Is Gen Z uniquely bargain-conscious?

From a couple of recent posts on RetailWire, here are some comments about whether today’s Gen Z shopper entering the consumer landscape is more price-conscious than his/her older sibling, parent or grandparent. My opinion:

Shoppers regardless of age are more price-conscious and value-oriented than ever. Some of this is residue from the Great Recession, and some of this results from the “empowered shopper” with plenty of price data as close as the nearest cell phone.

I wouldn’t describe Gen Z as uniquely price-oriented. I’ve taught a college-level retailing class for ten years, and it’s always a challenge to discuss retailers that the students can’t afford to buy from. (And today’s college students fall right into the Gen Z age profile.) These are mostly students who are working through college while taking on significant debt, so it’s no wonder that they visit TJMaxx instead of Nordstrom. But their spending power will change as they form households and grow their career earnings potential.

And from a later post on the same topic:

I’m not convinced that Gen Z shoppers are any more or less bargain-conscious than their older siblings, parents or grandparents. It’s the world we have lived in for a long time — not just post-recession or with the advent of m-commerce. It’s not by accident that Target, Walmart, Kmart, Kohl’s and others opened their doors in 1962 because it signaled a “search for value” that hasn’t let up.

I’m more focused on the two items on the list that will affect stores’ real estate strategies for years to come. If Gen Z shoppers are both mall-agnostic and commute-averse, this will benefit neighborhood retailers — or at least those retailers willing to rethink their traditional approaches to site selection. And, of course, it benefits e-commerce retailers like Amazon who bring a different meaning to “localization.”

Amazon Go…it’s a go!

After a long period of testing, Amazon Go is finally opening its doors to the public. Its first C-store location in Seattle has already received a lot of attention for its technological leap, where the shopper can walk out the door and pay for purchases without stopping at a register. Here’s my comment on RetailWire:

I assume the long gestation period was needed to test not only the technology but also the merchandise content. From the descriptions of Amazon Go, it is more focused on fresh and ready-to-eat food than a typical C-store and devotes less space to categories like candy, chips and so forth. It will be interesting to read some on-the-ground reporting about what the store actually looks and feels like.

I expect Amazon to be patient with the concept, because some customers simply won’t be comfortable right away with a cashier-less environment. At least for now, human interaction in any kind of store (including a C-store) is part of the equation unless you’re an early adapter of the Amazon Go tech experience.

Online shopping: Mobile or laptop?

Online shopping is migrating rapidly from desktops and laptops to mobile devices. On RetailWire, panelists recently discussed this trend:

The answer to the question depends on which retailer you’re talking about. Amazon (for example) makes the process of buying directly from your smartphone app as simple as possible, so it’s easy to buy without having to reach for your laptop. On the other hand, some transactions are more complex (for example, the dishwasher we bought after Thanksgiving) and really benefit from a bigger keyboard and screen to “close the deal” — even if the initial searches happen on the smartphone screen. (At least that’s true for this troglodyte.)

Lesson learned for all e-commerce and omnichannel retailers: Follow the Amazon model where possible, and make the transaction as easy as you can — from search to selection to checkout. If more retailers follow this example, the smartphone share of wallet will continue to grow at a rapid rate.

Holiday 2017, in several observations

Starting with Black Friday, I’m stringing together a few comments on RetailWire about the holiday 2017 shopping season. By all estimates (and retailers’ reports), sales were better than expected considering the doom-and-gloom early in 2017 about the “death of brick and mortar” at the hands of Amazon. Here’s the thread:

1. Most of the anecdotal evidence and reports from retailers suggests that foot traffic was down, especially on Friday, but overall sales volume was good. This suggests that stores’ omnichannel strategies are working to drive total sales, instead of the “silo” effect of looking at e-commerce and brick-and-mortar as two separate businesses.

There is also a sense of higher discretionary spending, which will tend to benefit department stores along with off-pricers specializing in apparel. Early cold weather doesn’t hurt, either.

2. Several factors came into play, including low unemployment, the “wealth perception” of high stock prices, and a break on the weather that helped drive sales of seasonal goods. But I think there are two other key factors in this holiday season’s apparent success: First, the large number of store closings during the first half “cleared the deck” for those left standing to gain market share. And, even more important, most brick-and-mortar stores finally figured out how to leverage their own e-commerce business into a true “omnichannel” experience for their customers.

Omnichannel: Not just a matter of semantics

As retailers continue to grapple with their own definition of “omnichannel,” I thought this RetailWire comment might offer some clarity:

I ordered razor blades from Amazon a few days ago, and I just ordered some K-cups this morning. (They will be here later today.) Would I describe this as “omnichannel,” because it involves commodity items that I might have found in a physical store? No, I would call this purely an e-commerce transaction.

A true “omnichannel” initiative is one that bridges the divide between e-commerce and brick-and-mortar. If I had bought the K-cups from walmart.com (and picked them up at the store), that would be closer to an omnichannel play. And the more seamless the shopping experience, the better … whether I am buying food, consumables or apparel.

Once we get past the semantic distinctions, there is little doubt that programs like BOPIS, BORIS, ship-from-store and curbside pickup are escalating rapidly. The consumer continues to search for the perfect combination of price and convenience — the “blue-eyed unicorn” of today’s retail.

