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.
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.
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:
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.
The brand consultancy agency Interbrand recently published the "Best Retail Brands 2014" report. Quoting directly from the document, following are key ideas from the 136 page report.
In an attempt to be closer to one of the global centers of technology innovation, a growing number of retailers are investing in Silicon Valley. Couple examples from the more than a half dozen retail companies making the IT move to California and the innovation gold they are trying to mine:In February, Walmart opened its second technology center in Silicon Valley. "These centers are tasked with app development and digital coupon projects as well as creating seamless shopping experiences for consumers using online, mobile, social and stores." In May 2013, Target opened a tech lab in San Francisco. In this center, Target is focusing on mobile apps, online search and social media development, all as foundation to ecommerce expansion.
The growing trend of retailers shaping their own technology development journey is not limited to California:
Throughout history, retail technology has evolved in waves. With the industrial revolution and mass manufacturing, the mom & pop store transitioned to the supermarket. The massive amount of data on shipping trends, i.e. what's selling, placed the manufacturers at the center of controlling the information to drive retail sales.
Bar code scanning in the 1970s transitioned the knowledge power base to the retailer. The planogram, i.e. what to actually place on the shelf for sale, was now a retailer decision.
As discussed in a previous post, we are currently in the middle of the next major evolutionary technology wave re-shaping the retail industry. The foundational elements driving the new retail megatrends include:
Every year, the National Retail Federation (NRF) trade event in New York seems to get bigger and more global. 2014 did not disappoint with over 30,000 retail professionals listening to 300+ industry experts and visiting a record 200,000 square feet of exhibit space showcasing the latest technologies. Brazil had once again the largest contingent of attendees outside the United States.
NRF is a great stage on which to reflect the " Big Ideas " that are reshaping retail. The top 10 from NRF 2014 include: