Chaos & Disruption in the Consumer Sector – And a Path Forward by Susan Hawkins
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Thoughts Shares Industry Insights
Some Takeaways from a recent ACG Boston Industry Spotlight Series
The Crisis in the Retail Landscape Continues…
According to the keynote speaker Paul Raffin, CEO and Founder of The Merchant Matrix, “The Rush to the Bottom” with cheap goods and outmoded sourcing solutions has eroded the value proposition of traditional retailers. The retail sector has lost its ability to create theatre, strengthen connections and build on shared experiences. Even stellar luxury retail brands are hurting as customers (particularly millennials) are resisting the lure of branded status offerings.
The result? “A death spiral” as retailers watch disruptors such as Amazon ($100 billion in sales) grow exponentially. We can expect more store closings and an overall scale back of retail space in the US. Malls will be repurposed as entertainment centers with a growing focus on food and recreation.
There is a way out…
However there are alternatives to this decline. Raffin cited the innovation of subscription models such as Rent the Runway that focus on short-term rentals of party dresses and accessories and Whole Foods entering new more price sensitive markets with its 365 brand. Renting vs. owning is growing as a concept particularly with Generation Z and the millennials who are now the largest generation in the country. He called out the success of Pirch, the home goods store based on the twin concepts of “joy” and “embrace the awesome” replete with showrooms that reflect the “test drive” experience including working showers.
The food industry, including restaurants, is thriving….
Industry multiples are high, particularly for those goods that feature “clean” ingredients as well as those that enable a “controlled indulgence” experience. Big food companies are willing to pay very high multiples for emerging brands such as Annie’s that have been vetted by the marketplace. Other examples of successful food brands include Polar Beverages short run Unicorn campaign. Customers will continue to demand convenience and quality. Innovation is a hallmark at Blue Apron which is challenging grocery stores through home delivery of food and recipes. The push towards wellness will find expression in healthier ingredients not only in food but other CPG goods such as personal care products and clothing where organic inputs will be increasingly valued
Millennials will determine whether or not consumer brands are successful…
They are now the largest generation in the country and despite the challenges that some of them have faced in “launching” (according to the Huffington Post 36% of 18 to 31 year olds are still living at home) they represent an enormous spending bloc, particularly with respect to disposable income. Their views on ownership vs. renting are a disruption to current models as they endorse the “Uberizing” across diverse sectors ranging from clothing to accommodation. They are empowered consumers who look to You Tube for product knowledge and news, not traditional media. This shift is creating a more transparent marketplace where power has become more distributed. Companies who successfully embrace this market will thrive. The need to connect, to find meaning endures.