisis, consumer confidence rebounded in 2011. According to Specialty Retail Pulse, the first six months of 2011 marked a significant turning point for the specialty retail market. Kiosks, carts, and temporary stores saw a growth of 14%. Industry experts noted the influence of economic recovery and the appeal of unique product offerings on market growth.
As Jeff Dilloway, CEO of Specialty Retail Group, stated, “Consumers are more willing to indulge in unique and specialized products after the economic downturn, seeking items that provide value and differentiate themselves from the ordinary.”
With increased confidence, this sales channel saw an upward trend and started to outperform the “big box” retail segment. Therefore, the second edition of this quarterly report examined the sales trends between 2010 and 2011. The analysis focused on four key categories; apparel, cellphones/accessories, toys, and holidays.
This Specialty Retail Report shows that the apparel segment saw continuous development. Children’s apparel as a subcategory experienced an exponential increase, evident from triple-digit growth. In addition, with pop-up toys, Toys “R” Us figures also grew exponentially.
According to Patricia Norins, Publisher of Specialty Retail Report, “The specialty retail market remains in a strong growth pattern for 2011. As we head into the holiday season, sales should continue to climb despite recent economic news. Entrepreneurism is not only alive in North America —-it is contagious.”
Given the exponential growth in sales, the food segment also experienced positive changes. In 2019, the total food sales at supermarkets in the US amounted to $653 billion. This figure excludes convenience stores. Sales by the 20 largest food retailers totaled $410.4 billion this year nationally. It implies that a major chunk (65.1%) of growth came from grocery store retailers. 1990 – 2019, food retailers’ market share increased by 85.9%.
Retail trends in the food segment also experience growth. USDA Economic Research Service (ERS) created a report demonstrating food store sales and a share of food sales by retail segment and concentration. In 2019, 115,526 food stores in the US sold $717 billion of retail food and nonfood products.
Approximately 92.1% of sales were generated from grocery stores—including supermarkets and smaller grocery stores. Convenience stores excluding gasoline, amounted to 4.6%, whereas specialized food stores—including meat and seafood markets, produce markets, retail bakeries, and candy and nut stores have a 3.3% share of the total.
After the 2007-2008 Great Recession, grocery store food sales saw an upward trend. During the period of economic uncertainty, grocery retailers saw negative inflation-adjusted growth. However, the ERS report shows that the sales of grocery store foods grew in 2010. Rather than -0.19%, food sales growth averaged 1.31% per year between 2010 and 2019.
The Great Recession led to a decrease in market shares. However, after 2012, the largest retailers in the US witnessed a long-term trend of increased sales. The trends show a continued increase in sales for the top 4 retailers. On the contrary, the top 20 and top 8 retailers’ ratio dropped slightly. For the top 20 retailers, the decline was seen by 1.6%, whereas a 0.6% decline was witnessed for the top 8 retailers.
The share of food sales at supermarkets, warehouse clubs, supercenters, and other grocery stores for the top 8 and 20 retailers rose for 5 consecutive years from 2012-2017. However, the top 4 retailers have seen an increase every year since 2012.
All of these retail statistics and the latest trends will create new winners. However, with massive shifts in the industry, retailers must react to stay relevant in this dynamic market. Let’s explore the top 5 trends that will matter the most in reshaping the retail landscape.
Demographic Shifts
With fluctuations in the industry and sales, it is imperative to stay on-trend and cater to the three customer segments, which will majorly impact spending behaviors.
Each of these customer segments is unique. Therefore, retailers must incorporate customer-driven strategies for a better chance of growth. Baby boomers, Hispanic consumers, and millennials are the newest target audiences.
People between the ages of 13-30 are approximately 15% of US consumers. This group is the first tech-savvy individuals who prefer shopping online. Therefore, retailers must understand their spending habits and modify their strategies accordingly.
Personalize Interactions
Tailoring interactions and offerings based on customer preferences and behaviors is crucial.
Retailers can use data analytics and customer insights to deliver personalized recommendations, targeted promotions, and customized experiences that resonate with individual shoppers. For instance, US consumers have doubled their spending on digital newspapers.
Retailers must use sophisticated algorithms and predictive models to utilize digital media trends effectively. Moreover, target customers also base their spending habits on peer recommendations. Therefore, retailers also need to reallocate their budget to spend on influencing peer connections.
E-commerce and Evolving Consumer Behavior
The rise of e-commerce platforms played a pivotal role in driving the exponential growth of specialty retail in 2011. Over the past decade, e-commerce platforms have risen by 18% yearly.
This consumer behavior is fueled by the accelerated adoption of smartphones, allowing customers to shop online—mobile accounts for 50% of the traffic, especially for fashion retailers.
Be it personalized promotions or leveraging payment capabilities, smartphones influence every shopping stage. According to a recent McKinsey survey of digital shoppers, smartphone technology will complement the in-store experience.
Optimize Distribution Channels
Same-day delivery and free shipping for loyal customers are not inconceivable anymore. As a result, efficient supply chain and logistics management are becoming imperative to meet customer expectations.
Amazon already offers same-day delivery in some cities and one-to-two ground delivery in other cities of the US. Consequently, customers will compare the shipping speeds of different retailers.
Third-party distribution services are also evolving. eBay and Amazon are examples of companies that have made big investments in distribution infrastructure and are selling to other retailers. Consumers expect seamless procedures when it comes to delivery and returning unwanted products.
New Business Models
With increasing competition, different shopping formats are emerging. Many manufacturers are directly selling to customers, such as Apple and Nike. In addition, numerous marketplaces are created to allow individuals and entrepreneurs to sell their products to the masses.
Technology is breaking down barriers and helping new retail models to emerge. With new models, retailers do not have to worry about global competition.
Considering the trends mentioned above and including them in the marketing strategies can help retailers shine in a flood of competition.
