PART 3 Short Cases Convenience Economy 1/10 into higher income levels; today, however, the opposite is true. Declining or stagnant wages, coupled with a growing income gap during the past 15 years, have resulted in many families slipping out of the middle class. If past trends continue, it's unlikely that recovery from the Great Recession will lead to a rebound in the share of adults in middle-income households. Since the middle class has fueled spending on everything from housing to cars to food purchas- ing, a smaller middle class has a wide-ranging impact on the economy. See Figure 1. This overview presents just a few of the changing con- sumer dynamics that will shape the retail marketplace in the future—both near and long term. Retailers need to be aware of changes in consumer behaviors in order to modify their market- ing tactics and strategies, and to meet the needs and wants of today's consumers. Questions Case 1: Eating Patterns in America* Household changes will shape the future of eating for years to come. The "typical" U.S. consumer and the households in which they live are very different from those of 20 years ago. The changes are reflected across the spectrum of eating patterns today-who, what, when, where, how, and why. Single-person U.S. households are 38 million strong and growing—the highest in history- This represents 55 percent of all adult only households. The typical size of an American family is 2.5 persons per household, with more than one-quarter with children headed by single moms. Smaller households, in many cases, are a long-term choice for adults choosing not to be married and/or have fewer children. This change has wide- ranging implications for retailers and manufacturers in terms of marketing, merchandising, new product development, packag- ing, and positioning. By 2044, the U.S. Census Bureau projects that more than one-half of Americans will be in a minority group; by 2060, nearly one in five of the total population is projected to be foreign-born. The Hispanic population has accounted for more than half of the 27-million U.S. population increase in the last decade. Hispanies currently represent 18 percent of the total U.S. population. Although Hispanics will continue to be a very large and growing group, Asians are one of the fastest-growing ethnic populations, currently representing 8 percent of the U.S. population. The Millennial generation is more diverse than the preced- ing generations, with 44 percent being part of a minority race or ethnic group. Even more diverse than Millennials are youngest Americans—those younger than 5 years of age. In 2014, this group became majority-minority for the first time, with 50 percent being part of a minority race or ethnic group. The share of the U.S. population that is considered middle income has been shrinking over the last four decades. In the past, those in the middle-income group typically moved up 1. According to the information in the case, how are American demographics changing? 2. As a supermarket retailer, how would you address the rise in U.S. single-person households? 3. As a local gift shop, how would you address the rise of Hispanics in the United States? 4. What are the implications of Figure 1 for retailers? 5. What demographic trends not mentioned this case should retailers address? How? Case 2: The Convenience Economy Comes of Age* Among the transformations on the retail landscape in the recent past, perhaps none was more profound than proliferation of the "convenience economy," in which everything is at the consum- er's disposal at the click of a button, according to Chris Bryson, CEO of Unata, a leading omnicommerce solutions provider. He FIGURE 1 The Shrinking Middle Class The share of adults who live in middle-income households has eroded over time from 61 percent In 1970 to 51 percent in 2013, according to a Pew Research Center study. Stagnant wages and a growing income gap during the past 15 years have caused many families to slip out of the middle class. 1970 61% Source: Based on material in Bonnie Riggs, "Eating Pattems in America: The State of the Consumer," Convenience Store News, March 2016, pp. 58, 60, Reprinted by permission. Convenience Store News (c) 2016 (www.csnews.com) MIDDLE 2013 51% * Based on material in Bonnie Riggs, "Eating Patterns in America: The State of the Consumer," Convenience Store News, March 2016, pp. 58, 60. Reprinted by permission Convenience Store News (c) 2016 (www. . Based on material in Jim Dudlicek, "Fridge's Dare [The Convenience Economy Comes of Age]," Progressive Grocer, February 2016, p. 28. Reprinted by permission. csnews.com 9781292214672_R....pdf Show all х . Type here to search O M } ? lco E 3:54 PM 1/26/2020 states, “2015 was the year UberX went from a smaller, unknown player to a force driving change across sectors. We're at a point where new business ideas are often described as 'Uber for _."" The convenience economy's biggest shift, Bryson says, "came when major players like Starbucks started embracing it with the "Order Ahead mobile app," which has led to "wide- spread adoption of this kind of immediate customer transaction, and reinforced the need for quick and convenient service on a daily basis," and with it, a huge shift in consumer expectations across all sectors. Retailers of all stripes "are suddenly playing catchup, learning how they can incorporate real-time, on-demand trans- actions into their strategies," notes Bryson, who founded Unata in 2011. The company's roster of grocery clients includes