Obtaining information from 87% of all retailers in the United States and much more across the world, Marshal Cohen has the statistics to back up his theories.
Marshal Cohen is the Chief Industry Analyst for the NPD Group and is a nationally known expert on consumer behavior and the retail industry. The University of Arizona’s Retailing and Consumer Sciences students had the privilege of listening to him speak about what retail will be like in 2022.
“We’ve already changed, now they (retailers) need to change along with us,” said Cohen as he discussed how retail is not dying, it is evolving. The three major topics Cohen brought attention to were the new categories that have seen the most growth in 2017 and why, how focusing on one small category of growth is not enough to compete with the categories that have more volume, and lastly, private labels are becoming more popular than large brand name product.
When you look at retail trends today, prestige beauty, for the third year running, is the best and healthiest business because they’ve figured out how to resonate with the consumer. Beauty may not be the largest sector in retail but in 2017 it has seen the largest amount of growth. When you look at every segment, there are specific reasons why apparel, footwear, and the accessories businesses are not growing at the rate they once were. The answer is Consumer-Based Trends.
Retailers must listen to what their customers want. Athleisure is a trend that evolved from customers. Yoga pants took off and now that’s all people want to wear. The market is flooded with different styles of leggings, hoodies, and sneakers. More people buy athletic wear to lounge around compared to actually working out in it. Slippers are another example Cohen brought up. People wanted to wear their slippers more often. When shoe companies realized this they started to make slippers with rubber soles so they would last longer.
One of the struggling markets Cohen pointed out is the accessory business. Fancier and luxury handbags are struggling because they failed to change along with the consumer based trend. If everyone is wearing athleisure, a fancy handbag is not going to go with most outfits. However, the luxury brands that started making fancier backpacks have done better because it fits the needs of consumers and flows with the new trend. The retailer has to change their products with the evolution of trends.
The retail industry is evolving because consumers are changing. When Zappos started selling shoes online, customers thought it was crazy to buy shoes without trying them on. Zappos introduced free shipping which gave customer’s what they wanted and people started buying shoes online. This idea of free shipping or free two-day shipping is changing the frequency at which people purchase because they can make smaller purchases.
How to Grow an Area of Business
Two major changes in consumers are the fact that people want to spend more time at home which is what Cohen calls “nesting,” and consumers want to spend more money on experiences and travel.
Cohen told a story about a retailer who recognized the trend of traveling, however, they kept thinking that they could not put all the traveling products together because they have specific departments and isles where things go. Cohen convinced them to put their travel products in one area of the store and the company watched the sales in that category triple! You must give customers what they want, and they will spend.
The only thing about focusing on these smaller growing categories is the concept Cohen calls, “leading to lagging.” As important as it is to focus on the growing category, sometimes the smaller categories to not make up for the loss that is happening in the higher volume ones.
The Prestige Beauty category is practicing the same concept but in a different way. As the make-up category is about to hit its highest peak, they start to look and create another leading category, such as skin care to rotate into the leading category.
Less Brands, More Private Labels
One way companies are taking advantage of this method is through the creation of private labels. Amazon bought Whole Foods to gain access to their private label, they have also created their own Fashion line and are expanding into more categories. Customers are realizing they can buy the same product at a lower price. For example, Amazon has gone after the same manufacturer as Lulu Lemon, however, their products are being sold at a much lower price. Customers hear Lulu Lemon and they start to place a higher value on the private label brand. From a retailer’s perspective, this is great because private labels mean higher margins.
After listening to Marshall Cohen, our retail students realized how useful data can be. Some of the methods retailers have been practicing for years are no longer effective because society does not work the same way it did ten years ago. Retail is not dead, it is just starting to evolve and it is going to be bigger than ever before.