Experts take a look ahead at retailing 2006
Steve Kaufman, Editor, VM+SD
In 2005, we were dominated by political disapproval, economic uncertainty, international upheaval, massive weather instability and those up-and-down-and-up gas prices. What does this all presage for 2006?
For answers, we again turned to the VM+SD Editorial Advisory Board. Tapping into their experience and acumen, we asked what to expect this year.
"First of all," said Christian Davies, vp and creative director at FRCH Design Worldwide, "anyone who makes a prediction about the future of retail has a very short memory. The last time I heard the words 'the future of retail'? Two words: 'Prada SoHo' – as if the future of retail were plywood plinths, a dodgy veneer skateboard ramp and a video that lets you look at your arse."
But retail designers have to be willing to anticipate the future with at least some expectations of trends, tastes and changing habits, and 2005 did leave some road markers.
Rising prices, falling confidence
"We had rising gas and energy prices and falling consumer confidence in the administration's ability to improve the economic climate," noted David Milne, director of store design and construction for The Limited Brands apparel division. "There was the war in Iraq and hundreds of thousands of hurricane-related job losses. And all of this is exacerbated by TV's propensity to use fear as a reporting strategy (fear of war, of attack, of hurricanes, of aging, of disease, of obesity, etc.). It affects markets instantly."
"If fuel prices do not abate, inflationary pressures could be felt in retail pricing that might curtail consumer spending in the longer run," warned Peter Dixon, senior partner at Lippincott Mercer.
"High fuel prices work their way down the economy," agreed Jose Padron, global visual merchandising manager for Godiva Chocolates, "and the political uncertainty lowers overall consumer confidence."
"In the long term," said Dixon, "energy prices matter less by cutting into discretionary consumer spending than by increasing the cost of goods."
Are there opportunities from the fuel price issue? "The opportunities in an increased price/cost market go to those who differentiate and execute," said Dixon, "who do things that matter to consumers, regardless of price."
Ken Pray, coordinator of store design at The Kroger Co., noted that "many in the supermarket industry are actively tapping into that opportunity. To provide a gas station in the parking lot offers customers efficiencies of time, fuel and cost. A powerful combination. Beyond that, the more money that pours into the gas tank, the less discretionary spending consumers have to dine out. It's cheaper to buy groceries."
In-store digital media
Kroger is also one of a growing list of retailers experimenting with digital media – plasma and flat screens, dynamic messaging and in-store broadcasting – as another way to differentiate itself from the competition. Is this the year that dynamic media take over retail environments? Our experts are divided. It seems to depend on how well content can be mastered.
Pray believes digital media are inevitable. "The flexibility and dynamic qualities they offer surpass printed media," he said. The challenge will be to keep it in moderation and relevant to the customers. Otherwise, it becomes a distracting annoyance. Less can be more."
Jack Hruska agrees on the distraction point. "In-store digital media right now are a distraction, not an important component of the retail experience," said the, divisional vp, store planning and design, Federated Department Stores. "That could change if we could do for retail what ATMs did for banking – create an easy-to-use function."
"It depends on your retail category," said Milne. "It is hugely challenging to marry and update content with seasonal product (such as apparel), especially if that includes regional or category distinctions between your brand stores. Besides, most apparel customers don't stop and watch the in-store digital media content – it's just another design element within the store experience."
"If you create content, it's the future," said Padron. "If you don't, then it is out of reach financially."
However, Dixon believes the financial considerations will level off because all the various costs will come down. "There will be a global surplus of flat screens soon," he predicted. "And as the cost of pushing info down the digital pipe becomes free or almost free, and information storage becomes unlimited, there will be no reason why stores, fixtures and even the shelves themselves cannot speak to the customers, delivering info, demo and entertainment."
The return of visual
Our experts are more inclined to see the rebirth of visual merchandising as a meaningful way to communicate with shoppers and differentiate the brands.
"Fun and theater are back in all levels of retailing," said Rick Burbee, creative director at Sears Holdings Corp.
"I think we began to notice the void that occurred after 15 years concentrating on promotionality," said Hruska.
"The pendulum may be swinging too far, though," said Mike Tersigni, design director of Banana Republic. "When all is said and done, it's the product! Good visual can take good product to the highest level, but it can't help bad product."
The most influential retailer?
Good visual, good product, good marketing, who's positioned to be the most significant retailer in 2006? Whoever can compete with Wal-Mart.
"Based on the response it is eliciting from Wal-Mart, you would have to say Target is having a massive influence," said Davies.
"Target, and others, are making inroads into Wal-Mart's domain," said Hruska. "Wal-Mart has announced plans to trade up but this may result in further distraction to its core customer. I think this is an issue for Wal-Mart and an opportunity for its competitors."
Wal-Mart dominated plenty of the headlines in 2005 with unwanted attention from unions, zoning boards, enviromentalists and even a movie-maker.
"After such a long run, and the ubiquity of its locations, it only seems natural that Wal-Mart pauses and retools," said Dixon. "Even its best customers might be getting a little tired of just the Always Low Prices thing. The recent focus on public image, more fashion-conscious advertising and green stores shows it is sensitive to emerging tendencies and where value can be extracted from the market, and will not just rest on its laurels."
"One of the key points from VM+SD's recent conference in Chicago," noted Burbee, "was 'the value of value.' Many customers want quality along with fair price, not just low price always."
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