Emerging Trends At Retail

2007-09-20T11:09:00.000-07:00

We've Moved!

It's official! We have moved to a new website. You may now read insight from "The Sales Hunter" on our "Emerging Retail Trends" blog. Click on the link below or visit www.emergingretailtrends.com/blog. It's the same great stuff, just a new location!

Emerging Retail Trends Blog

2007-09-08T13:18:00.000-07:00

Emerging Retail Trend: In-Store Media and CBS

Yesterday, we saw the key purchase of an in-store media company by the broadcasting giant, CBS. This is just another demonstration of the growing importance of in-store media. As reported in the Wall Street Journal, Sept. 7, 2007, CBS paid $71.5 million for SignStory, which had in-store video montiors in 1,400 supermarkets.

I’ve mentioned previously the increasing importance of in-store advertising and this is just another confirmation of this trend. Mainstream news sources have been talking about how companies are running from traditional media such as network television, etc., and moving their spending to in-store activities. This is an understatement. The real problem is that there are not enough viable vehicles to absorb the movement of advertising dollars. I’m very bullish on this and I believe very strongly that in the next 5 years, we’re going to see the emergence of a number of new ”consumer-specific” advertising vehicles. I’m not sure exactly how these will appear or where, but I do know that there will be a lot of money spent developing new advertising mediums.

In the words of the vintage broadcast networks, “Stay tuned. We’ll be back shortly.”

2007-08-25T19:55:00.001-07:00

New, Bigger, Better Blog and Website....
It's coming, in just a few short weeks we'll be making the move from this blog site to a new website / blog. I'm pleased to announce www.EmergingRetailTrends.com will be our new home effective October 1, 2007.

Thanks to all of our readers / contributors and we look forward to the launch of our new site, October 1, 2007

2007-08-06T18:21:00.001-07:00

Emerging Retail Trend: The Sell-Off of Brands

Every couple of years, we go through the cycle of major companies selling off brands they deem no longer worthy of their focus. The cycle never ends, and with the amount of hedge money in the marketplace, look for some interesting moves in the next couple of months. The announcement by Unilever is just the start. I believe Kraft will sell off some brands and SaraLee will sell even more. The end result is that it will create significant opportunities for some smaller companies to pick up some brands. The downside is that these brands will come with so much debt connected to them that it will be difficult for any of them to mount anything significant in terms of a long-term marketing push.

2007-08-06T17:41:00.000-07:00

Emerging Retail Trend: The Pet Economy - Business Week Magazine

I can't pass up the opportunity to comment on the recent cover story in Business Week magazine (August 6, 2007). The headline read "The Pet Economy", with a picture of a pampered dog on the cover. The article talks about how the the pet industry has been booming and is continuing to grow. If you've been following my annual Emerging Retail Trends reports, you'll know that I first said this more than 3 years ago. I'd agree that the pet economy is showing no sign of slowing anytime soon. Thanks Business Week for commenting on what Emerging Retail Trends first reported on 3 years ago!

2007-08-04T14:42:00.001-07:00

Emerging Retail Trend: Secondary Sourcing

Several years ago, I talked about the need for companies to have secondary suppliers and sources for goods and services. With all of the supply chain issues coming out of China, the need for companies to have alternative sourcing is more important than ever. The problem with China is only the tip of the iceberg. The on-going issues with the transportation grid are only going to get worse. In the next 15 months, we will be facing potential strikes on the west coast ports and the implementation of new Homeland Security rules regarding the movement of containers. These factors are not to be taken lightly, and depending on how they all play out, could cause major disruptions even before we call into play the usual issues surrounding weather, currency valuations, energy, etc. Retailers and manufacturers alike need to be paying more than lip-service to this issue because if and when supply-chain disruptions do occur, there will be those who cannot recover from them and will ultimately be forced out of business.

2007-07-23T05:46:00.000-07:00

Emerging Retail Trend Update: Wal-Mart Discounting Strategy

Wal-Mart's announcement today of price cuts on as many as 20,000 items in a back-to-school push really shouldn't surprise anybody. They are in a tough spot and the only way out is to dive deeper with their pricing. I've talked about this on several occasions in earlier blogs (Feb. 18 and Dec. 04, 2006 to name just a couple).

Wal-Mart has to keep their real estate productive and the only proven method they have to build sales is through discounting. The vast majority of their other attempts to go upscale have backfired. For vendors, it means the ride is going to get rough. However, there is light at the end of the tunnel (although it is still probably 10 years away).

I firmly believe Wal-Mart is now in a mature state of existence in the US. In my opinion, there are only a handful of things that will save them:

Spin off Sam's
Build up Neighborhood Markets
Open a new, small deep-discount format
Begin to move away from the SuperCenter concept

If you're in the real estate end of the retail business, you are going to see major shifts in space. Hang on! It's going to be a wild ride for the next few years and, as a result, it's a great time to be part of the retail industry.

2007-07-21T15:22:00.000-07:00

Emerging Retail Trend: Decline of Television Shopping

HSN and other television-driven, shop-at-home formats are going to start rapidly declining in the next 3 years. They are already becoming very frayed around the edges. I'm basing this on the following reasons:

1. There has always been a very high return rate on their products which have served as a damper on their profits.
2. When compared to the speed at which people can shop online for anything at anytime, the format moves too slow.
3. The ability to use the Internet to seek out a lower price for something that is being shown on the television shopping channel is quickly turning these programs into nothing more than a product showcase for the manufacturer.
4. Cable capacity / competition is forcing every cable operator to increase the fees they charge their content providers. The continued upward spike in these fees is another cost that must be passed along to the consumer.

I know there has been a lot of money thrown at these formats in recent years from very smart investors like Barry Diller, but, in the end, they are going to lose out to the flexibility of the Internet.

2007-07-14T15:17:00.000-07:00

Emerging Retail Trend: 4th Quarter Prediction

Look for retail sales in the 4th quarter to be at the high end of analysts' projections in the US this year. Barring a terrorist attack, the US economy will remain quite strong despite energy and housing concerns. It appears consumers are adjusting their budgets by spending less in the casual dining category as a way to not have to modify spending in other areas.

My hot pics for items include iPhones, HD televisions (although this is the last year they will be hot), Nintendo's Wii, and games that run on the Wii system. As far as retailers go, look for Wal-Mart to do something very dramatic with Dell Computers. You can also look for Microsoft to attempt to do something major, but I predict they will fall far short in meeting expectations no matter what it is because they have been unable to connect with the consumer and deliver on what the consumer is looking for.

The trend to watch will be the percentage of holiday sales involving the Internet. I predict this will be the breakout year and we'll see the Internet become a very significant player in 4th qtr. sales.

2007-07-04T12:09:00.000-07:00

Emerging Retail Trend: Retail and Private Equity Buy-Outs

Retailers are increasingly attractive to private equity firms looking to take over companies. Blackstone and KKR are just a couple of these private equity players. The risk is that with every buyout comes the expectation of a return-on-investment (Sears and Kmart are two very good examples). This usually means cuts in labor and any other area where money can be saved, putting further strain on the retail industry as a whole. These cuts have helped the Internet become more of a destination of choice for consumers looking to buy.

This movement by private equity firms is causing more retail categories to see an increase in sales being done via the web than in a retail store. We've already seen this change in the categories of travel, financial services, and segments of consumer electronics. This creates an opportunity for the retailer who is not owned by a private equity group to emphasize the role of customer service. (Two companies that are doing this in the grocery industry are Hy-Vee and Wegman's.) For retailers, it's more important than ever to focus on training and retaining employees to use them for a competitive advantage

2007-07-01T07:13:00.000-07:00

Emerging Retail Trend: Emergence of Micro-Supply Chains

I believe we will see micro-supply chain systems emerge in the next 3 years. Let me explain.

Due to the rapid increase in zoning laws and other regulations all designed to block the building of big-box stores, retailers will be forced to adjust their business model. At the same time, big-box retailers have already invested tremendous sums of capital into warehousing and technology. The challenge is for them to be able to modify their existing systems to fit a changing marketplace. One way they will do this is by creating micro-supply chains. In the simplest terms, this will consist of smaller staging areas located just outside of a metro area where slower moving product or items unique to only select stores can be held for shipment on a frequent time schedule. European retailers have used a similar type of model for many years and with Tesco coming to the US, it will increase the awareness of this type of delivery process.

There are several implications to having this type of system. Retailers can build smaller stores and dedicate a higher percentage of their building to retail space rather than the backroom. In addition, retailers will be able to modify their distribution mix much more effectively by individual stores and be able to reduce the amount of on-shelf inventory. To make this approach work, retailers will have to invest more into technology and, in particular, "rapid-order POS systems." They will also have to be able to better control their loading dock, which will push DSD shipments into very precise 15 minute delivery windows. In addition, retailers will need to tackle the difficult task of having a staff capable of quickly re-stocking items when customers are actively in the store. For this reason, it will probably open up significant opportunities for merchandising companies to increase their portfolio of the services they offer. Finally, the development of micro-supply chains will allow retailers to further the integration of retail store and the web. Retailers will be able to more effectively offer consumers unique SKUs on the web and be able to deliver it to any store the consumer selects within a matter of hours.

A final note on this will be the role companies such as UPS and FedEx will play. Due to the advanced supply-chain systems they already have installed for many other industries, I will not be surprised to see them begin to take an active role in working with retailers to set up these types of systems.

2007-07-01T07:08:00.000-07:00

Emerging Retail Trend: Sales Tax and the Internet
In the US, federal law does not mandate the charging of local sales taxes for items bought on the web if the seller meets certain criteria. If the Democrats remain in control of Congress after next year's election, look for this to change. Democrats will see this as a loophole that needs to be closed to help states and local governments find additional revenue. Although there are a number of additional reasons as to why the tax-free era of the Internet is soon going to come to an end, the biggest one is the search for additional tax revenue.