Diminishing returns for Black Friday

With the release of the NRF’s annual holiday shopping forecast comes a RetailWire discussion about Black Friday. The debate? Whether the event itself is essentially dead as a volume driver. My opinion? Not so fast:

“Killed” is too strong a word, because Black Friday still represents one of the biggest shopping days on the retail calendar. But the day has lost its punch for a number of reasons:

1. Most obviously, the shift from brick-and-mortar to e-commerce. With the growing number of store closings and “zombie malls,” this will be a bigger problem than ever throughout the 2017 holiday season.
2. The Thursday paper stuffed with promotional circulars doesn’t reach the huge number of Gen Y and Z shoppers who don’t even read the paper.
3. As stores have extended Black Friday opening hours into Thanksgiving itself, they have simply cannibalized their own business.

I could go on, and these are tough “macro” challenges for an individual retailer to overcome. Some of the potential solutions involve greater use of targeted social media and other messaging to reach younger customers…and this is true from early November all the way to the last crucial weekend before Christmas.

But the biggest challenge may be to make the sale offerings and merchandise content more compelling. Easier said than done (without months of advance planning), but the recent focus on putting entire assortments on sale — instead of key items at compelling price points — has drained Black Friday of its former sense of urgency.

The impact of “activewear as sportswear”

It seems more apparent than ever that some of the “women’s apparel” problem is actually a long-term lifestyle change. RetailWire panelists discussed this in the context of Gap’s Athleta activewear division:

I was in Madison, Wisconsin last week and walked down the pedestrian mall running from the state capitol to the University. It was impossible to ignore that the vast majority of women were wearing “activewear as streetwear” — in particular, black yoga pants instead of jeans. And these were college students for whom jeans would have been “the uniform” five years ago.

On the last wave of quarterly earnings calls, most retailers complained about the lack of traction in their women’s sportswear businesses — while mentioning the rapid growth of fitness wear. It’s increasingly clear that activewear is cannibalizing more traditional women’s apparel, so Gap ought to push the growth of its Athleta brand as hard as it can for as long as this lifestyle shift continues.

Are social media driving the speed of trends?

The short answer to my own headline question (above) is “yes,” but there is a lot more to this issue. Here’s my comment from a recent RetailWire panel discussion:

Social media may be a factor in fashion trends going Aeand moving faster. But the influence of “fast fashion” retailers (Zara, Forever 21 and others) can’t be understated. They mastered their supply chain in order to bring new goods to the selling floor a lot faster, and in order to react to early test orders in a big way. Most traditional retailers built their logistics around long lead times, especially on private-brand goods, and are scrambling to catch up.

The idea of “speed to market” requires a change in mindset — affecting supply chain management, the willingness to chase big ideas, and the ability of retailers’ vendors to move just as fast.

Groceries are battling too much space too

Excess square footage in general merchandising has been well-documented, especially with 2017’s wave of store closures. The trend hasn’t swamped grocery retail — yet — but don’t be surprised if the advent of online grocery shopping will take a toll. Here’s my comment, from a recent RetailWire discussion:

The grocery business is suffering from the same “overspace” problem that has plagued general merchandisers for years, leading to waves of store closures this year. The retailers in the middle — the old standbys like Kroger — are particularly vulnerable to increased competition from discounters, small-format stores and retailers doing a better job engaging with “foodies” and Millennials. (At least Kroger has a winning concept with Mariano’s in Chicago.)

There is no doubt that shopping behavior is changing. Some shoppers are opting for more frequent but smaller trips for fresher food, while others are bulking up at warehouse clubs. Aldi, Lidl and Trader Joe’s are offering smaller stores with curated assortments, and now Amazon is lurking in the background with its purchase of Whole Foods. As a regular shopper at Kroger’s “Metro Market” chain in Milwaukee, I can tell you that the overwhelming amount of choice (to fill all that space) makes even a simple shopping trip harder than it should be.

While some mid-tier chains are in a better position than others to survive, some industry consolidation is probably long overdue here. Meanwhile, here’s a related post about mall developers looking to fill empty space with food retail:

It’s ironic that we’re talking about food stores taking over vacant mall space today, after discussing excess square footage in the grocery business yesterday. There may be specific malls where it makes sense to add a small-footprint store like Fresh Market, but it’s hard to see how full-line mid-tier stores like Kroger can make this work on a large scale despite its test in Ohio. Presumably the grocery store would be the “last stop” on the shopping trip, if the shopper visits the rest of the mall at all.

The entire issue comes down to mall developers and how they reinvent all that real estate. Southdale (outside Minneapolis) is replacing a JCP store with a three-level fitness center; other malls are adding more dining and entertainment. But pulling off-mall retailers (TJX, Costco) into the fold may be a more viable solution if the price of entry is right.

Thoughts on the QVC-HSN merger

Here are some quick impressions that I posted on RetailWire about QVC’s plan to acquire HSN. “Home shopping” has lost its novelty — especially as TV viewers cut the cable cord — so the combined company faces some daunting challenges:

The initial benefit of the QVC-HSN merger comes from economies of scale in a mature segment. (It’s the same kind of play that Macy’s made for May Company several years ago, recognizing the lack of organic growth in traditional department stores.) But it’s clear that home shopping (via TV) is not where the action is. It’s up to QVC to figure out how to translate the “treasure hunt” experience of off-pricers to its model, and especially how to engage mobile shoppers at its site. It becomes an urgent challenge as more consumers (especially younger ones) continue to cut the cable cord.