The changes that have taken place in recent years have led to a revolution in the distribution sector in a process that is not yet over.
The retail sector, i.e. the marketing of products, is in crisis. The rise of new technologies, together with changes in the pace and habits of life, have led to a boom in closures and crisis that has its greatest exponent in the United States and the massive closure of shopping centers.
The challenge affects all sectors related to this business model, see food or fashion. In Spain, these movements are already materialising in the destruction of jobs. For example, DIA supermarkets are preparing for an ERE of 1,604 people and Carrefour to lay off 2,400 worldwide. El Corte Inglés is also preparing for closures, has sold its optical division and is on its way to removing the Hipercor brand from its list.
What’s going on in the retail world? Let’s explain the circumstances surrounding these changes, what are the prospects from now on and what cards are betting the companies in the sector.
1). The economic crisis
The real trigger of all these changes is the financial crash of 2008. The arrival of the crisis and the end of the good economic health of families, gave way to the need to ‘buckle up’.
And all of this is still the case today. Shoppers look down to the last penny, which has led to stores being forced to sell with permanent offers (thanks to the liberalization of sales) and reducing the profit margin.
In addition, there is a certain generalized impoverishment of society, since salaries do not grow in many cases corresponding to the CPI, if they are not completely distant from the standard of living corresponding to the prices found in the market.
All this has led to a drop in consumption that Moncloa has tried to alleviate with measures such as the rise in the minimum wage, although the recession that is approaching for the next few years may once again put this point in check.
2). Untimely working days
Long working hours have meant that users have, in many cases, little time to shop and consume. This has been especially true in the food distribution sector, where large multinationals are beginning to leave the ‘hyper’ model in the background and opt for supermarkets and, above all, local shops.
In the case of shopping centres the same thing happens, which has led people to bet on immediacy and closeness. This can be seen with the increase in the prices of commercial land that is taking place in the centre of cities: families are beginning to abandon these ‘excursions’ to shopping centres in order to opt for light local purchases.
On this point, without a doubt, the economic crisis has also had an influence, as we have mentioned. Buyers are now betting on small purchases that are not far away in time, instead of filling the cart every weekend.
3). The rise of new technologies
All these factors add up to the boom in new technologies that is being experienced among users. Online shopping rates are only growing and people are beginning to lose their fear of buying products over the Internet.
All this means that the visit to shops is reduced in benefit to the comfortable purchase from a portable device so that, then, a deliveryman arrives at each house. And even in a world with more movement than in the past, many can take advantage to make the purchase while they are on the way from their jobs to their homes. Again, the time factor contributes to these changes.
4). Greater Supply and Globalization
New technologies along with globalization have brought a whole range of offerings. Thanks to this, the product factor ceases to be an attraction, since we have all kinds of brands and articles within reach of the palm of our hand. All this also allows us to compare prices and start a battle that did not exist before, at least with such intensity.
But there is more. The arrival of these devices has meant the consolidation of the globalising process that everyone has been going through over the last decade. And with it, the shopping tourism that brought so much profit in the past ceases to become an attraction.
The Transformation: Not Just Buying
Faced with this scenario, many companies are beginning to react with two fundamental axes in order to overcome these obstacles. These are the two main bets:
The arrival of experiences such as wind tunnels in shopping malls are an attraction in the midst of the retail crisis.
If the product ceases to be of interest and people have little time to spend shopping, it becomes clear that the model must change to seduce those people who should be willing to invest the little time they have in traveling to a store.
For this reason, the commitment to transformation involves turning the purchase into an experience. This is being done in all sectors. Supermarkets, for example, with a ‘gourmet’ section and staff capable of advising at all times, as well as stalls of eye-catching products, among which the starting gun was fired with sushi and the ‘showcooking’ installed in many establishments.
As for the shopping centres, those giants that are currently kept on feet of mud, there is an obvious bet. There we have for example the wind tunnels and even large lakes with boats like the one installed in Puerto Venecia de Zaragoza. In the end, the purchases end up being a complement to the visit of a kind of amusement park.
Another model, too, is successfully expressed by Primark: leaving aside the online sector and focusing the entire store on compulsive sales through offers. The Irish company places the items, furniture and posters in a way that stimulates the reward system of our brain. It doesn’t sell online and remains oblivious to this phenomenon, it will be for a reason.
2). Commitment to differentiation
That is another of the great challenges, to attract the customer who has an exclusive interest when buying a product. And, in this case, everything points to personalized attention, turning the buyer into the protagonist and guiding him so that, in the end, he feels once again that he is living an experience and making a correct purchase.
The most widespread example in this type of case is the personal shopping service installed in many stores. Some of them include a small catering with drinks and food in the service, something that is not found in all establishments and that, without a doubt, will never exist on the Internet.
There is also great interest in including cafeteria services within supermarkets, allowing the consumption of food that is on sale within the shelves, but cooked in a certain way. These are just some of the points with which companies want to take us out of the sofa of our homes.
3). The crutch of omnicanality
As the popular saying goes, “if you can’t handle the enemy, join him.” That could be the mantra of omnicanality, that is, ordering online and picking up the product in the store in a certain period of time.
This reduces distribution prices, but also attracts an audience to stores that would otherwise not be produced. From there, we would need to develop a strategy so that their arrival serves for more than just receiving a visit.
The future: slimming down structures
Carrefour is already testing high-speed autocobro boxes in Brazil to replace all its ATMs “Carrefour is already testing high-speed autocobro boxes in Brazil to replace all its ATMs”.
With a model in full change and the uncertainty of the recession that is coming for the next five years, the sector is also preparing organic changes. Perhaps not all the positives to include in their ‘good practice manuals’ that contribute so much to improving brand images.
One such example is the Carrefour 2022 plan, a roadmap with which to save “2,000 million euros” by 2020, according to the letter, along with job losses. To do this, they would use the digitalization of in-store services, such as autocobro, as well as the reconversion of large ‘hyper’ in small establishments.
This undoubtedly indicates that the companies of the future will have smaller and at the same time agile structures. But the problem is obvious and is not a matter for companies alone. If a crisis looms and job destruction is expected… Who will decide to buy from a shop?
Author: Adrián Parrondo Adrián Parrondo Los replicantes