2007-06-30T13:02:00.001-07:00

Emerging Retail Trend: Minimum Retail Pricing

The US Supreme Court issued a very interesting ruling this week that will alter the manufacturer - retailer landscape forever. Up until this ruling, a manufacturer was very limited in their control over the retail pricing of their items. This ruling changes things. Although people expect this to be used primarily by manufacturers and retailers who are in the luxury goods sector, I believe smart CPG companies like Kraft, P&G, and others will also use this ruling to help them redirect funds from trade to advertising.

During the past 10 years, we've seen a real decay in brand loyalty. Let's not kid ourselves: this has primarily been because the focus has shifted from building brand image to reducing price points. Don't go jumping on the bandwagon and blaming Wal-Mart for this. It was an issue that was emerging long before Wal-Mart became the dominant player. In reality, we have President Carter to thank for this and his misguided attempt at price controls (but that's a whole separate issue.)

With manufacturers now having the ability to establish minimum retail price points, they will now be able to launch new products with a plan that allows for a price / value relationship to be established with consumers that will sustain long-term volume. The game of deep-discounting a new item to drive trial does not do anything to attract the consumer base the product needs to sustain long-term volume. This change in the law will allow manufacturers to shift funds away from trade into other areas that will help build brand equity. I believe the big boys are going to attempt this at first and Wal-Mart and others will naturally attempt to retaliate. However, in the end, it's a good move for the US economy as a whole.

There are additional winners with this ruling. The advertising industry and the media will now have access to more funds. The providers of in-store services, including the designers and builders of displays and merchandising companies, will also benefit because the manufacturer will now be shifting funds to help build brand equity rather than price discount.

2007-06-30T12:48:00.000-07:00

Emerging Retail Trend: Big-Box Retailers Under Attack

This past week has not been a good one for the big-box retailers. The US Supreme Court has ruled that manufacturers can establish a minimum retail price. (See my earlier posting on this topic.) Now, comes word of states passing laws which will greatly impact the ability of big-box stores to be built. Up until now, the fight (with the exception of Maryland and their attempt to pass a heath care bill designed for Wal-Mart) has been almost exclusively on the local level dealing with zoning issues. The fights have been led by a wide number of groups, from unions to small business owners, to environmentalists, etc.

Now, we see a number of states beginning to pass laws or looking to pass ones that will require a retailer to undertake a rather extensive impact study to determine if the planned store should be built. This move to the statehouse means an additional level that big-box retailers will need to fight, causing it to cost more to build new stores.

When you combine the two issues of minimum pricing restrictions and new state laws, it adds more pressure to the long-term viability of the big-box stores. I've mentioned in earlier postings to look for Wal-Mart to reduce their new store construction to 100 stores a year in the future and I've been talking a lot about the need for every big-box retailer to develop alternative formats. I believe this will continue, but you will also see retailers upgrading their websites. In addition, there will be the emergence of "micro-supply chains": a new trend that I've been looking at for some time. I now believe it will come to pass with all of these recent changes. Watch for a posting on this new idea.

2007-06-29T05:14:00.000-07:00

Emerging Retail Trend: China / Product Safety / Supply-Chain

The past six months has been difficult for China's food supply-chain and it should not surprise anyone. The economic engine in China has been racing for a long time, and no one should be surprised by the safety issues they're now facing. For years, China has turned a blind eye to labor issues, environmental controls, and, of course, intellectual property rights, so the fact that they have not been paying attention to food safety is not a shock. This issue is not going to go away because it runs much deeper into the Chinese business fabric than their government will ever allow us to know.

We will see many more supply-chain disruptions in the next few years. The problem is compounded by the Chinese business mentality that believes in taking whatever shortcuts are necessary to fill an order and do it profitably. Also contributing is the level of competition within China from the rapid growth of the interior of the country. With the Summer Olympics approaching, we can expect the Chinese government to take some significant action toward solving this problem. However, I believe this will drive it further underground and make it harder to uncover as Chinese companies point the finger at each other.

In my opinion, the solution for these companies is to ensure that the supply chain has multiple sourcing levels. Although this may not be the most efficient, it doesn't matter how efficient a supply-chain model is if the consumer doesn't consider it safe.

There will be several outcomes that result from this. One is going to be further advancements in the technology used to track shipments, including RFID, which will see increased usage because of it. Another outcome is a tighter monitoring of the retail store and its inventory. The retail store has the least amount of supply chain control and, therefore, has the most to gain. I don't believe we're going to see wholesale implementation of a perfect stock rotation program at retail. However, I do believe we will see the ability of any store (working in conjunction with its suppliers) to pull a product nationally within 72 hours. A final outcome is going to be greater use of open dating and source coding on packages, with companies beginning to use it as a perceived benefit with the consumer.

2007-06-24T15:35:00.000-07:00

Emerging Retail Trend: Retail Labor and Immigration

Finding quality labor has always been a significant feat for the retail industry and now with the heated US immigration issue in the news, you can expect that retailers will expand their background review process when hiring new employees. The impact is going to be felt this fall as we move full speed into the holiday season, especially in the warehouse/distribution types of jobs. This issue is being compounded by both the increase in the US federal minimum wage and the continued push to cut inventory while moving as close to a just-in-time environment as possible. Although the final outcome is uncertain, if the US economy picks up and if the Asian supply-chain develops any type of kink in it, we will run the risk of having holiday shortages on more than just the most popular items.

2007-06-21T12:14:00.000-07:00

Emerging Retail Trend: Theft and the Retail Store

Theft has always been a problem for any retail store, especially those with more expensive goods. Theorhetically, the more traffic there is in a store, the more problems they will encounter. Therefore, success in any retail location can and does create a whole new set of issues involving shrink. One problem involves employee safety. Today's shoplifter is more prone to conduct an act of intimidation to get away. While on vacation in Mexico this week, I noticed that many of the stores not only have security guards, but they're armed and wearing bullet-proof vests. This was true across a wide range of retail channels in a wide range of demographic areas. I predict that what I'm seeing here, we will see in the US and Canada in a few short years.

This raises the concern (or opportunity, depending on how you look at it) of how to leverage the web as a retail outlet or point of ordering / distribution. By doing so, stores would only exist to allow the customer the opportunity to feel and try out the goods, but would utimately reduce their retail inventory and size. The web, then, would become the sale and distribution vehicle. It would be a mix of high-tech kiosk and security, and a high-cost, quality retail location. I'm merely sharing this as a passing thought in light of what I'm seeing in my travels. Food for thought!

2007-06-21T07:01:00.001-07:00

Emerging Retail Trend: Wal-Mart Vest and Employee Image

It's about time Wal-Mart is finally ditching the ugly blue smock / vest!

Wal-Mart is doing this for two reasons.

To help improve their image with the consumer segment they've been trying to reach with their failed clothing lines.
To help improve the caliber of employee they hire.

Without a doubt, the smock has been a huge reason for their poor image and when you put a dozen buttons and pins on the typical vest worn by the Wal-Mart greeter, it certainly gives you the impression you're walking into a flea market.

Over the years, I've known a lot of talented people who have gone to work at Target instead of Wal-Mart and one of the primary reasons they always give is the stupid vest and yellow smiley face. Wal-Mart will only grow at a rate equal to the the quality of the employees they can hire. When you're the largest private employer in the world, you have to do things differently. In Wal-Mart's case, it has been to lower their standards far too often. This is not to say that Wal-Mart doesn't have talent. On the contrary, they have some of the sharpest and most talented people in the retail industry. It takes a highly-skilled, competent person to be able to lead a typical Wal-Mart store simply because of the cross-section of employees they hire.

If Wal-Mart could improve the talent in their stores, they may attract the more upscale shopper they've been trying to go after this past year. My opinion is that they will not be successful because they will not be able to improve their hiring standards. In the long-run, the more they try to go after the upscale shopper, the more they risk alienating their core shopper base.

2007-06-03T12:07:00.001-07:00

Emerging Retail Trend: Niche Retail and the Death of Mass Retail

The retail industry is about to go through the most significant change since WWII. Since the end of that war, the retail industry has been all about creating more efficiencies by giving the consumer more of everything. We've seen things like the birth and now near-death of the enclosed mall, catalog sales exhibit the 9-lives of a cat, the evolution of category killers, and, of course, the rise and domination of mass-retailers.

We are now at the starting gate of the most profound change in retailing....the explosion of niche retailers linked to a narrow customer base through multiple mediums. Let me explain. The mass retailer such as Sears, Wal-Mart, and others are either in deep trouble or are on the verge of it. The most prominent reason is that the consumer has become so well-educated through the web and other media sources that they expect to be able to buy products that fit their particular lifestyle. The issue for the mass retailer is that there is no longer a few key lifestyle groups that comprise the majority of the population. Rather, there are now nearly as many different lifestyle groups as there are people. The result is that people only want what they believe is a product that benefits their specific lifestyle.

If you're doubting me, take a look at what's happened to the automobile industry over the last 30 years. Thirty years ago, the number-one selling automobile was probably the Chevrolet Impala and to earn the number one position, it had to sell in excess of one million units. Currently, the number one selling vehicle is a Toyota with sales far less than one million. Why? The consumer today has far more choices because of the globalization of the automobile industry and it's ability to segment its selection.

The same thing is beginning to occur with retailing in general and in the next five years, this will boom. This explosion will not only be fed by the expectations of the consumer, but also by the intermingling of shopping and entertainment in lifestyle centers. In addition, the web and the ability for companies to deliver to consumers exactly what they want no matter where they happen to live will contribute to the boom.

For investors in retail stocks, it means that they have to be careful about investing in a retailer who owns their own sites and operates on a 20-year site model. On the other hand, look for investments in retailers who are actively developing specific consumer niches. The same thing applies to real estate. The more a developer can do to attract niche retailers with smaller store sites, the better off they will be. Finally, anyone who is actively developing web-enabled and cell-phone enabled tools that help connect retailers with consumers will find themselves dealing with a significant number of opportunities.

