The retail market is rapidly changing. While the long view is not overly bleak, those who cannot move with the changes will be out of business.
So says marketing consultant Robin Lewis, at a recent meeting sponsored by the Retail Marketing Society Lewis publishes The Robin Report and is also the co-author with Michael Dart of Retail’s Seismic Shift. In a prior life, he was a VP at Goldman Sachs. Below are some key points Lewis made in his presentation.
The increasing global productivity, efficiency, local sourcing and 3D printing are making products more available more quickly. This is countered by no real income growth, growing income inequality, a move towards dematerialization – most of it generated by Gen Z (more about that in a moment), and lower productivity growth. In short, the system as we know it is unsustainable.
Who is Gen Z? They were born in the timeframe between the mid-90’s and mid-2000’s. They earn about 52K. They are highly fragmented in the sense that they all live together in small clusters. Of all the generations, Gen Z exhibits the lowest probability of living in a mixed generational circumstance. If you’re in New York City, just take a quick trip to Williamsburg to see what this looks like. This could be good in that they are concentrated and thus easy to reach and bad in that they are insular in thinking. According to Lewis, they are redefining value and values. They don’t spend as much and when they do spend, it’s more on travel than “things”.
More key characteristics of this group:
This is the dematerialized generation. The implication is that everything is moving towards free. What this means for companies is that they cannot discount price their way to growth. Something has got to change.
According to Lewis, this is the beginning of the end of the mass market. He talks about the move from Kraft® to craft as an example. People are looking for more personalization (the Alexa generation, goodbye Macy’s hello Nordstrom) and most big companies can’t provide that.
Furthermore, the single most important part of the value chain for this group is the last point of sales contact. It doesn’t matter who that person is or where they sit on the company food chain. It could be a salesperson or it could be an online chat contact. I have been teaching this point to classes of graduate students and entrepreneurs for several years now. Customer service is the bottom line. It’s the easiest element of a company to execute. However, most companies don’t see this as important as other factors.
In part 2, I will discuss what Lewis identified as the 7 C’s and how that affects sales and marketing in today’s new world.