2010 Retail Outlook: Forget “The New Normal”

Let’s start 2010 by striking the phrase “the new normal” from the collective lexicon.

It suggests that a predictable, steady state lies somewhere ahead for the retail industry.  That’s not going to happen anytime soon, especially not in 2010.  Having said that, here’s a quick snapshot of what we do think will be happening in the retail space for the coming year.

The fact that economy will continue to limp along will create a huge opportunity for discount retailers in 2010.  More specifically, Wal-Mart’s plan to attract upscale shoppers, particularly in the area of home electronics, is dovetailing nicely with a parallel trend by affluent shoppers to increase trips to discount stores.

As credit markets loosen up, expect to see a wave of mergers and acquisitions in the retail space.  As brick and mortar retail consolidates, look for an uptick in online retail sales as consumers seek alternatives to what they see as homogenized retail offerings.

For supermarkets, the challenge will be to hold on to the trips of shoppers who are tempted to stray to stretch their household budgets at Wal-Mart, Costco or Family Dollar.  Gone will be the huge sections of countless varieties of barbeque sauces.  Look for smart, simplified, and localized assortments to make a comeback.  (Interestingly, when overblown assortments get reduced, consumers often perceive an increase in variety.)

Among big box retailers, there is evidence of pent-up demand for durable goods–TV’s, appliances, and the like.  Competition for these dollars, however, will be fierce.  Wary consumers will be pounding the Internet for “crowd sourced” product information and customer feedback on pending purchases.  An increasing number will be looking for input from Facebook friends and Twitter followers.

Dollars stores and–oddly enough–convenience stores will also benefit from the down economy.  There’s data suggesting that c-stores are an outlet of choice for a growing number of consumers making micro-basket fill-in trips–three or four items.  Paying a higher price on the smaller basket seems to be acceptable.  This should bode well for the sale of grocery items in the drug channel as well.

Across all retail outlets, competing on analytics is no longer a competitive advantage.  It’s the ante to stay in the game.  All customers are not of equal value.  To not focus your marketing resources on your most valuable customers is not just short sighted, it’s foolish.

Finally, today’s youth are spending more time online than anyone thought possible.  If you want to reach them you need to be there as well.  If you are not fluent in mobile and social media, take a teenager to lunch. And bring a notebook.

Here’s to a prosperous 2010.

Gregory Grudzinski heads Fulcrum’s Retail Solutions Practice and can be reached via email at ggrudzinski@fulcrm.com.