2007-06-03T11:59:00.001-07:00

Emerging Retail Trend: Product Packaging = Upscale Potential

Upscaling a product's package has always been a sure way to increase a brand's equity. Over the past several years, I've talked about how CPG companies have been using packaging redesigns to help justify a price increase or help reposition the brand to a new audience. I'm seeing no signs that this trend ending. In fact, all signs point to this trend accelerating. This is being fed by the consumers' desire for a more niche retail shopping experience as opposed to the mass retail environment which has become the norm. This trend in changing packaging is going to open up a number of opportunities for companies at every stage of the supply chain to see significant business opportunities.

2007-06-02T12:43:00.000-07:00

Emerging Retail Trend: Wal-Mart, Real Estate, Municipal Governments

Wal-Mart's slow down in the US will result in them opening up only 100 - 125 stores per year in the US within the next couple of years. This is down from nearly 270 in the past couple of years. Along with the problems they're having with same-store sales, the impact is going to have a lot of municipal governments questioning the value of the infrastructure investments they've already made to attract a Wal-Mart. This will also mean Wal-Mart is going to have a far more difficult time in the future trying to obtain zoning permits and getting local governments to agree to road, sewer, and other infrastructure improvements. The end results are the ability for Wal-Mart to open up new stores will become far more difficult, and the cost to open each new store will increase dramatically.

Implications of all of this on the real estate community are significant. For developers, it means they need to be far more patient in expecting to develop raw land in an area where Wal-Mart is expected to build in the future. For developers who own sites around existing stores, they will be able to be more confident that Wal-Mart will stick with their present location longer than they might have in the past. (Look for Wal-Mart to become more aggressive in using their existing store sites to expand on instead of building entirely new sites.) Finally, for developers, this should serve as another indication that the retail environment is beginning to move away from massive 200,000 sq. ft. sites and the consumer is looking for smaller, niche retailers where they can park, shop, and leave quickly.

2007-06-02T12:29:00.000-07:00

Emerging Retail Trend: Wal-Mart's Declining Clout with Vendors

With Wal-Mart on the ropes in nearly every category and in ways most retailers will never experience, look for them to begin experiencing another problem they have not not had to deal with for a long-time: vendor resistance. All signs point to a large number of vendors starting to show more resistance to Wal-Mart and their bullying tactics. I'm already seeing signs of major suppliers standing up to Wal-Mart and, more importantly, Wal-Mart being far more willing to negotiate. This is a huge departure from the past five years where whatever they asked for they got. The pinnacle of their clout was when several of the leading business magazines ran articles on the number of top CEOs who had made the pilgrimage to Bentonville.

For the vendor community, this is great news. For other retailers, this is good news. For the consumer, it is bad news. The day is coming when Wal-Mart will be just another strong retailer along with Costco, Target, Best Buy and other channel / format leaders.

2007-06-02T12:05:00.000-07:00

Emerging Retail Trend: Wal-Mart...What's Next?

The announcement of Wal-Mart slowing their US expansion at their shareholders meeting is old news. Everyone in the industry already knew this was coming and most people (myself included) believe they could slow their US expansion to 100 - 125 stores per year in the next couple of years.
Wal-Mart has a host of problems that need to be dealt with. The number one priority is getting their share price up equal to their peer group and what Wall Street expects from them. To achieve this, look for Wal-Mart to do several things immediately including:

1. Scale-back their move into clothing. This has been a huge expense for them in terms of both money and resources and there are no indications the move is working to any degree. Wal-Mart will focus more on the basics (underwear, socks, etc.) with which they do well.
2. Electronics has been another big push for them. Although they've shown a little more success in this are, they have still ventured too far from their roots. They will never be in a position where they can sell complete home entertainment systems the way Best Buy can. They also do not have any chance in becoming an expert in PC repair the way Geek Squad and Best Buy have been able to. This means Wal-Mart will be focusing more in low-end electronics or what I'll call "disposable" electronics (items consumers buy, but only expect to have for 2 - 5 years at the most). Dell computers is a good example - smart move on their part.
3. Wal-Mart will continue to get out of mature departments that don't support the type of consumer they're looking for such as domestics.
4. Look for Wal-Mart to slow both their testing of major appliances and their expansion in deli and other full-service departments. In both cases, this is due to their inability to attract and retain capable employees.

2007-05-28T04:41:00.000-07:00

Emerging Retail Trend: Minimum Wage Laws in the US

With Congress now moving the minimum wage up to $7.00+ an hour over the next couple of years, look for a number of changes in the retail environment.

Here's how I see them:
1. Continued growth of self-checkouts
2. Reduction in store hours
3. Fewer retail clerks
4. Slower expansion of retail into new emerging areas

Here's an explanation of each:
1. Self-checkouts will begin to appear in retailers who, until now, had resisted installing them all for the sake of trying to provide personalized service.
2. With labor being a major part of a retailers cost structure, the minimum sales needed per hour to remain open will now force some to reduce their hours of operation.
3. Reducing the number of retail clerks has happened every time the minimum wage has been increased in year's past.
4. With the rising cost of operating a store, look for retailers to slow their expansion into new markets. This will have a significant impact on REITS and others in the retail estate / construction industry.

My conclusion: Look for publicly-traded retailers to begin to state how they will slow their new store openings and begin to focus more on increasing same store sales.

Finally, and this is a little premature to judge, but if the price of gasoline remains above $3.00 per gallon and home values continue to trend lower, we may begin to see a significant slowing in the US economy. I'm basing this on the decreasing level of disposable income from the price of gas and the decrease in consumer confidence from the decline in housing prices.

Stay tuned...more to come.

2007-03-26T11:17:00.001-07:00

Emerging Retail Trend: Consumer Electronics Sales Concerns

Circuit City and CompUSA are both have begun to close low-performing stores and reviewing their retail process to find the right solution. At the same time, Dell the creator of the on-line marketplace, is also going through some real soul-searching. We’re watching CE go through another cyclical phase.

I believe the problems Circuit City, Dell, and others are having are the same. Each one is facing different issues, but at the same time, the entire CE category has been victimized by several trends. First is the explosion of flat-screen televisions, HDTV, etc. The rise to bigger screens and a lower price has been nothing short of amazing. At the same time, the PC world has been nibbled away at by Apple. The release of Vista has not done enough to stem either of these tides, which can only mean the consumer has finally awoken to the fact that buying software when it’s first released can many times be a mistake for the novice user.

I believe the CE sales model is going through another shakedown and the result this time will be lower margins for the entire supply-chain. The upshot of this is that while margins are going to get pushed lower, the expectations of the consumer are only going to increase. I’ve been talking about this for some time now, but I can’t emphasize enough how the role of personalized service in the store and in the consumer’s home is going to determine who wins in CE industry.

Emerging Trend: Continued growth in customer service through the use of in-home services designed to install and maintain CE products.

2007-03-25T19:07:00.000-07:00

Emerging Retail Trend: Loyalty Card Data

Although loyalty cards have been around for a number of years, everyone will admit that nobody has truly found a way to mine the data for what it is really worth. The shakedown in this area is now about to happen because of the wide number of government agencies looking to establish laws around the protection of consumer data. If any of these laws pass (and I believe they will since no lawmaker would ever vote against something designed to protect the consumer), we will see changes in this sector.

Several of the laws being talked about assess significant penalties if any consumer data is inadvertently released. This means the risk to the retailer is simply going to be too big for them to continue with loyalty card programs in their current format. For many retailers, the process is run by outside firms with manufacturers and others allowed to buy and use the data for marketing purposes. If changes take place, look for retailers to dumb down their data systems by removing all names, etc., or to exit the process completely. Keep in mind, it will be much easier for companies to exit now than it was 5 years ago because of the decline in checks. The loyalty card was an out growth of the check-cashing card and now, with the use of checks on a rapid decline, these cards no longer play as critical a role.

Emerging Trend: We will see an increase in the study of market basket data and household data at the expense of loyalty card data.

2007-03-25T13:36:00.000-07:00

Emerging Retail Trend: NARMS ROI In-Store Marketing Activity Study

What is the real impact of in-store marketing activities? This question is continuously being asked by manufacturers and retailers alike. At their upcoming conference, NARMS will be releasing a comprehensive study conducted by IRI which will answer this question. (For more information on the conference, visit www.NARMS.com.)

The following questions are just a few that the study will be helping to answer.

What is the impact of spending resources making sure a shelf is set correctly?
What is the impact of spending resources on securing displays and other in-store merchandising?
Is there a payout if resources are used to get a new product on the shelf faster?
Does POP have a payout if resources are used to ensure it's in place?
What are appropriate benchmarks for each of these key areas?

One of the biggest things the study will do is provide the industry with benchmarks from which companies can establish objectives. In my 25+ years in the industry, one of the biggest failures I've seen is not setting proper objectives. They often get set for retail execution by people who are too far removed from the retail floor to be able to know what is really possible.

My objectives for sharing this with you in my blog are simple. If you have any connection to what goes on at retail, you will want to attend the NARMS Conference, April 14 - 17 in Tucson. Secondly, I would encourage everyone to attend the special presentation of the study on April 14. Those in attendance for this special session, will receive the complete study and what I will refer to as the "secret sauce recipe": presentations you'll be able to use with your customers. You might say there will be an ROI on the ROI, but only for those who attend. If you cannot make this event, then do yourself and your company a favor by sending someone else from your company to the event.

Because it's in just a few weeks, don't wait to register! Visit www.NARMS.com/ROI for instructions. The program will be delivered by myself and Steve Frenda of IRI.

2007-03-18T06:45:00.000-07:00

Emerging Retail Trend: China's Bank Rates and the Cost of Imports

Chinese officials announced that they are raising interest rates for the third time in a year. This move will strengthen the yuan in an attempt to make funds more expensive, thus slowing their economic engine by increasing costs. China's move is not unexpected and, in my opinion, this will not be the last increase.

The implication is that it will force a slight increase in the cost of some imports. The higher value of the yuan when combined with the increased cost of transportation and the ongoing struggles of west coast ports to keep up means we will see a round of price hikes. However, nobody knows what the absolute amount of any increases will be. In the short-run, it may allow some US based manufacturing firms to be able to survive a few more years.

