According to a new Whitepaper from Nielsen, What’s In Store, In-Store For U.S. Retail In 2016, presented byTodd Hale, Senior Vice President, Consumer & Shopper Insights, traditional mass merchants and supermarkets have yielded share to value channels (club, dollar, and supercenter) and drug stores, prompting a series of changes, including format blurring, new marketing outreach techniques and shopper entertainment.
Highlights from the findings include:
The report goes on to say that retailers will be challenged as never before to differentiate from an ever-expanding competitive set that brings novel ideas and fresh perspective to the marketplace. Using historical trends in retail channel sales and store counts, along with a select number of macroeconomic variables, Nielsen predicts above average compounded annual dollar sales growth (CAGR) for the e-commerce, club, dollar, pet store, supercenter and drug channels ranging from 8.5 to 2.7%.
Ecommerce tops the list of growth channels. During the 2011 holiday season, retailers across different channels touted free shipping and big discounts, attracting consumers eager to save time and gas money by shopping at their fixed and mobile keyboards.
Responding to sales gains made by online competitors, brick-and-mortar retailers are evolving their business models to add more choices for online and offline ordering as well as delivery and pick-up options.
Projected Retail Channel Compound Annual Growth Rate
Compound Growth Rate 2010-2016
Discount department stores
Losing Share & Negative Growth
Home, bed, bath
Source: Nielsen TDLinx & Nielsen Analytics, March 2012
Throughout the recession and economic recovery, the club chains appealed to shoppers seeking value, says the paper. Club store growth reflected a unique connection with affluent consumers, the 21% of households that exited the recession early, as evidenced by their increased all-outlet shopping trips and overall spending.
A major impetus behind dollar store growth was a recession-fighting strategy featuring an expanded offering of consumables to attract price-conscious shoppers across all income strata. Additionally, dollars stores kept their foot on the gas with respect to store expansion in existing and new geographic areas. As a result, the 21,500 site store count for the three leading dollar store chains [Dollar General, Dollar Tree and Family Dollar] now exceeds that of the three largest national drug store chains [Walgreens, CVS and Rite Aid].
Over the past decade, supercenter format expansion had the greatest overall impact on U.S. retail sales. While industry pundits discuss the future of these and other big box formats, future supercenter expansion from the big players in the channel will continue to foster sales growth over the next five years.
The American love for pets triggered a 40% increase in chain pet store numbers between 2005 and 2010. With pet ownership reaching all time highs, the pet channel will deliver a strong CAGR through 2016.
With an aging population with strong demand for prescription drugs, the drug channel will maintain fiscal health, outpacing the average channel growth rate. All other channels will lose ground, even if they continue to grow on a nominal dollar basis. Specialty retailers such as auto, sporting goods, electronics, books, toys and home/bed/bath stores will face the biggest challenge.
Some specialty retailers (e.g. toy, book and electronics stores) have experienced significant erosion in store count as big retailers in each sector closed their doors for good. Either declining store counts or lower shopper demand has led to decay in shopper penetration for many specialty retail channels. Pressure from offline and online big box competitors and pure play online retailers will likely lead to further declines.
Supercenter store count more than doubled to 3,468 stores and
these mega one-stop-shop behemoths captured nine share points within consumer packaged retail formats between 2001 and 2010.
With the exception of an aggregate 6.1 share point gain for e-commerce, supercenters and club stores, the Nielsen forecast suggests that share shifts between 2010 and 2016 will be relatively minor for the other formats. Supermarket share will decline at a diminishing rate relative to the past decade or more. The convenience/gas channel share will decline just slightly, while the mass merchandiser channel will experience a share loss of 1.7 points.
The projected share decline for mass merchandisers reflects the historic Walmart effort to convert existing discount locations into supercenters and to a lesser extent from Kmart store closings. Specialty retailers are expected to suffer share declines across the board, ranging from a one percentage point fall for home improvement outlets to a marginal 0.2 percentage point drop for sporting goods stores. Surveying the smaller specialty retail channels, only pet stores will realize a share increase.
Expect Amazon, Apple, Facebook and Google to focus on highly profitable enterprises outside their current purview, including retail. An industry expert has said, “Amazon, Apple, Facebook, and Google don’t recognize any borders; they feel no qualms about marching beyond the walls of tech into retailing…and even finance.” These four companies will enhance or disrupt the future of retail, either in how and where merchandise is sold or how organizations communicate with shoppers and consumers.
Points of marketing differentiation suggest in the report include:
The paper concludes by anticipating that:
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