The Future of Retail & Restaurant Development
THE FUTURE OF RETAIL & RESTAURANT DEVELOPMENT
John Crutchfield III
President & CEO,
Greater Killeen Chamber of Commerce
As I write this, in mid-May 2017, I am looking at a news release in which it is revealed that Pennsylvania-based, teen apparel retailer Rue21 is filing for its second bankruptcy since 2003. Aeropostale, The Limited and Gander Mountain all declared recent bankruptcies. In addition, JC Penny, Macy’s, Sears, Kmart, Payless, Crocs, BCBG, Abercrombie and Fitch and Guess have all announce major store closings this year. Barnes and Noble is said to not be doing well. We are seeing restructuring in the restaurant industry as well. There are many reasons that an individual store can fail, including expired and unrenewed leases, a saturated market, products that do not meet customer’s quality standards, and so on. When you see the national restructuring at the level that we are witnessing, something else is at play.
While you could argue that, based on what you have just read, this is the worst of times for retail and restaurants, other evidence suggests the opposite. Consider this fact: Black Friday sales for 2016 across the U.S. were up 21.6%. The revenue is there. The companies I have mentioned are just not getting their share. It is fair to ask why?
The evidence suggests that some in the retail and restaurant category are going through, what is called, a Kodak Moment. In a recent article, I wrote that in 1998 Kodak had 170,000 employees and sold 85% of all photo paper worldwide. Where are they now? Their business model disappeared and they went into bankruptcy. Obviously, Kodak management did not see, nor did they adjust their business model to, the development of the digital camera which was first invented twenty three years earlier in 1975. Today, rather than being a spot-on Kodak marketing tag line, a Kodak Moment has come to mean that executives fail to see how customers and markets are shifting. In other words, ignorance plus arrogance equals irrelevance.
I suggest that one of the biggest drivers of these ever-increasing Kodak Moments is technology. More specifically, it is the company’s understanding and use of technology, or lack thereof. Those who are proactive become knowledgeable and strategic and, as a result, will see opportunity. Consider these trends:
Restaurants must avoid those Kodak Moments as well. They can do so through multichannel marketing – a comfortable physical presence coupled with active social media to put digital content in play and things like mobile ordering apps coupled with big data. Again, the market is large and will be dominated by millennials in the future. There is competition. Why do you think grocery stores are developing online ordering, pickup capabilities, meal kits and grab and go kiosks? They are using technology to blur the line between grocery stores and restaurants and, in the process, creating more market share for themselves.
Closures and consolidations will continue. Locally, we will continue to see some turmoil in our retail and restaurant inventory. This will create unserved demand in our market. While we cannot keep retailers and restaurants out of the market, nor should we try, it is important that we do all we can to shape that inventory through the intelligent use of incentives. For more on that subject, you can read The Process of Retail Development in the 2016 Restaurant and Catering Guide.
John Crutchfield III
President & CEO,
Greater Killeen Chamber of Commerce
As I write this, in mid-May 2017, I am looking at a news release in which it is revealed that Pennsylvania-based, teen apparel retailer Rue21 is filing for its second bankruptcy since 2003. Aeropostale, The Limited and Gander Mountain all declared recent bankruptcies. In addition, JC Penny, Macy’s, Sears, Kmart, Payless, Crocs, BCBG, Abercrombie and Fitch and Guess have all announce major store closings this year. Barnes and Noble is said to not be doing well. We are seeing restructuring in the restaurant industry as well. There are many reasons that an individual store can fail, including expired and unrenewed leases, a saturated market, products that do not meet customer’s quality standards, and so on. When you see the national restructuring at the level that we are witnessing, something else is at play.
While you could argue that, based on what you have just read, this is the worst of times for retail and restaurants, other evidence suggests the opposite. Consider this fact: Black Friday sales for 2016 across the U.S. were up 21.6%. The revenue is there. The companies I have mentioned are just not getting their share. It is fair to ask why?
The evidence suggests that some in the retail and restaurant category are going through, what is called, a Kodak Moment. In a recent article, I wrote that in 1998 Kodak had 170,000 employees and sold 85% of all photo paper worldwide. Where are they now? Their business model disappeared and they went into bankruptcy. Obviously, Kodak management did not see, nor did they adjust their business model to, the development of the digital camera which was first invented twenty three years earlier in 1975. Today, rather than being a spot-on Kodak marketing tag line, a Kodak Moment has come to mean that executives fail to see how customers and markets are shifting. In other words, ignorance plus arrogance equals irrelevance.
I suggest that one of the biggest drivers of these ever-increasing Kodak Moments is technology. More specifically, it is the company’s understanding and use of technology, or lack thereof. Those who are proactive become knowledgeable and strategic and, as a result, will see opportunity. Consider these trends:
- Shopping is becoming social. Information is everywhere and people use it. 70% of customer’s research online before purchasing in-store and the average shopper uses approximately 10.4 sources of information to make a purchase decision. Retailers can no longer rely on word of mouth and hard copy advertising, they must now create online content.
- Millennials are setting the tone. This year, they will have more spending power than any other generation. 51% say consumer opinions found on a company’s website have a greater impact on their purchase decisions than recommendations from family and friends.
- Mobile is the new medium. Forrester Research, Inc. says that commerce on smartphones is expected to skyrocket from $3 billion in 2010 to $31 billion in 2016.
- Online is a serious challenge. Because online retailers have less brick and mortar, they can offer lower prices.
- The way to beat online is multichannel marketing. The big winners will be retailers and restaurants who can blend the online and offline, the digital and the physical, into one seamless experience consisting of a robust physical presence (which means cool places), e-commerce (the Internet), social media and mobile apps.
- Mobile marketing can drive shoppers to physical stores, but the use of technology in-store can dramatically increase purchasing on the spot. And, multichannel shoppers spend 18 to 36% more than those who use a single channel.
- Big data can uncover unprecedented insight. Technology exists that can collect and analyze the massive amounts of data that consumers generate with every keystroke, including physical movements in stores. Retailers that can successfully capitalize on that data will have the ability to target and personalize their marketing campaigns–a huge competitive advantage.
Restaurants must avoid those Kodak Moments as well. They can do so through multichannel marketing – a comfortable physical presence coupled with active social media to put digital content in play and things like mobile ordering apps coupled with big data. Again, the market is large and will be dominated by millennials in the future. There is competition. Why do you think grocery stores are developing online ordering, pickup capabilities, meal kits and grab and go kiosks? They are using technology to blur the line between grocery stores and restaurants and, in the process, creating more market share for themselves.
Closures and consolidations will continue. Locally, we will continue to see some turmoil in our retail and restaurant inventory. This will create unserved demand in our market. While we cannot keep retailers and restaurants out of the market, nor should we try, it is important that we do all we can to shape that inventory through the intelligent use of incentives. For more on that subject, you can read The Process of Retail Development in the 2016 Restaurant and Catering Guide.