On a different but related note, we are already expecting to see significant increases in fruit prices and other food items because of the cold February temperatures. This is on top of record corn prices due to the surge in ethanol production. When you combine all of this together, we may see increases in the CPI (Consumer Price Index) for 2007 reaching levels we have not seen in a number of years.

2007-03-17T20:04:00.000-07:00

Emerging Retail Trend: Cadbury's Impact on Wall Street

Yesterday's announcement from Cadbury that they would split themselves into two companies (candy and beverage) is a huge change of perspective from a company that had always vowed never to split. This move will certainly put them a position to be bought out.

We have not seen a rash of mergers, buy-outs, and divestitures in the CPG sector for some time (other than the normal buying and selling of smaller brands). This can only mean that the move by Cadbury could easily trigger some more shifts. Kraft has been vocal about potentially spinning off some brands and I doubt Unilever and P & G are through making moves. On the other end, we could easily see offers being made on Sara Lee and ConAgra. I don't have specific news to base any of this on, but when we look at the recent behavior on Wall Street, it can only stand to reason that we could see some changes in the next six months.

2007-03-13T15:45:00.000-07:00

Emerging Retail Trend: Dollar General and the Extreme Value Retail Channel

KKR's move to buy out Dollar General should by no means be viewed as a signal that the extreme value retail channel is in trouble. It's actually quite the opposite. I've been saying for years how this channel will continue to grow at a much higher rate than the retail industry. The move by KKR only confirms this. If they did not feel there was locked up value inside of Dollar General, they would not be doing this. Yes, they will undoubtedly close more stores and realign their product mix, but any changes they make will be more than offset by growth from Family Dollar and others.
My view is that this category will continue to grow based on the level of debt the average household is dealing with as well as the ability this category has to open stores quickly and at a lower-cost than nearly every other retail channel.

Emerging Trend Predictions: First, there will be continued growth in the EVR channel. It will face an increasing number of competitors from other retail channels. Secondly, do not expect to see any slow down in the number of retailers being bought out by private equity firms in the next two years. The only thing that could impact this trend is if we see a significant bump in interest rates, which we are not likely to see as long as the price of equities continue to move sideways at best.

2007-03-09T16:22:00.000-08:00

Emerging Retail Trend: Beverage Category Trend
Jones Beverage announced this week that it will start selling their beverages in cans through most grocery retailers. This change by Jones represents another in the long running movement of brands from the new age category into the mainstream. Even though Jones soda will still be a new age beverage, the fact that it is moving into cans is a significant acknowledgment of how big they believe they can become. Coke and Pepsi, who for years owned the carbonated beverage category, have been under a perpetual attack because of the number of beverage options the consumer has. I believe this "maturing of brands" trend will continue and the competition for shelf space and consumer share is only going to become more intensive.

Emerging Retail Trend Implication: Look for beverages to continue to find ways to gain shelf presence in every location possible, both inside and outside of retail stores. For merchandising companies who have not developed a level of expertise in the beverage category, they had better do so quickly. If they are only doing work with beverage companies inside of traditional retailers, they must expand to non-traditional venues. The expertise needs to be not only knowledge of how to merchandise the category, but also in how consumers make their purchase decisions and how retailers and others use the category in their overall plan.

2007-03-08T09:32:00.000-08:00

Global Shop 2007 Report
If there is any doubt that the lines of retail channels have blurred, you only need to attend Global Shop, the trade show for the retail industry. At the conference held in Las Vegas, there are more than 700 exhibitors and 15,000 attendees all seeking to find ways to reach the consumer. The big idea I've encountered here is proof that there are no boundaries in what will or will not work in any particular retail channel. For people who are not familiar with Global Shop, I strongly encourage you to mark your calendar for March 19 - 21, 2008. Rather than making a prediction based off of my experience, I'm going to save my conclusions and share them with you over the coming months.

2007-03-03T10:40:00.000-08:00

Emerging Retail Trend: The Rise of Retail "Pop-Up Stores"

Kraft Foods is planning to open their own retail store (expected to be open for only a few days) in downtown Chicago to help them create buzz around a new pizza. This is essentially what we've been calling a "pop-up" store. For several years, we identified these as a huge trend to help companies gauge market acceptance of new items or a new geography. (Remember Target's "retail navy" in Manhattan a few years ago and the buzz it created.) This move by Kraft is significant for several reasons:

First, it represents a move by a major CPG company to sell directly to the consumer. A few years back, this would have been thought of as a suicide move because of the perception that it would take sales away from a retailer. Today, it's called "smart marketing" and will allow Kraft to gain huge buzz and consumer feedback not available in a retail store.

Second, it's significant because it's coming from Kraft. Irene Rosenfeld, Kraft's new CEO, has stated how one of Kraft's biggest opportunities is in finding ways to leverage its supply chain. There's no better way to leverage a supply-chain than by selling directly to the consumer.

Several years ago we said "pop-up" stores would become a real trend and the move by Kraft certainly validates this and takes it to another level. Keep your eyes open as we'll see additional CPG companies create "pop-up" stores for a whole variety of reasons from creating buzz to simply generating sales.

Emerging Trend Opportunity: Enterprising companies have a window to develop turn-key retail operations that can be put in place quickly. These companies can sell these services to CPG companies and others as a one-stop source for a CPG company to establish "pop-up" stores quickly.

Disclaimer: From 1980 - 1992, I worked for General Foods / Kraft Foods and during this time, I was able to get to know Irene Rosenfeld. As a side note, I remember being part of discussions in the 1980's about why General Foods would not open up an employee store in the corporate offices in White Plains, NY, for fear of retailer retaliation.

2007-02-26T10:46:00.000-08:00

Emerging Retail Trend: NARMS Radio is Now on iTunes

I'm pleased to announce that I'm the host of a new Internet audio program called NARMS Media Network and NARMS Radio. The purpose of this program is to share the insights and wisdom of leading experts from a wide range of retail perspectives. I encourage you to check out NARMS Radio by downloading it from iTunes or from www.NARMS.com. In the coming months, you'll find me commenting on this blog about some of the people I interview. But why wait to hear about them? Listen to their expertise today!

2007-02-24T10:37:00.000-08:00

Emerging Retail Trend: Customer Service is Coming Back

We've all read quite a bit about the troubles Home Depot is going through regarding customer service. Now we're seeing comments being made from the Chairman of Starbucks, Howard Shultz, concerning his belief that they are losing some of their special relationships with customers. Suddenly, there is new focus being placed on the role that the retail clerk plays. (I'm not going to kid anybody: this is only a short-term event. The financial boys will never allow customer service to be a big deal for very long.)

However, with the current focus on customer service and the numerous minimum wage law changes, retailers are going to feel more of a squeeze. One opportunity that is now on the radar screen is the training of retail clerks. There's a window that exists for manufacturers and others to aid the retailer in helping them improve the knowledge and skill level of the employees on the sales floor. I do believe this window will only remain open for a short-time. As soon as retail earnings take even the slightest dip, we'll see the financial boys cutting out training since, in their mind, it's too hard to measure. It's too bad since the only sustainable competitive advantage any company can have is its employees, not price.

2007-02-18T06:30:00.000-08:00

Emerging Retail Trend: Wal-Mart Quarterly Earnings Forecast
This week Wal-Mart will announce their 4th quarter earnings and their store comp sales which are expected to be the lowest in nearly a decade. With this announcement on Tuesday, look for Wal-Mart to become even more aggressive in their pricing as they are going to be under real pressure from the financial community. For vendors, it means it's going to be a very tough year so they need to push like crazy to find any savings possible through "green" types of activities.

In the next 24 months, senior management at Wal-Mart is going to face more pressure than they've every felt before. With a stagnant stock price, low store comps, and a presidential election in the works, I suspect we'll see a change at the CEO level within two years. I've never made this type of a prediction before about Wal-Mart. However, barring a spin-off of Sam's or some other dramatic event, I believe a change at the CEO level is all but certain to happen and the release of the 4th quarter earnings this week will be the start of it.

2007-02-14T09:48:00.000-08:00

Emerging Retail Trend: DIY is Dead, Now It's DIFM
We've all heard the term DIY (do-it-yourself) and know how it describes the home improvement market. In fact, you could say DIY also applies to the consumer electronics channel and a number of others. Well, I hate to say it, but in the US, we've reached a point where DIY is no longer good enough. It's now DIFM: Do It For Me. In the past couple of years, we've seen an explosion of services offered by retailers which go way beyond the typical home improvement type of installer that has been part of that industry for years. Best Buy is doing great with the "Geek Squad" and now the office supply chains are coming out with their own. Not to be left out, the home improvement segment is beginning to bring a unified look and feel to the typical independent contractor.

Don't get me wrong. This is not a new concept. Sears developed this service approach nearly 30 years ago and there was a time in their history where these outside contractors delivered the bulk of their profits. What we're seeing here is a much broader application of the process and, in so doing, we will begin to see retailers putting significant emphasis on it as a way of distinguishing them from the competition.

Stay tuned on this one as it's only going to become significantly more important in the years to come in the retail industry. In future postings, I'll share my thoughts regarding how it will impact the internet, generational issues, and others. In the meantime, let me know what you think.

2007-01-18T12:51:00.000-08:00

Emerging Retail Trend: Retail Sales Trends for 2007

The Consumer Electronics industry will continue to be strong thanks to the growth of HDTV, the release of Vista, and the continued growth of the iPod and other similar devices. Clothing may end up being soft due to the mild weather the US experienced in 2006 and the impact it had on the industry. If the price of gas comes down, the grocery industry could see stagnant real growth because consumers will have more disposable income and will spend it on eating out. Keep in mind, the grocery industry is going to have dollar growth this year from the inflation in the fresh produce area due to the winter freezes. There will also be increased prices for grain and protein items due to the rapid expansion of ethanol. Finally, grocery will be hit harder than most segments because of the increase in many minimum wage laws at the state or local level and the pending change at the federal level.

