MIKE DROP

The Evolution of Retail:
A Tale of Disruption, Digitalization and Consumer Shifts

The retail landscape has undergone radical transformations, with the rise of e-commerce, technological advancements and changing consumer behavior. This shift has led to a divide between retail winners and losers, a trend set to continue as online giants and factory-direct e-tailers dominate the market.

BY Michael Appel

i was recently asked how retail has changed. And my first thought was: It’s changed in almost every way possible.

Retail used to be a very simple business. Success required a focus on products that customers wanted, having it in stock and at the right price point and sold by friendly, helpful store associates.

However, over the past 30 years, retail has become more complicated. It’s always been a highly competitive business, but the growth of online selling, the emergence of new technologies and social media have transformed retail. Moreover, the pace of disruptions (such as workforce shortages, runaway inflation, supply chain hiccups, etc.) has also increased.

Consumer behavior has shifted and evolved. Along with the growth of e-commerce, consumers expect free shipping and free returns (blame Amazon, even though their free shipping isn’t actually free once you factor in the Prime annual fee!). Consumers also want frictionless experiences online and in-stores. And they want to shop when and where they want, and on different devices.

The digitalization of retail was and is another big challenge. And we have COVID to thank for that. It’s been a wild ride over the past couple of years because of it. Many of the retailers that did fare well were at the right place at the right time selling the right stuff. And then the music stopped. There was a rush to invest in digitalization, without thinking it through, so when e-commerce plateaued, most of the unicorns and digital natives collapsed.

Look, retail has always been challenging. And it’s because retail is a business that's closest to the consumer — and that consumer is ever changing. The advent of technology, which is an integral part of running retail businesses today, has also accelerated the pace of change — both in terms of being able to give retailers more tools as well as giving consumers access to so much more information.

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Consumers also want frictionless experiences online and in-stores.
And they want to shop when and where they want, and on different devices.”

ADOBE STOCK

If you study the history of retail over the last 100 years, there's always been new entrants and new disruptors. Retail brands who we thought would last forever, such as Sears & Roebuck, are no longer in business — and yet they were the dominant retailer for decades! What killed them and other regional chain and department stores? Consumers who expected price, value and selection. Just look at the three largest retailers in the world: Walmart, Amazon and Costco. These are businesses that deliver on all three.

And more change is on the way with the explosive growth of Shein and Temu, which are China factory-direct models. They are game changers – for now. They benefit from Section 321 de minimis, which allows e-commerce shipments to a consumer valued up to $800 to come in duty free. But that could go away at any time.

So, as the online giants and factory-direct e-tailers continue to grow, retailers will have to continue to up their game, evolve and innovate. Those that don’t, may not be around to see how this all shakes out.

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