Attending the India Retail Forum (IRF) a few weeks ago, absorbing the vibrant energy of the attendees, and listening to the insightful presentations was a great reminder that these are exciting transformational times for the global retail industry. As summarized in the last post, driven by consumer technology, retail disruption will increase and will include a few surprises from emerging markets such as India.
The retail sector in India has reached more than $500 billion in industry sales. Organized retail which today is at 8% penetration will grow at more than 20% during 2012-2020. The retail industry has contributed consistently 18%-20% to the country's GDP. Food and grocery is the largest category with the retail sector with 60% share, followed by apparel and telecom.
Last week had a chance to speak to a large audience at the India Retail Forum in Mumbai. Chairing an industry panel discussion, my contributions included an opening presentation to a session titled "8th WONDER IN RETAIL - FUTURE PARADIGMS AND TECHNOLOGIES THAT HAVE THE POWER TO CARRY OUT DISRUPTIVE INNOVATIONS". Summarizing key insights from the opening presentation:
Post World War II, retail has been re-shaped by four megatrends. Technology has been the driver of retail power shifts through each of four megatrends. The fourth retail megatrend had its origins in 1992 when IBM released the first smartphone. It started transforming retail with Apple's smartphone around 2010.
Complementing smartphones are emerging deployments of smaller / smarter store sensors that will lead to customized, higher value, improved shopping experiences. All four megatrends have been about the availability of data and its effective utilization. The fourth megatrend places retail power in the hands of the consumer.
A recent Forbes article highlighted the following key takeaways from Tesla's latest quarterly results which beat expectations:
Major improvements are expected in batteries, including a pure lithium anode that might triple battery capacity in the future. The new Gigafactory batteries will have 10%-15% better capacity due to improved chemistry. The new factory will also reduce costs by at least 30%, allowing Tesla to deliver the much less expensive $35,000 Model 3 by 2017. CEO Alan Musk expects that within the next 10 years electric cars will reach cost parity with combustion engines.
Car production continues to increase and Tesla expects to deliver 35,000 cars during the current financial year. Tesla's goal is to reach a run rate of 100,000 cars per year by the end of 2015. Next spring, Tesla will release the Model X crossover SUV. Musk expects selling as many units of the new model as the current Model S. The CEO noted that they already had a lot of orders for the Model X, despite buyers having not seen the vehicle.
"It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way - in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only." - Charles Dickens
Over the last couple of weeks have been contemplating the subject of creating a lasting family legacy. When does one start thinking about creating a legacy? Is legacy simply the wealth possessions you pass on to your children? Why do leaders ponder their post existence legacy and even try to shape it? Should you aspire for a personal, family, or business legacy?
Couple weeks ago Inditex, one of the world's largest apparel retailers, went public with their Zara deployment of item level RFID. Pablo Isla, the chairman and CEO, announced that Inditex has already installed RFID at more 700 stores in 22 countries and will complete the rollout of the Zara brand (nearly 2,000 stores) by 2016.
Loss prevention technologies are playing a key role in the deployment of RFID at Inditex. Included in the rollout are dual technology RFID / EAS hard tags, dual technology RFID / EAS point of sale detachers, and a hard tag global re-circulation program.
The Inditex announcement coincides with a ChainLink retail research study on RFID published earlier this year. The top three reasons identified by retailers for deploying RFID included loss prevention in stores, item-level/on floor replenishment from back-stock, and cycle (inventory) counts in stores.
By 2018, the smart home market will reach $71 billion, more than double the $33 billion in 2013. Eighty percent of the current market is driven by entertainment. By 2020, other research points to a $1.7 billion market just for light controls and $1.4 billion for automated thermostats.
This month Time magazine dedicated their cover to a special report on "The Smarter Home". According to Time, the following companies will control your future smarter home:
Apple - With iOS 8 this fall Apple will release the Apple Homekit. Say "bedtime" to Siri and your Philips internet bulb will turn off.
Google - Followed up $3.2 billion purchase of Next (smart thermostats / smoke detectors) with acquisition of Dropcam (web enabled security cameras.
In 2012-2013, global retailers lost $112 billion to shrink or 1.4% of retail sales on average. The top 5 countries with the highest shrink as a percent of sales included Mexico, Brazil, Argentina, USA, and China.
This past week, Jack L. Hayes, published his 26th annual USA Retail Theft Survey. Highlights of this latest report:
Several recent articles were a great reminder that with the accelerated pace of technology adoption, all business models can be quickly disrupted. Global mobile connectivity, virtual marketplaces, social media, and bypassing linear technology adoption approaches are a few of the trends reshaping the current global economy.
To access a broader market, innovative companies are breaking apart traditional value chains in legacy businesses and targeting higher margin niches to faster growth.
"Apple has seemingly served as an anomaly to the theory of disruptive innovation. After all, it grew from $7 billion in 2003 to $171 billion in 2013 by entering established (albeit still-emerging) markets with superior products — something the model suggests is a losing strategy."
Regular trips to Asia, retail customer meetings, APAC industry keynotes, and recent business articles confirm that economically China is going "Back to the Future".
Before USA surpassed it in 1890, China was the world's largest economy. By the end of 2014 China is on track to become the world's number one economy once again. This crowning achievement is arriving 5 years earlier than originally projected by the IMF.
It took 155 years for the UK to double its GDP with about 9 million people in 1870. The USA and Germany took 30 to 60 years with tens of millions of people. China and India, with 100 times the number of people than the UK doubled their GDP in one tenth of the time.
By 2030, the majority of the world’s population will be considered middle class. China and India will have the largest middle class consumption as a share of the world's total population.
Earlier this month had the pleasure to speak to 100+ business leaders from Central, Eastern Europe, Scandinavia, Russia, and the Middle East at a conference in Budapest Hungary. This week's post summarizes some of the key insights from my presentation titled "The Future of Retail".
In EMEA, only the Middle East and Eastern Europe have 2018 retail growth forecasts that outpace the rest of the world. The Middle East is the only region in EMEA where 2018 GDP will grow faster than the world aggregate.
Russia is experiencing some spending slowdown, but it is still an attractive market. The country has become more mature in modern retail and consumers don't necessary fully cut spending during turbulent times. Moscow and St. Petersburg are increasingly saturated, but other cities offer opportunities. 42 cities in Russia have more than 500,000 people. Modern retail shopping space for the size of the country is still in short supply. The food sector is experiencing double digit growth and consumer electronics are growing 30%. Luxury brands see Russia as a key market with wealth increasing.