2006-12-07T23:53:00.000-08:00

Emerging Retail Trend: Gift Cards and Christmas

Thus far, although overall Christmas sales appear to be good, they are really not where they should be considering the economy. This leads us to wonder when holiday sales will start to take off. The answer lies not with retailers having to discount more, but with the consumer's lack of time or desire to shop. Therefore, the week before Christmas we are going to see a flurry of activity with gift cards. This year, gift cards will reach new levels and, as a result, I believe we will see retailers actively promoting their sale and developing economic incentive programs to further stimulate the use of gift cards as a wise gift-giving alternative.

2006-12-04T19:24:00.000-08:00

Emerging Retail Trend: Wal-Mart, the Blue Retailer

For the past 4 years, Wal-Mart has been struggling with slowly declining store comp numbers. Just like watching a slow moving baseball game, we're finally making our way to the final innings. As I've said before, look for Wal-Mart to develop a "dollar category" retail format that allows them to build smaller stores much faster than they're currently able to build Supercenters. Also, we will see them start talking about spinning off Sam's Clubs as a separate company in order to unlock shareholder value. Wal-Mart has gone a long time with their stock stuck while, at the same time, undertaking one issue after another. If they're to have any hope at becoming a trillion dollar company (and I'm betting against it), they will have to dramatically redefine how they do business.

2006-11-25T09:39:00.000-08:00

Emerging Retail Trend: Black & Blue Friday and the Internet

Everyone’s desire to ensure Black Friday was a hit resulted in just that: a hit! But, in some situations, the hit was actually customers bumping into one another as they fought over a limited number of deeply discounted items, all while in a sleep-deprived mode. Clearly, the early-morning crowd control problems will need to be dealt with before next year. Here’s my solution: entry to the store is determined by the bar-code the customer has downloaded from the retailer’s website.

Now, let’s walk through how it works by using our mythical retailer, “Best-Cost Mart”. They begin hyping through their regular advertising campaign leading up to black Friday, but with the hook to visit the website on Thanksgiving Day to download the “VIP Pass” entitling them to be one of the first people into the store. Thus, they would be assured to receive great deals. After the number of VIP Passes are released that the retailer chooses, they begin issuing “Preferred Customer Passes” which would allow people to be part of the second group. "Best Cost Mart" can continue this process to cover the anticipated number of shoppers they expect between 6 AM and 9 AM on Black Friday. Once at the store, the bar codes are scanned at the door to allow entry. As a precaution, an access number is also printed allowing for a back-up in case the bar-code is not readable.

On the plus side for “Best-Cost Mart”, they would be able to drive a significant amount of traffic to their website. By having people enter their name, etc., they would gain valuable information, right down to the store level. They can also increase their sales by having website-only deals to generate profit on Thanksgiving Day.

Although my plan is not perfect, we all must realize that the web and retail are forever linked and because of it, retail will never be the same.

2006-11-14T05:12:00.000-08:00

Emerging Retail Trend: Minimum Wage and the Retail Clerk

Based on the election results of November 7, we the people (at least in the US) have spoken and, in nearly every case, voted to increase the minimum wage. With Congress now controlled by the Democrats, the only question to be answered is how much the federal minimum wage will be increased by. We’ll see quick impact with retailers working to further decrease the number of retail employee hours to ensure their total labor costs do not increase. A couple of other areas where we can expect to see rapid changes include:

More outsourcing of activities to third-party companies
More pressure on manufacturers to provide product in packaging that does not require any store labor to merchandise
Increased use of surveillance cameras to monitor retail conditions
Expansion of RFID and its use in more areas
Increased reliance on self-serve checkouts
Increased use of technology to remotely control in-store activities
More reliance on the internet to provide the customer with the knowledge they may have previously received from a sales clerk
Decreased store hours
In some far west markets, we may even begin to see a tendency of some retailers to lock up prospective retail sites, but be willing to delay the build-out process until they can be assured of more success

2006-11-08T07:23:00.000-08:00

Emerging Retail Trend: Kmart and Sears

Watch what Kmart and Sears do over the next six weeks. The strategy they take towards the holiday season is going to give us a good indication of where they’re headed. Eddie Lampert has been very vocal about not being aggressive towards pricing and if we see him continue with this strategy, then we can expect to see them continue their pattern of closing more stores in 2007. My prediction is they will not be aggressive in pricing, but will attempt to leverage the Craftsman, Kenmore and Lands End brands, and merchandise these at close to full-price. If this comes to pass, then we can conclude that they are starting to de-emphasize their retail operations as they move towards being more of a marketing company, managing a few key brands.

2006-11-08T07:21:00.000-08:00

Emerging Retail Trend: Black Friday and the Web

We’re just a couple of weeks away from the official kick-off to the Christmas shopping season…the Friday after Thanksgiving. Let’s not kid ourselves: holiday shopping has already begun and there is considerable buzz on the internet regarding the new Elmo doll by Mattel and the release of PlayStation 3. Both of these are expected to be in short-supply and it will be interesting to see what blogs, bulletin boards, and sites like MySpace have to say about them. We’ve now reached a web saturation point where a manufacturer and a retailer can see their season be made or lost by the buzz on the web. The problem with all of this is that because the holiday season is so short, it means retailers and manufacturers have to monitor what the web is talking about immediately to enable them to respond accordingly.

I’m not predicting it will happen this year, but I am willing to say that within the next 3 – 4 years, we will see at least one manufacturer and/or retailer that winds up having their holiday season severely impacted due to a negative buzz being spread too quickly on the internet.

2006-11-07T05:12:00.000-08:00

Emerging Retail Trend: RFID in the CPG Retail Industry

RFID is going mainstream in the CPG retail industry. In the September 11, 2006, Business Week Magazine, they did a rather extensive article regarding the use of RFID technology and how it will impact things such as shoplifting. I couldn’t agree more! If you been a reader of our Emerging Trends report, you’ll know I first began talking about this a few years back. If you’re new to this blog and the Emerging Trends annual reports we do, take a minute to jump over to the main website (www.TheSalesHunter.com) to see them in their entirety. Go to the Annual Reports tab under the Emerging Trends section and you can download reports from past years.

2006-11-02T07:34:00.000-08:00

Emerging Retail Trend: Macy’s Kills Newspapers

This might be a little bit of an exaggeration, but the newspaper industry is being hit hard with the Federated’s consolidation of department stores into one name: Macy’s. This change is allowing them to run national campaigns using advertising vehicles not normally available to regional department stores. The big losers are newspapers which made high margins from selling regional department stores ROP advertising. Now, Macy’s can use other vehicles, thus taking away a nice revenue stream from the newspapers. The challenge will be for the newspapers to come up with more targeted advertising strategies and at rates that are more affordable than their traditional rate structure which bordered on obscene.

For smaller retailers and manufacturers, there may very well be a door opening to develop creative programs with newspapers. These new programs could allow newspapers to open up revenue streams and allow these smaller players to become introduced to audiences who have not yet been exposed to their advertising before.

Here’s an idea: a newspaper could develop a double-truck layout featuring 3 – 4 retailers who are all located in the same mall under a common theme that pulls traffic to the mall and the particular stores. Individually, each of these stores could not buy enough ad space to draw traffic, but by combining with others they would not be able to.

2006-10-30T19:34:00.000-08:00

Emerging Retail Trend: Go Ugly on Black Friday

Get ready for a Black Friday that is going to be even more difficult than before. Wal-Mart has just announced their October same store sales were the lowest they've been in years and this can only mean one thing: Black Friday is going to see things we've never seen before. Wal-Mart is fast approaching the point where they have to do something drastic to save themselves from themselves. With their sales trends continuing to slide and the numerous strategies to jump-start sales all stalling, it leaves them with only one trick.....low prices and there is no better time than to proclaim them than the day after Thanksgiving.

I have a theory that you have to go back several years to a particular Black Friday where Wal-Mart took on the toy industry and won. From that point on, it's been all down hill. After their victory in toys, they began taking a tremendous amount of media attention about how they were on track to take over the world. Subsequently, Wal-Mart came back the following year and pulled a fake punt with regards to low prices on Black Friday. This move left them scrambling to run ROP ads and anything possible to try and save the holiday season. Fast forward a few years and we see the results: they've never fully recovered. It's hard to find a month where Wal-Mart's store comps are not beat by Target.

Get ready! The lion is going to roar and when they do, it will be hard to not feel their wrath!

2006-10-30T15:07:00.000-08:00

Emerging Retail Trend: Wal-Mart Meets Wall Street

Wal-Mart is facing growing pressure from Wall Street and the financial community. As a result, we can expect to see changes over the next couple of years including the following:

1. Slowing their rate of domestic expansion. Building stores costs money and for the past couple of years, new stores have not been delivering the return-on-investment the financial community expects.

2. Neighborhood Market format will move up on the food-chain. Look for the number of Neighborhood Market stores to begin to increase dramatically as Wal-Mart rolls out this format into areas of the country where they've encountered problems building Super Centers.

3. More focus on international growth. The recent acquisition of a competitor in China is only a start. Look for Wal-Mart to dramatically step up the level of focus they place on their international operations. Their failure in Germany won't stop them; it will only make their resolve greater to develop more countries.

4. Stock buyback. Now that's a new one, but look for Wal-Mart to begin a regular on-going stock buyback program as a way to increase their stock price.

2006-10-10T20:04:00.000-07:00

Emerging Retail Trends: On-line Downloads
We're starting to see the end of the DVD distribution business model currently being used by Wal-Mart, Target, and others. In the past 5 years, Blockbuster, Hollywood Video, and other rental retailers have seen their volumes shrink due to the ability of Wal-Mart and others to sell new movies at prices that make the one-time rental fee seem expensive. Now we're on to the next disruptive change.... Movie studios are starting to unveil web based distribution methods that allow consumers to download a movie directly from the web in the same manner music is downloaded. Naturally, this change gives people greater access to movies and, more importantly, allows consumers to buy movies without having to visit Wal-Mart, Target, etc. Consider the damage this could do to Wal-Mart and others regarding the loss of traffic and the deep-discount DVD strategy these retailers now use.

