Gen Z is waiting in the wings, digital and mobile are coming even more to the fore, globalization has brought the world closer and distribution is the new key to consumer happiness.
Sitting at the epicenter of these and other tectonic forces is retail, which has been forced to take action. The question is: Just how should merchants change and are they moving fast enough?
Taking measure of that evolution is consultant Michael Dart, partner at A.T. Kearney, in his new book, written with Robin Lewis, “Retail’s Seismic Shift: How to Shift Faster, Respond Better and Win Customer Loyalty” (St. Martin’s Press).
Here, a conversation with Dart on how the landscape is changing and what retailers can do to keep up.
WWD: You write about the supply and demand imbalance. Why is fashion producing too much merchandise?
Michael Dart: There are a number of forces driving the imbalance. One is the incredible production efficiency, another is the business of globalization. That just created so many new sources of supply.
The problem on the demand side is that people are spending less on physical assets. We’ve moved into a world where we’re spending [more] on services.
WWD: What can be done to right the imbalance?
M.D.: It’s going to be a bit of a shakeout. That’s what we’re in the early innings of right now. Over time, we’re just going to see the retailers shrink as well as the brands themselves, the number of brands and that’s going to start to bring us into an equilibrium.
WWD: You argue that niche brands are going to be the new mass market. How so?
M.D.: There’s just been an incredible fragmentation and people have been exposed to so much, so many choices. They’re trying to figure out, “How do I find what really stands for me?” There are so many new interesting niche brands that have a very clear focal point and can actually do quite well. It’s hard for them to grow sustainably, they tend to get boxed in in a certain range, but the whole market is kind of being eaten away by these niche brands.
WWD: Is there still going to be a place for Wal-Mart?
M.D.: The trends that we articulate in the book are almost an existential threat to every mass retailer. There are strategies that you can deploy to try to mitigate that and I think Wal-Mart is trying to do that, which is making a lot of acquisitions of smaller niche brands, secondly they’re trying to make a much more flexible supply chain. They’re being as progressive as they can be to address a lot of these concerns. Probably they are the one retailer you look at right now who has a good chance of standing up to Amazon.
WWD: The book signals out distribution as the vital link in the retail chain this century. How can companies that aren’t Amazon win at distribution?
M.D.: For retailers, obviously having a highly experiential store fleet is a reason to actually go to the stores, also if you can have a real sense of community or environment. If you have small neighborhood stores that are close to the consumer and are very convenient, that can work as well. If you can really make a smart omnichannel experience — buy online, pick up in store — that can be a winning strategy.