Discover your Retail Relevance

Retail is a dynamic sector. Responding quickly, capitalising on opportunities, switching every promotion around at the last minute; it pretty much sums up the daily routine.

But retail is dynamic in other ways, too, especially in light of the speed with which the economy and society have been moving in recent years. The emergence of online shopping and the financial and economic crisis have really shaken up the market and caused structural changes. Not all existing businesses have managed to navigate through this transition successfully. Many retailers went bust, but at the same time new concepts and companies were born.

The market hasn’t come to a standstill and retail transformation keeps moving ahead. 26,000 new jobs were created in the retail industry last year. Great news!

The thing is, though, that none of these jobs went to the physical store. In fact, 21.000 jobs were lost in that area. So where did they go to? They went to distribution centres, e-commerce teams and departments focused purely on customer service. There’s little room left for the old-fashioned salesperson in today’s retail world. Not only are fewer people needed in the stores, retail is looking for a whole new breed.

CROSSING BORDERS

The economic policies of the EU have, in recent years, focused on simplifying shopping in other European countries (cross-border shopping). The laws and regulations on economic traffic are now so much aligned with each other that many of the obstacles have been removed. This has impacted the buying behaviour of consumers, including the Dutch. Last year, more than one-third of the Dutch consumers bought products from abroad one or more times. The majority of these purchases were made at online stores such as Amazon.de, but the Dutch also crossed the border in droves to buy bathrooms and fireworks. A notable observation is the increase in purchases outside the EU, particularly in China. In 2015, Dutch consumers spent more than half a billion euros in webstores abroad, 25% of which were spent in China. The low prices of online market places such as Ali Express, as well as the subsidising of the shipping costs by the Chinese government, created rapid growth.

But we’re now also seeing that international competitors are setting up shop right here in the Netherlands. Holes that were left in the major shopping centres following the bankruptcies of established Dutch retail chains were quickly filled by new companies from abroad.

In 2015 alone, 18 new chains entered the Dutch market, including Søstrene Grene, Bolia, Sandro, H&M and JD Sports. But also globally leading retailer Inditex with brands like Zara, Berschka, Pull&bear, Massimo Dutti and Stradivarius, has experienced explosive growth and there’s no end in sight yet. Just recently, Inditex announced it will be renting an additional 4000m² in the totally renewed Hoog Catharijne shopping centre in Utrecht. Also in areas outside the main centres for shopping, in the DIY market for instance, foreign investors are gaining ground. In spite of court cases by existing market players, Hornbach as well as Bauhaus have opened new hypermarkets in the Netherlands.

It’s quite clear that an ever-greater share of the expenditure by Dutch consumers is ending up in the hands of foreign businesses.

CHANGING SHOPPING PATTERN

The shopping streetscape, too, is undergoing major changes. After years of increasing vacancy rates, the number of empty retail properties declined for the first time again in 2016. This doesn’t mean there are more shops, but the buildings themselves are now used for different purposes. For example, 500 of these properties were converted into residential dwellings in the past year, and over 1000 of these premises are now occupied by restaurants, cafés and other hospitality businesses. It’s clear that the municipalities and real estate sector are making a serious effort in upholding their agreement in the 2015 retail agenda to ensure the retail centres remain future-proof. The consequence of this is that there are fewer shops and fewer shopping areas.

But the shops are not only fewer in numbers, they are changing as well. There are now large market halls in Rotterdam and Amsterdam, and leading grocery chains Albert Heijn and Jumbo are also opening their own Food Markets. These are concepts we didn’t even dream of a few years ago. Not only in food are we’re seeing chains open bigger stores – flagship stores – in A1 locations. All across retail, huge stores are opening that sell a full product range and, more specifically, a full-on brand experience.

Going bigger doesn’t apply to all chains. Many are moving in the opposite direction by opening branches that are smaller in size and carry limited, carefully selected stock. You’ll often find stores like this in smaller cities and towns. With a little help from the in-store kiosks, the full product range is still available. Home improvement chains are moving in both directions: besides the hypermarkets on the urban fringes, Gamma and Praxis have opened small DIY stores with a more limited stock in different cities. This is something furniture retailer IKEA has also done in a number of cities abroad.

Finally there are the major outlet centres, which have also grown in number here in the Netherlands. Besides Batavia Stad in Lelystad and Rosada in Roermond, the Zoetermeer city council has also approved the construction of a massive outlet centre. The upsurge in outlet centres places even more pressure on the existing retail shopping areas.

CHANGING PRICE STRATEGIES

In December 2016, health food chain GNC announced it was closing 4400 of its stores for one day so it could change the pricing policy in the stores. According to the company, the business model was outdated, the prices and discounts were confusing and were not in sync on the online and offline channels. One of the reasons GNC gave for the change is that the prices in the market are virtually completely transparent. Many customers have a smartphone and can compare product prices on the spot.

Similar issues are also at play in our own country. Dutch DIY chain Formido reported that its stores would be working with “reasonable prices every day”, moving away from the well-known DIY discount vouchers. Here too, market transparency was the main instigator for this change in price strategy.

However, (price) transparency is not the only reason retailers are changing their price strategy. The success on the Dutch market of chains like Action, Lidl and Op=Op Voordeelshop is forcing the competition to keep a close eye on their own pricing. In the UK, research was recently conducted on the growth of discount retailers. One very interesting outcome of the study shows that discounters mainly grow during times of economic crisis, but don’t lose any of this market share once the hard times are over.

RELEVANCE

The above are examples of developments currently taking place and which are changing the market. And it is precisely in this changing market that retailers should be asking the question: “How do I stay relevant?” and “How can I continue to add value and distinguish myself in doing so?”

Distinguishing yourself can of course be achieved in many ways. In our blog we will write about current topics in which you, as a retailer, can make the difference. There are the three key areas in which you can really distinguish yourself: innovation of shopping concepts, well-trained staff and current, relevant content.

The new consumer demands new retail concepts

Retail is
getting a
digital heart

Discover your Retail Relevance | Retail Blog · Kega