2006-10-09T19:14:00.000-07:00

Emerging Retail Trends and Channel Segments:

One of the biggest emerging retail trends of the 1980s was not something that occurred inside a store. Rather, it was the emergence of numerous different retail channels including toy, office supply, club, super discount and a variety of others. Twenty years later, this trend is coming back to haunt us. Every emerging retail trend has its flip-side and this one is emerging now: the lack of breakthrough retailing concepts that fill large segments of the industry. I’m watching with interest all of the channel-blurring that is going on as each tries to encroach on another channel, all for the sake of trying to maintain sales growth. This encroachment (the latest being the home improvement channel selling items traditionally found in consumer electronics stores) is a case in which retailers are chasing volume for the sake of volume. What makes this interesting is it’s no different than how the grocery channel has behaved for more than 20 years. However, the grocery channel has been a low-margin category during this entire period. In my book, this means there are numerous other channels heading down the road of severe margin compression and we have an over-abundance of retail space selling products in mature categories.

The door is open for a new round of emerging retail trends with regards to channels and I believe the next round will include the emergence of channels that are highly interactive with the consumer and use the web as a communication tool. These channels will also blur “click and brick” in ways we have never seen before and, for the first time, will bring web retailers such as Amazon.com and eBay directly into retail locations.

What’s your perspective on the emerging retail trends and categories?

2006-10-04T12:34:00.000-07:00

Emerging Retail Trends and Labels

Ten years ago, an emerging retail trend was focusing on food labels. Much of this was driven by the feds and the changes in how food companies could label things, but the result was consumers beginning to pay a significant amount of attention to product ingredient labels. Last week, New York City opened the flood gates again with a recommendation to outlaw the use of trans fats in any restaurant in New York City. Now, we all know food companies have been working towards eliminating the use of trans fats, but it now appears a new round of media attention is emerging. It’s hard to tell what the impact will be, but, in the meantime, it’s going to be imperative for every employee of a food company to know how to respond to a consumer’s inquiry regarding trans fats. The old days of a salesperson simply saying “I don’t know” is no longer acceptable. Every employee or representative of a food company in any capacity needs to know how to respond.

2006-09-27T06:20:00.000-07:00

CPG Retail Trends: E. coli, RFID, and Produce Departments

There’s still no end to the buzz over the E. coli breakout and its potential link to bagged spinach. It does not appear that it will go away quickly or slip from the mind of the consumer anytime soon. The issue now is how should grocery stores handle refunds? If a consumer returns a suspected bag of spinach, there’s no question that they deserve a refund. But, what happens when the consumer returns a bag of lettuce demanding a refund because of what they heard from someone else? Who ends up paying: the grocery store or the supplier? Whose reputation is on the line: the retailer or the supplier? Furthermore, what happens when it’s an unbranded produce item? In that situation, the store’s reputation lies squarely with the retailer’s willingness to give refunds should bad information start floating around on the internet?

In this scenario, we’re only talking about the grocery store. But, the same thing can easily apply to restaurants. Can you imagine restaurants suddenly having to deal with a scare regarding potentially harmful lettuce?

The solution lies in the continual expansion of RFID technology and its potential benefits with regards to product safety. If this is tripping a trigger with you, I encourage you to listen to a podcast I did with two RFID experts on this subject. You can find the podcast by either going to my website and clicking the “NARMS Radio” logo at the top right or going to the iTunes podcast section and enter “NARMS” in the keyword search.

2006-09-25T19:08:00.000-07:00

Emerging Trends at Retail Spotlight

Emerging Trends at Retail Spotlight is a new feature where we will attempt to identify new trends, and, more importantly, share with you insights as to how these trends may impact the entire retail industry. Watch this column in the coming weeks and when you see a new trend, don’t hesitate to let us know what you think.

2006-09-21T11:16:00.000-07:00

CPG Sales Training is AWOL

It’s amazing how CPG sales training appears to have disappeared from the scene. Just when it’s more needed than ever, it seems like many companies have reduced the resources dedicated to CPG sales training. This means that those companies who do put resources into training stand to achieve significant gains by being able to out-think their competition. For too long, CPG companies have had the belief that sales are all based on the marketing proposition of their products. In reality, however, their sales are more in the hands of the sales force, based on the sheer consolidation of customers.

2006-09-20T17:31:00.000-07:00

CPG Retail Trends Continue to Evolve

It’s amazing how CPG retail trends wind up impacting the entire retail industry. A case in point is with what is happening with store resets. For years, the CPG industry has provided both the intelligence and the manpower to execute store resets. Now, we’re seeing more and more retail channels having the manufacturers provide the intelligence and the manpower to execute the reset work. Maybe someday we’ll see a store with no real employees, just representatives paid by the manufacturers supplying the store.

2006-09-11T08:14:00.001-07:00

Consumer Electronics Battlefield

Although we’ve already been talking about this topic this year, as we get closer to the end of 2006, it’s worth discussing again. Watch out for the 4th quarter war in consumer electronics between Best Buy, Circuit City, Wal-Mart, Amazon.com and anybody else who wants to play. With Microsoft holding back Vista until early 2007, we’ll see a lot of consumers choosing to avoid buying a new computer this year. This is not good news for CE retailers and it can only mean the battle is going to get ugly from a price and supply standpoint for anything and everything else in the industry. We’re going to see "unheard of" prices in the areas of HD televisions, portable cameras, home theatres and sound systems of all types. I have been encouraging a lot of people to wait until late November to make any CE purchases and, in particular, to watch for record-low price points on “black Friday” (the day after Thanksgiving.)

2006-08-29T12:53:00.000-07:00

A Little Cheese With Your Wine?
A hot category both for retailers and the internet is wine. Finally, we’re seeing the archaic laws that have been used to control the sale of wine and spirits be eliminated. Thanks to the efforts of retailers such as Costco, cases are working their way through the courts that in the end are starting to eliminate the three-tier system of alcohol sales that exists in many states. The result is that the consumer gets a wider selection and whenever this occurs, sales increase. The new Wal-Mart in Waco, Texas, for instance, is now recording more sales per square foot than in the dairy section. Simply put, it means Wal-Mart is selling a serious amount of wine.

Keep in mind that as these laws get struck down and the sale of wine opens up to more retailers and, more importantly, the selection of wine enlarges, retailers will naturally devote more space to wine. When that happens, something else is going to get less space. For traditional grocery departments, this can only come as another attack on their turf in terms of lost shelf space.

Now, the news is not all bad. These moves will also prompt retailers to make their wine departments "destination centers" to encourage traffic into their stores. Naturally, when retailers sell more wine, consumers will buy food items to go along with it. This will give the grocery industry another opportunity to practice consumer-specific merchandising and when they do this, they’ll end up selling more groceries in total.

Let me know your thoughts. In particular, what do you see retailers in your state doing as these laws slowly fall by the wayside?

2006-08-01T18:45:00.000-07:00

Packaging Becomes the Reason
Although I’ve been talking about this for several years, we’ve only begun to see the early stages of how changes to packaging can radically alter how a product is perceived or used. Business 2.0, a cutting edge business magazine, recently did a major article highlighting some of the more recent changes in packaging and how it provides consumers more flexibility in how products are used.

Of course, at the core of this move is the need for the manufacturer to sell more. However, for the consumer, it’s all about helping them save time. The more time saved, the more people will pay, and the more people pay, the more resources there are to create even better packaging.

If Wal-Mart is serious about its push to being green and its effort to reduce solid waste, then there will be tremendous pressure placed on manufacturers to make their packaging as simplistic as possible. This will often result in an immediate conflict between a smaller package that uses less material versus a larger package that allows the consumer to more efficiently use the product inside. Only time will tell which will win. However, I believe that the real answer lies in Wal-Mart not focusing on individual products to determine how to minimize waste, but rather looking at the product's consumption cycle to determine how to reduce solid waste.

I’ll continue to monitor this. I’d like to hear what others have to say.

2006-07-24T12:09:00.000-07:00

Wal-Mart / Shoplifting / PR
Wal-Mart’s move to not prosecute as many shoplifters is certainly creating publicity and, as usual, the press is not favorable of them. This only proves the size of the issue Wal-Mart has in trying to turn the public's perception around. It is interesting to note that there are many other retailers who have similar policies towards shoplifting, yet none of these are in the media spotlight. Wal-Mart is in a self-inflicted, perpetual spiral of PR chaos and, in my book, without another catastrophe, they will be unable to turn it around. We saw this a little bit last year with their response to Hurricane Katrina. However, despite the size of this event, it did not substantially alter the public's perception. This only goes to show how big of an issue they have and that no matter what anyone says, they will never be able to be what they want to be.

2006-07-19T04:31:00.000-07:00

Changing World of Coupons
Valasis, the largest distributor of free standing inserts, is in talks to purchase the direct mail company, Advo. It’s easy to gloss over this, but it represents the continued evolution of the traditional way CPG companies have marketed their brands.

Coupons have been under siege for years. However, the move by Valasis shows how companies that have a dominant position in one area of marketing realize their dominance may not translate into long-term success.

At the end of the day, the most effective means of marketing is at the point-of-purchase, whether that be the store shelf or on-line. Everything else in the marketing mix must be geared towards the point of decision.

2006-07-19T04:18:00.000-07:00

Midprice Restaurants Are Hurting
We’re finally beginning to see the impact of $3.00/gallon gasoline. Many midprice restaurants are starting to see a slowdown in their total sales, both in the size of the average check and total number of checks. We knew it would eventually happen, but it’s almost surprising how long it has taken to start showing up. Gas at $3.00/gallon has to translate into a budget reduction somewhere for the average household. (It is interesting to note, however, that upscale restaurants are not seeing this same slowdown. This means high-income patrons are not willing to alter their dining habits.)

If you are a food retailer, this means there is now an opportunity to replace the meal occasions that were filled in the past by mid-scale restaurants with meals purchased in the store. Keep in mind that we have to push the concept of selling meals at retail, not just food items. This window of opportunity for “meal retailers” will not remain open indefinately. In time, either gas prices will fall or the consumer will modify their budget by driving automobiles with better gas mileage. Remember, the consumer is still looking to maximize their time and experience. In both cases, this is not going to be satisfied in the long-term by selling "food", but rather “meals.”

