Don’t blame Millennials for ruining retail because they make more purchases online. In fact, what appears to be a retail apocalypse is really a retail “renaissance” that’s in the works.
So says a new study from Deloitte, which noted that consumer economics are driving the retail industry bifurcation. The report called “The Great Retail Bifurcation: Why the retail ‘apocalypse’ is really a ‘renaissance’” was released on Wednesday. The study is based on a survey of more than 2,000 consumers.
According to the report, retail is changing “in line with consumer income bifurcation.” It noted that high-end and price-conscious retailers are seeing their revenues rise, growing 81 percent and 37 percent, respectively, while retailers in the middle — so-called balanced retailers that deliver value through a combination of price and promotion — saw just a 2 percent increase in sales over the past five years.
Specifically with regard to consumer income bifurcation, the study said over the past 10 years, the lower 40 percent income group has struggled to keep up with expenses, while the middle 40 percent has seen its income shrink. Both groups — 80 percent of consumers — have seen a worsening of their financial situation, the report noted. The study also concluded: “Income and net worth gains are disproportionately going to the highest-income group.” Compounding the problem is that for those in the lower income level, their share of income spent on non-discretionary categories such as food and health care has gone up.
And it found that lower- and middle-income Millennial consumers spent in similar patterns as other members of their income cohort.
The study also noted that the perception of a retail apocalypse stems from the possibility that most of the store closures — and even retail bankruptcies — have been from those so-called balanced retailers. The report said both price-based and premium retailers “have been opening more stores over 2015 to 2017 than closing them.”
Kasey Lobaugh, a principal at Deloitte Consulting and the report’s lead author, said retailers are opening new stores “at an astounding pace, and physical retail is growing alongside digital….While specific retailers may see an apocalypse, others see opportunity.”
The study concluded that huge shifts in economies, competition and consumer access to options, fueled by advances in technology, is shifting the retail market so that those who win are the ones that are able to offer a value proposition aligned with consumer needs.
Separately, the annual “State of Retail Online” study from the National Retail Federation and Forrester concluded that traditional and online retailing are becoming increasingly intertwined as consumers shop across both touch points. The study, also released on Wednesday, found that 42 percent of store-based retailers expect a net increase in the number of brick-and-mortar stores in 2018. It also found that online sales coming from desktops are still double those from mobile browsers, but mobile sales are expected to grow 36 percent a year versus just 8 percent growth from desktops.