From the editor

From the editor
Trends that set the course for retail

By RoxAnna Sway, Editor in Chief
March 01, 2008

This year promises to bring many changes and challenges as the economy and retail readjust and realign. Here are five trends to watch for in 2008 and beyond:

Size matters: smaller, not bigger

Big for big's sake is dead. Retailers are now thinking small—or at least smaller. Wal-Mart, Circuit City, Home Depot, Macy's, McDonald's and many others are planning smaller stores. These retailers are committed to squeezing the most profit per sq. ft. out of compact space, cutting construction and staffing costs in the process, and fine-tuning their assortments to better fulfill the needs of specific audiences. For all but a few categories of retail, the days of the 85,000- to 100,000-sq.-ft. superstore are over. Customers today want a more intimate shopping experience, closer to home. They are becoming less willing to devote the time and energy it takes to patrol the vast footages of gigantic stores—even grocery stores. That means retailers must do a better job of store planning, monitoring and analyzing sales, and in editing and presenting merchandise, for a more efficient use of space and a more productive shopping experience.

Mantra for the '00s: Green is good

Indications are that some consumers are already growing tired of hearing about green, and if we are not careful, a backlash could develop. For homeowners, replacing light bulbs voluntarily is one thing; being required by law to replace them, or being scolded for not doing so, is another. And the tons of advertisements with green messages (some of it "green washing") have already started to produce yawns. Which is too bad, because, if "greed is good" was the mantra for the '80s, then "green is good" should be the mantra for the '00s. Make no mistake, green is here to stay; it's a trend, not a fad. But retailers must figure out how to incorporate and market green—without being insincere, pandering or dictatorial. That being said, a survey by KPMG LLP found that 60 percent of respondents said they "would pay more for environmentally beneficial products," and 88 percent said they were "very concerned about the environment." There's a goldmine here—or should we say, "greenmine"—if businesses can get it right.

Coming to grips with global

Many American retailers are looking outside this country for much of their future growth. Wal-Mart, for example, says that the bulk of its growth will come from abroad. American exports are giving a badly needed boost to our GDP (in fact, U.S. GDP growth is around zero percent, if exports are not included, according to Morgan Stanley), and should our economy slip into recession, offshore opportunities may help keep some firms in the black.

What is innovation?

Hint, it's not just a line extension or another new product. And it's not just adding gimmicks, bells and whistles to what already exists. A lot that tries to pass for innovation in today's market misses the mark. Few new products involve real innovation, such as that seen in the iPod, Facebook or Starbucks' original concept. A contracting economy will put products and brands to the test this year—and some won't make it. Just look at some "innovative" ideas that have already gone bust: Forth & Towne, One Thousand Steps, demo stores, Talbots Mens, Talbots Kids and Sigrid Olsen. This will be the year of the retail shakeout, as the industry sheds some of its not-so-innovative concepts and seeks to better define true innovation.

Rollouts are so wrong

Consumers don't want cloned stores, coast-to-coast. They want "their" store to be special and to acknowledge them as individuals. When it does, it earns their loyalty. The ubiquitous retail construction concept of KISS (keep it simple, stupid) rollouts has had its day. If you don't think so, just take a closer look at ailing national chains, including Gap and The Limited. The formula that worked for nearly 30 years, when chain expansion was rampant, no longer works. Even Starbucks has stumbled from too much standardization. Today, every unit must be carefully designed and specifically crafted to serve its unique audience.

Got a comment? E-mail me: rsway@ddimagazine.com.