Let me know your thoughts on this and, in particular, I’d like to hear your ideas on the concept of selling "meals" versus "food".

2006-07-18T08:58:00.000-07:00

Food Industry Focusing On Estate Taxes….and It’s Wrong!
I’m going to vent here for a bit on a subject that is not new, but it amazes me how many times it comes up in food industry association meetings and with food retailer executives. What recently pushed me over the top was a article in Supermarket News regarding several senior food retailer executives' comments about estate taxes. My problem with this is, "Who cares?" Issues like this are only discussed among industries that are dieing and/or going through significant turmoil, which is exactly what is happening in the food industry. In times like this, we need leadership to drive change, not accept defeat. The food retail industry will never be what it once was as long as we have leaders who continue to be more concerned about the estate tax than on working to grow the industry. I have been part of this industry for more than 25 years and it makes me extremely frustrated to see how the marketplace has changed because the leadership has not focused on growing the industry.

2006-07-18T08:39:00.000-07:00

Buyouts Continue in Retail
Several years ago, I believed we were entering a period of time when the amount of retail real estate “in-play” would be significant. What I meant by this was that due to the number of retailers in the midst of mergers or buy-outs, many retail locations would become available for lease. Since I first predicted this, we’ve seen K-Mart, Toys-R-Us, Federated, and a host of others go through buy-outs, but it appears we still have several years to go before this trend subsides.

The reason for the continued trend is the perception by equity firms that there is tremendous value locked up in retail locations. As long as interest rates don’t skyrocket, we will see equity firms continue to push for takeovers. A recent article in the Wall Street Journal highlighted this fact and even mentioned retailers such as Gap, Pacific Sunwear, and others as targets.

A key item driving this trend is the price of oil. We’re continuing to see it sell at record prices, and as long as this continues, it will do several things that will impact the rate of takeovers. First, high oil prices equal high gas prices and, as a result, we are starting to see consumers reduce their amount of travel. This means location is going to become even more important, which is a key attribute any takeover firm looks for when pursuing a retailer. Second, the high cost of oil is also putting a damper on the economy, allowing it to grow at a manageable rate and keeping interest rates from needing to continue to rise. Naturally, lower interest rates allow funds to be available for a buy-out.

In the end, we will continue to see a tremendous amount of retail space becoming available. This means leases will become shorter and more flexible, all to the expense of the developer.

I plan on sharing more thoughts on this subject in the months to come.

2006-07-01T10:48:00.000-07:00

Pet Supplies Will Continue to Grow Driven by Baby-Boomers.
An interesting statistic to ponder: veterinary spending is expected to grow nearly 8% this year. This is according to the American Pet Products Manufacturers Association. Total pet industry spending is more than $35 billion per year. Both of these numbers are growing at twice the growth rate of the US gross domestive product.
There's no doubt this trend is driven by the sheer number of aging baby-boomers who are now empty-nesters in terms of children but full-nesters in terms of the care they show towards their pets. When you look at the demographic trends of baby-boomers it's easy to conclude this trend shows no sign of slowing for at least 10 years. The real question is what are the new and exotic items and services not now on the market that will emerge in the next few years to tap into this growth segment?

Two areas we will see dramatic growth in are: pet day-care centers and many more vet centers located inside of pet oriented retail stores.

2006-06-28T09:03:00.000-07:00

Forget advertising. Think “buzz”.
The boom in MySpace.com, FaceBook.com, and other web-enabled communities is now allowing people to quickly share commentary among wide audiences. A specific example of this is the “buzz” created around the television show “American Idol” and the number of websites, blogs, etc., with opinions on each of the participants. The “buzz” factor is significant, especially for those under the age of 45. This is both a positive and a negative for manufacturers and the retail community. If a product is able to create a positive “buzz”, it can achieve significant sales without advertising. However, a product or retailer can be doomed if the talk is negative or, worse yet, if it is untrue. For the business community, it means attention must be paid to what is being said in these unconventional media streams and, therefore, plans must be developed to help influence the “buzz” wherever possible.

2006-06-28T09:02:00.000-07:00

PC sales will be slow in 2006, but will greatly pick up in 2007.
Due to the delay in Microsoft’s® release of Vista©, their much awaited replacement to Windows©, until early 2007, look for PC sales to be slow in the second half of 2006. When it does release, look for significant increases in the sales of PCs, printers, monitors, and other things related to personal computers. The “buzz” around the release of Vista© will be significant and every PC manufacturer and retailer will be looking to maximize sales. For those retailers with a year-end of January 31, the push will be aggressive to allow them to realize electronic sales in what may otherwise wind up being a tough year. Retailers in the second half of 2006 will look to offset slower PC sales by pushing high definition televisions and other electronic items.

2006-06-28T09:01:00.000-07:00

The garage will no longer be the last room to organize.
Over the past several years, we’ve seen a dramatic increase in the sale of organizing systems for the garage. This trend is only beginning and, in the next several years, will grow dramatically to include not just organizing systems, but also service companies to come on site for their installation.

2006-06-28T08:57:00.001-07:00

Health care clinics will be moving to retail.
Several retailers are already beginning to add health clinics to their stores. This trend will explode over the next 3 years due to the availability of retail space and the synergy created by having a health clinic in the same space as a pharmacy.

2006-06-28T08:57:00.000-07:00

Wal-Mart® will continue to step up their emphasis on PR.
Over the past several years, Wal-Mart® has dramatically increased their public relations focus. We see this in the level of TV advertising they’re doing, including the sponsoring of network news programs and the use of prominent people like Andrew Young and his organization, GoodWorks International©. (Andrew Young is the ex-Mayor of Atlanta and a UN Ambassador.) Wal-Mart’s® increased expenditures in advertising, which can be seen most dramatically by their hiring of more than 100 additional people to work in their Advertising/Marketing/PR Department in Bentonville, will continue.

2006-06-28T08:54:00.000-07:00

Pharmacy information systems will be developed.
Pressure is building in both Congress and the health care community to create a national databank of each person’s medical history. Currently, the pharmacist serves as the final line of defense for a patient in the dispensing of medications. However, because of the number of potentially adverse drug interactions and the proliferation of people receiving prescriptions from visits to multiple doctors, the risk of a fatal interaction is high. The pharmacists are only able to uphold their responsibility if patients have all of their prescriptions filled at the same pharmacy and, due to the transient nature of patients between medial clinics and pharmacies, it becomes impossible for them to do that.

The only way to correct this growing problem is for a national database to be created that all pharmacies and, ultimately, health care providers would have access to. Naturally, a move in this direction has significant issues associated with it. However, the need for it will continue to increase. In response, pharmacy chains will begin building individual databases to serve all of their pharmacies. Wal-Mart® successfully implemented this in 2005 and it was heralded as a significant benefit in light of the number of people displaced by Hurricane Katrina. Smaller pharmacy chains and independents will be under great pressure to participate in a database, which will force many to merge or become part of a larger marketing group.

2006-06-28T08:53:00.001-07:00

Labor pressure will be affected by the higher minimum wage.
Numerous states and municipalities have enacted laws raising the minimum wage above the federal level. In January, 2006, the U.S. Bureau of Labor Statistics announced there were more than 140 minimum-wage bills introduced during the previous year in 42 states. As the number of states with higher minimum wages continues to increase, pressure will grow on retailers to find ways to further reduce labor. The first jobs to be cut will most likely be those part-time ones occupied by high school students. This will place further long-term pressure on retailers to be able to attract front-line supervisors and management.

2006-06-28T08:53:00.000-07:00

Sales tax plans will be developed that affect Internet sales.
Currently, federal law exempts everything sold on the Internet from sales tax as long as the entity selling the goods does not have a material presence in the state. The Streamlined Sales & Use Tax Agreement (SSUTA) developed by 19 states is an attempt to circumvent federal law. Pressure will increase on Congress from cities and towns to implement a form of taxation on Internet sales. Compounding this issue is the lack of statistics as to how much is really sold online. Considering there are more than 7,500 different taxing jurisdictions in the US, it will become hard for Congress not to create some form of tax plan for goods sold through that medium.

2006-06-28T08:52:00.000-07:00

CarSpace.com will have an impact on your wallet.
On the heels of FaceBook.com and MySpace.com, the latest trend is the development by Edmunds.com of CarSpace.com. Launched February 27, 2006, this new website is designed to allow car buffs to show off their cars and share their opinions. The growth of this site will be quick and has the potential to create numerous new markets for automotive products to be showcased. Naturally, this site also has the potential to create a high degree of both positive and negative “buzz” for the after-market auto market.

2006-06-28T08:51:00.000-07:00

Home sales will continue to decrease while home improvement will continue to increase.
Because of the continued slide in home sales and values, look for more people to invest in minor household improvement projects as a way to appease themselves in lieu of moving. Concurrently, you will see an explosion in the number of items people can purchase to update the look of their home. Growth will occur not just in the hot area of home entertainment, but also into outdoor living.

2006-06-28T08:50:00.001-07:00

Energy costs will impact shopping trips.
With the continued increase in the price of gasoline, the number of shopping trips the average person makes will to continue to decrease. However, the length of the average trip will not decrease (other than in response to the continued time pressure). Because people want to maximize their drive-time and gasoline usage benefits, a side trend will be the increase in the percentage of shoppers using a regional center on the weekend.

2006-06-28T08:50:00.000-07:00

High energy costs will bolster energy-efficient products for the home.
There will not be a decrease in the cost of energy in the near future so look for the continued growth of anything designed or perceived to help reduce home energy usage. The DIY (Do-It-Yourself) channel will be the logical winners, but it will also open additional opportunities for service companies to provide in-store demonstrations and in-home installations.

2006-06-28T08:49:00.000-07:00

Takeovers, mergers, and bankruptcies will continue.
We have only seen the tip of the iceberg in regards to the number of retail takeovers that will occur in the next several years. Driving these takeovers will be the perceived value of the real estate. However, this perception has been created by the amount of real estate already coming onto the market due to the takeovers to date and the growth of REITs. Only in major metro markets where the availability of retail sites is scarce will we see this strategy paying out. In the end, there will be a number of retailers chasing unachievable numbers and more going out of business due to the amount of debt they have.