Longo's, Grocery Gateway, Lowes Foods, Lunds and Byerlys, and Raley's. When asked to elaborate on some examples of the convenience economy now catching his eye, and which are the most important, Bryson ticks off a shortlist of standouts, includ- ing the following UberX/UberEATS: "Consumers don't have to call to order their car/food, take out their wallets to pay, or wait very long for their car/food to arrive. They can watch the driver travel and arrive live on a map, with the ability to commu- nicate with their driver at the click of a button." Starbucks: "The Order Ahead app is simple and easy to use, and saves the customer minutes on a daily basis- which becomes especially valuable on rushed mornings. They are reinforcing this type of customer experience on a daily basis." Ritual: "This is a Toronto-based app-expanding in the United States that lets consumers order lunch ahead of time from various restaurants near their location. The app notifies consumers exactly when they should leave their current locale so they arrive at the restaurant just when food is ready for pickup, ensuring the food remains as hot and fresh as possible. Ritual is a simple and clean user experience that lets customers order food in a couple of clicks and saves them 5 to 10 minutes a day of waiting time." Amazon Echo and Dash with Prime: "With both Amazon Echo and Dash, consumers don't have to write a shopping list, go to their computers, or even pull out their phones to make an order, or take out their wallets to pay. With Dash buttons, they can order at the click of one button; and with Echo, Amazon has taken the click out entirely. It's the easi- est possible way for consumers to online shop. Combined with Amazon Prime, consumers don't have to wait long to get things that they've ordered." Although it's still unclear what the shopper of the future will find the most convenient way to shop for groceries, Bryson says, "The convenience economy so far tells us that the fewer clicks needed, the more adoption there will be, which is why we have our eye on Amazon Echo. We've seen how quickly Uber has changed the landscape, and we expect it to continue to change just as quickly in ways we don't yet know over the next few years. Retailers need to focus on setting up their sys- tems so they can easily flex, adapt, iterate, and connect with Questions 1. What is the convenience economy? Give your own examples. 2. Is the convenience economy good or bad for retailers? Why? 3. What would restaurants have to do to be able to efficiently and effectively use the Ritual app? 4. What is your favorite example of a retailer that has become more convenient in recent years? Explain your answer. Case 3: Are Hot Retailers of 2015 Still Hot?* Differentiation is important for the nation's fastest-growing ("hot") retailers. These retailers typically come in a variety of different flavors, but one thing they have in common is that they all do things a little differently—and this helps them get (and often) stay ahead of the pack. Chart-topper Hudson's Bay is "hot" because at least one man in retailing thinks there is still a place for the traditional department store. Hudson's Bay Executive Chairman Richard Baker, who bought Lord & Taylor 9 years ago, has assembled a conglomerate operating in three countries on two continents. Runner-up No MoreRack.com, founded in November 2010 and offering deep discounts on an array of general merchandise, was rebranded as Choxi in 2015 after Nordstrom objected to its name (due to possible confusion with its Nordstrom Rack off-price division). The new name is a mixture of "chock full” and "choice." It is not a real word in any language - which can assist a firm expanding globally. Number 3, Zulily, has elevated the flash sale model to new heights. The company's early strength was in infant clothing, toys, and accessories with a very strict no-returns policy. In May 2015, Zulily began a test program that allows some customers to return some brands of apparel and home linens. "The Hot 100 is a mix of companies that have balance sheets that allow them to make acquisitions or grow organi- cally," explains Bryan Gildenberg, the chief knowledge officer at Kantar Retail, providers of the Hot 100 data. "Hot 100 retail- ers can grow more quickly because they understand why people are buying. They understand the dynamics of their audience." Among those following the acquisition trail is Number 4, G-III Apparel Group. Best known as a soft-goods vendor to major department and specialty stores, it also operates its own retail stores under the Wilsons Leather, Bass, G. H. Bass & Co., Vilebrequin, and Calvin Klein Performance banners. Ranking as Number 5 is Wayfair, the umbrella company for five different home furnishings and décor E-commerce brands. The firm had a particularly good holiday selling season 2 years ago, with the active customers in its direct retail busi- ness reaching 3.2 million at year-end, up 54 percent from a year earlier. Two years ago, Number 7 on the list, Office Depot pur- chased a major rival in OfficeMax and not too long afterward put itself in position to be taken over by Staples, potentially reducing the number of office supply superstore operators to just one. If the Staples takeover cleared regulatory hurdled, Wall * Based on material in David P. Schulz, "Hot 100 Retailers 2015." STORES Mancine Auent 2015. SA_S6 Roorinted hemiccion 9781292214672_R...pdf Show all х Type here to search o . 2 3:56 PM 1/26/2020
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