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WEATHER OR NOT? RETAIL CLIMATE CHANGE IN THE 2020s

The notion of theming a retail insights piece around the weather should bring a smile to the face of any veteran of retail analysis, since weather frequently makes an appearance in a retailer’s explanation of its (usually substandard) performance. The vagaries of weather — a short-term, unpredictable, and visible force — are a good metaphor for much of the public conversation about retail today. Consider the hundreds of pieces written about “the race to one-day/one-hour/30-minute delivery,” for instance. The obvious equilibrium this “race” will reach is that different retailers will use a variety of assets and routes to market to get products to shoppers as fast as they care to receive them. None of this will determine who wins or loses in the future, and very little of it really matters to retailers trying to sustainably grow or brands trying to grow with them. That’s why in this edition of Breakthrough Insights you’ll see a little less on the topics du jour that dominate the media narrative today, and more focus on larger issues shaping the foundations of the industry. Consider this our overview of retail climate change, rather than the weather report. As a student of climate will tell you, four basic factors, rather than the weather, impact a region’s climate:

  • Map of the Earth: Latitude and proximity to water
  • Lay of the land: Elevation
  • Shifts in the air: Ocean currents and prevailing winds
  • The atmospheric ecosystem: Structural changes in base temperature

This Breakthrough Insights compilation features some of the best pieces we’ve released over the last year that highlight these types of climatic shifts.

Map of the Earth: How the Channel Climate Is Changing

Though the shift to eCommerce is the retail weather, other significant channel shifts taking place within the brick-and-mortar world deserve our attention. Figure 1 highlights the global retail landscape between now and 2024. The takeaway here is that brick-and-mortar formats are not responding consistently to changes in the consumer and competitive landscape. The formats in the middle are holding share in retail overall and gaining significant share in brick-and-mortar. This edition of Breakthrough Insights looks at two of the growth brick-and-mortar formats highlighted. Simon Johnstone evaluates the global strategies of Lidl and Aldi in discount, and we also provide insights on the growing role of fresh food in the convenience store channel.

Figure 1

Even within eCommerce, the climate shifts are useful to identify. Harriet Leach details the lifecycle of Amazon entering and leaving the China market. The Chinese eCommerce ecosystem has a totally different climate than the rest of the world, and over time, Amazon found that climate to be inhospitable to its classic retail business model.

Lay of the Land: How Retail Formats Are ‘Elevating’

If you believe the weather report, every brand in the world is embracing direct-to-consumer (DTC), turning its back on retail and forging its own relationship with shoppers. This, of course, ignores the fact that shoppers have for hundreds of years viewed stores as a way to simplify and curate those relationships. Malcolm Pinkerton does a great job breaking down the state of DTC, providing brands with a real understanding of the hard work it takes to succeed in this arena. The changing consumer and retail climate is forcing changes not just in channel strategy, but, to some degree, in the channels themselves. In terms of channel evolution, Tiffany Hogan’s piece on the rise of marketplaces in the fashion industry details how fashion brands are elevating beyond their mall presence and using the digital world to create a new relationship with shoppers who have turned their back on shopping malls. She also looks at the future of department stores in this context, since the department store model historically has been more like a curated marketplace than a traditional store. The future of stores in general is another weather report, as notions that stores need to be more tech-driven or experiential run headlong into practicality and economics. No one is better at sorting through marrying the possible and the operational than David Marcotte. His piece on the evolution of smart retail is a great read on how brick-and-mortar stores will change and transform to meet the needs of digitally enabled shoppers.

Shifts in the Air: The Winds of Major Change

It’s not just where people shop that’s driving retail change, but also what they buy. No topic will reframe more categories over the next five years than the increasing legalization of CBD and marijuana for medicinal and recreational purchases. The piece we’ve included here is a comprehensive look at how U.S. and Canadian consumers are using THC/marijuana and what their cannabis consumption is replacing — a combination of alcohol/tobacco and medical solutions like OTC/pain relief. The other recent climatic shift in wallet share has been the move away from physical goods to experiences. One of the fastest-growing experiences is gaming. In conjunction with a podcast Meaghan Werle, Mike Carlucci, and I did earlier this year on the future of esports, Meaghan pulled together a great piece looking at the retail possibilities within the esports environment.

The Atmospheric Ecosystem: Structural Changes in Temperature, Rainfall, and Weather Volatility The columnist and author Thomas L. Friedman coined the phrase “global weirding” many years ago to capture the idea that global warming was an incomplete description of the changes that elevated levels of greenhouse gases were foisting on global climate. This sort of structural change seems to best capture the ideas in our customer leadership 2025 analysis. In it, we took the framework developed by the Institute for Real Growth and applied its seven building blocks to the work of global, customer-facing teams inside major branded manufacturers.

Umbrella or Roof?

The American poet and former ambassador to Spain and England James Russell Lowell once wrote that “compromise makes a good umbrella but a poor roof.” This metaphor is a great way to think about the decisions companies need to make about the climatic changes we see in how stores work, where people shop, what they buy, and the work that needs to be done. Too many of our clients are reacting in knee-jerk fashion to the weather — trying to stitch together 100 umbrellas to make a roof. Hopefully, a more climatic view of change will allow them to allocate resources toward building a more useful, solid, and enduring shelter. Enjoy the read and the rest of 2019, and we hope to see you at a Kantar event somewhere along the way.

Bryan Gildenberg
Chief Knowledge Officer


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