2006-06-28T08:48:00.000-07:00

Anything you can plug in or operate on batteries will sell.
Household appliances, power tools, and anything we can think of that a power gadget can take care of will be the rage. As a society, we’ve become comfortable with computers and their capabilities. Similarly, we now expect a machine to do the things we used to do ourselves.

2006-06-28T08:47:00.001-07:00

We will spend more on our pets.
With the number of household pets continuing to grow and the Baby Boomer generation now becoming Empty-Nesters, the amount of spending on pets will only increase. This trend will not let up for at least 10–15 years. The level of growth will be dependent on the creativity of the pet industry to develop new needs for the pet owner.

2006-06-28T08:47:00.000-07:00

Retail and product exclusivity will become the norm.
Due to pricing pressures in nearly every channel and the success Target® has had in developing exclusive agreements with manufacturers, this trend will explode in the coming years. Every retailer will seek to create a niche they can defend. These select contracts will be for both entire product lines and individual SKUs. The challenge will be for manufacturers to maintain an efficient supply-chain while serving multiple retailers with different SKUs.

2006-06-28T08:46:00.000-07:00

Where did that store come from?
To take advantage of high traffic locations, seasonal timing, and short-term real estate opportunities, more retailers will open locations for a defined period of time. Sears® began participating in this strategy by opening a store for only one week in Manhattan during the 2005 holiday season. These short-term stores will be opened as a way to not only produce sales, but also to generate trial numbers that will allow them to gauge the marketplace without making a significant investment. This is a trend that will go far beyond the traditional surge of kiosks in malls around the holidays.

2006-06-28T08:45:00.000-07:00

If it has to do with your health, cleaning, or organizing, it will sell big.
Anything to do with these three categories will experience growth over the next 10–15 years as the Baby-Boomer generation continues to age. We will see numerous new devices developed to help take better care of ourselves, to keep our homes clean, and to organize our stuff. One area of particular growth will be garage organization and cleaning because it has received little attention up until now.

2006-06-28T08:44:00.000-07:00

We all need another new television.
With the continued growth of HDTV and the numerous new variations of flat-screen televisions, etc., we will see a lot of attention being given to this area until the consumer has replaced all of their traditional reception TV sets. Once that takes place and people become comfortable with what they own, we will see a slow-down in purchases, similar to what happened to both home computer and software sales.

2006-06-28T08:43:00.000-07:00

The electronics category will look like a battlefield.
Wal-Mart® continues making moves to grow their share of the market in nearly every segment of the electronics category. They are doing this by developing more products geared for a higher level of consumer than they currently attract. In addition, the other major player, Best Buy®, has moved aggressively to develop their new store format towards specific consumer groups. With both of these powerhouses and a multitude of Internet sites available to the shopper, the market remaining for everyone else is going to be limited. The industry, therefore, will be extremely price-sensitive in nearly every aspect and retailers will be forced to seek out exclusive product arrangements.

2006-06-28T08:42:00.000-07:00

The toy category is changing to reach a different audience and occasion.
Due to the stress placed on the toy industry by mass merchandisers, the entire category has come under intense price pressure. This, along with the changing lifestyles of children, is forcing the toy industry to reinvent itself. Toy manufacturers will develop numerous new electronic gadgets and lifestyle-oriented items to cater to a more sophisticated child. Additionally, the toy industry will move into more entertainment-oriented items geared to teens and adults.

2006-06-28T08:41:00.000-07:00

The Internet will soon become the biggest retail location.
It is hard to say exactly how much sales volume the Internet is responsible for. It is estimated that online sales could reach $95 billion in 2006. One thing is certain: the dollar volume was more than $81 billion in 2005, up 14% from the previous year. eBay® alone accounted for a net revenue of more than $4.5 billion in retail volume (source: eBay® 2005 Annual Report). Within the next several years, sales on the Internet will exceed Wal-Mart’s®, making it the largest retail entity. This will add to the pressure of having retail sales taxes applied to all Internet purchases. Secondly, it will significantly impact how consumers shop, especially around critical timeframes like Christmas.

2006-06-28T08:40:00.001-07:00

Home furnishings vendors will see a lot of consolidation amongst themselves.
As the retail marketplace across every format continues to consolidate, there will be increased pressure on home furnishings manufacturers to grow in order to maintain the strength needed to compete with the expanding retailers. The home furnishings industry remains very fragmented, unlike other channels such as food, drug, and pharmacy, which have seen considerable consolidation. Today, a large vendor in the household furnishings market is one doing $5.0 billion in annual sales. In many other retail channels, this would be considered too small to survive. A key investor already in this industry is Warren Buffet. Since he only invests in companies which deliver cash flow and predictable earnings, they’re ripe for consolidation. (Through his company, Berkshire Hathaway®, Buffet owns both retail furniture chains and vendors to the home furnishings channel.)

2006-06-28T08:40:00.000-07:00

When you go to the store, don’t forget to get the milk and the furniture in a box.
Ready to assemble (RTA) furniture will be offered for sale in numerous new retailers and will expand into new furniture lines. This will allow retailers without the square footage to be able to sell furniture. Grocery and drug stores, for example, will carry select lines of RTA furniture.

2006-06-28T08:39:00.000-07:00

EVR retailers will move rapidly into food.
EVR (Extreme Value Retailers like Dollar Stores® and Dollar General®) retailers will move into selling food including produce, deli, and frozen. Driving this is their desire to increase the number of customer visits and sales. Expansion into these categories will not slow the number of stores they continue to open each year. This format will remain the single greatest threat to Wal-Mart®.

2006-06-28T08:38:00.001-07:00

Target® will continue to be on target.
Target® will continue to spend money on capital expenditures at a percentage of sales higher than Wal-Mart®. Unlike Wal-Mart®, they will not find themselves fighting major public perception issues. To fuel their growth, they will build both SuperTargets® and conventional stores, based on what their projections say will work best.

2006-06-28T08:38:00.000-07:00

Winn-Dixie® will run out of gas and fade away.
Winn-Dixie® will emerge from bankruptcy only for a brief period of time before being completely dismantled. Due to the competitive environment of the south and, in particular, the strength of Publix® and Wal-Mart®, Winn-Dixie® will not be able to sustain the number of profitable stores needed to remain in business. Pressure from the real estate side will require them to close retail locations. Most likely, the possible suitor for Winn-Dixie® will focus on the real estate with plans to convert the space into something other than a grocery store.

2006-06-28T08:37:00.000-07:00

The long-term future for Sears® is not good.
Within 10 – 15 years, Sears® will completely disappear. However, the Kenmore®, Craftsman®, and the Die Hard® names will continue through licensing agreements with other retailers. Sears Essentials® will be a format in which they will find short-term success. However, in the long-term, they will not be able to distinguish themselves enough to survive. (Sears Grand® is a format which does not have a place in the new Sears Holding Company® where the focus is on leveraging real estate.)

2006-06-28T08:36:00.001-07:00

Lands’ End® will find a home in a different land.
Lands’ End® will be sold off by Sears® to help retire debt and to allow Sears Holding Company® to focus on their real estate. Although the brand would do well as a stand-alone company, Edward Lampert, the architect of the Sears®/Kmart® combination will seek to maximize revenue. This means whoever is looking to buy Lands’ End® will have to come up with a cash offer or one that affords Lampert significant tax advantages to reduce his tax burden from other asset sales.

2006-06-28T08:36:00.000-07:00

Neighborhood Markets® will expand into your neighborhood.
Wal-Mart® will begin rapidly expanding their Neighborhood Market® format because of the negative pressure they are receiving from communities regarding the building of their Supercenters®. To continue their growth in the U.S., they will use this format not only in developed markets, but also as a means to enter new ones.

2006-06-28T08:21:00.001-07:00

Wal-Mart® will focus on its International Division.
In the past 10 years, Wal-Mart® has gone from 226 stores to 2,305 in the International Division (source: 2005 Wal-Mart® Annual Report). Look for Wal-Mart® to continue to accelerate this trend in light of issues they’re facing in the U.S. and Canada. We can also expect Wal-Mart® to move into new countries such as India and expand rapidly in China.

2006-06-28T08:21:00.000-07:00

Wal-Mart® will not hit the trillion dollar sales mark.
Wal-Mart® will not reach a trillion dollars in sales as many have projected. In 2006, they will do nearly $350 billion. Another $650 billion in growth will not occur as Wal-Mart® will falter under its own weight and the numerous problems already present. During the 1970’s, people were led to believe we would one day be eating only McDonald’s® food. Today, McDonald’s® is still a large company, but by no means is the trendsetter it once was. The same can be said of Sears® in the 1960’s and A&P® before that.

2006-06-28T08:20:00.000-07:00

The office supply category is on the radar at Wal-Mart®.
Wal-Mart® will aggressively go after the office supply market trying to take away sales from Office Max®, Office Depot®, and Staples®.

2006-06-28T08:19:00.001-07:00

Unions will finally see victory at Wal-Mart®.
Unions will not walk away from trying to organize Wal-Mart®. On the contrary, they will increase their pressure in light of the numerous media awareness inroads they’ve been receiving. Within four years, we will see segments of Wal-Mart® in the U.S. being represented by unions. It will most likely come in the form of individual stores or departments within a store.

2006-06-28T08:19:00.000-07:00

Class-Action lawsuits will impact Wal-Mart®.
Wal-Mart® will face several more class-action lawsuits in the years to come, each one drawing considerable media attention. In the face of losing at least one of them, Wal-Mart® will reach a settlement in advance of a court decision. The settlement made may be well in excess of several hundred million dollars.

2006-06-28T08:18:00.000-07:00

Having the ability to pay by check will continue to decrease.
Due to the continued risk of insufficient funds and the paperwork involved in handling checks, many retailers will no longer accept checks. Retailers will promote the use of debit cards in their place, despite the recent changes that allow checks to be processed faster.