The Paradox of Growth

Lorena Serrano, Marketing, The Doneger Group
July 20, 2016

A multitude of factors are changing the landscape of the retail industry, yet it's technological advances and the use of digital platforms that are altering consumers' expectations of the shopping experience. The industry is becoming more segmented than ever, and while industry leaders are noticing a decline in market share, small and mid-sized retailers are slightly increasing their presence. Growth for larger retailers has suddenly become a challenge, and new consumer habits show that bigger is no longer better.

Industry Fragmentation

The proliferation of digital platforms has enabled small hopefuls to enter the industry. Amazon encouraged the fragmentation of the industry by allowing third parties to sell products on their website. With easier access to customers from digital platforms, competition in the industry has greatly increased.

Consumer trends have further contributed to this fragmentation. Urban centers are on the rise as millennials flock to cities and forgo the spacious living arrangements of the suburbs. As personalization becomes increasingly popular, mass products no longer hold the appeal they once did. This provides a challenge for larger retailers as they depend on mass production with little customization.

Retail Implications

Given the increase in competition and shift in consumer lifestyle, retailers must adjust their business models in order to grow. Smaller and more specialized retailers are finding success in urban environments. With smaller brick and mortar locations, larger retailers have to consider the implications of less shelf space, targeting products to be location specific. With a smaller assortment, retailers will have to correctly target their limited product offerings.

If retailers want to achieve growth, they must think small. Mass production and marketing is no longer the solution to increasing sales, and retailers must further segment their customer base and provide customized offerings. Decreasing store size and offering a unique assortment based on location are better solutions. Providing consumers with a unique and simple experience is key when attempting to grow within a segmented industry.