It is now more important than ever to offer new, popular merchandise before your competitors
According to the trend researcher and market expert Ulrich Eggert, the retail trade is likely to experience even more radical change in the years ahead. The trend towards a concentration of market forces, fierce competition and resultant take-overs and failures will intensify as consumers find they have less money in their pockets. Retailers who fail to recognize the signs of the times and act accordingly will live to regret it! There is still no indication, says Eggert, that consumer interest in bargain products has dwindled. On the contrary, he claims that “discount stores are proliferating!” And the figures certainly back him up in this. However, Eggert warns that this growth suggests that competition is getting hotter and that the market is due for some upheavals.
At a time when the volume of products sold continues to decline, there has been an interesting rise in demand for services. This is good news inasmuch as offering services does not require much floor space in the retail outlet. As Eggert points out: “Whether it’s travel, mobile phone contracts or tickets – the retailer simply needs to position a few stands for brochures in the store. ”Frequently, the business will be transacted online – sometimes via the actual service provider, who then simply offers the discount outlet a percentage commission on the sale or contract.
The biggest gains are being made by companies which Eggert refers to as pseudo-discounters. Their numbers include some big names such as H&M, Ikea and Saturn. These are stores that sell at discount prices but still maintain a specialist image or uphold a lifestyle or fashion image. Eggert believes that the market is stagnating at the luxury, premium goods end of the scale and that the real losses are in the middle. A form of realignment is taking place which is polarising the market and involves a twin form of merchandising: “One brings discount pricing and prestige together – for example, the H&M launch of a Lagerfeld collection – while the other pairs mass production with prestige, as exemplified by VW and the Touareg.”
The traditional retail specialists are likely to lose even more ground, says Eggert. Novel combinations such as coffee alongside electronics goods and electric appliances or shoes next to art or wine have become common and are proving successful. This form of mixed retailing is a trend that is definitely gathering momentum, in particular because there are no limits to the possible permutations. Thus, instead of selling just garments, fashion stores will offer the complete look, i.e. shoes and other fashion accessories, beauty products and cosmetics, jewellery and even glasses. Markets like this can be established outside the traditional retail centres, in the suburbs and beyond, where product diversity, customer loyalty cards and attractive prices will reshape the shopping experience for city-dwellers.
Eggert, who does not disguise his scepticism about the future of traditional distribution concepts, maintains: “In future, those who work alone will not stand a chance. The systemic form of distribution will wipe out the competition”. Franchising and licensing agreements are the order of the day. Eggert advises retailers to respect a number of basic rules which, in his opinion, are decisive. For example, the main strategy should have been tested and geared to a growth market. The franchise holders or partners to the venture must have the appropriate back-up and support of the head office or the parent company, which should ensure that the business receives adequate promotion and advertising. It is especially important that the cost of a franchise or license be reasonable and appropriate to the profits that can be expected to accrue from the venture.
Butlers, according to Eggert, is one of the companies that ticks off most of the boxes and has found the right balance. The broad selection of tableware, porcelain, textiles and accessories is geared to one of the few market segments that has continued to grow in Germany. Eggert points out: “The home is one area which has always been important to the German consumer and the attitude is: “If I can’t afford to buy some new furniture, I can at least buy something lovely for the home.” The Butlers chain addresses this trend with beautiful themed presentations, consistent quality and variety. The product ranges are regularly supplemented with promotional products. “In the lifestyle sector change is especially important. Anticipating trends and offering products before the competition is crucial.” This necessitates long-term planning. “Trend-setters such as Butlers or Tchibo”, says Eggert, “know a year in advance what will be in the stores”.
Retailers can take heart, because help is on hand. One way of identifying trends, finding inspiration and discovering what is happening on the broader marketplace is to attend the IAW – International Trade Fair for Promotional Products in Cologne. For the retail trade this is definitely the premium event for discovering trends and placing orders. It attracts approx. 250 exhibitors twice a year – in March and September – who welcome the chance to showcase their products in the heart of Europe. Trade buyers can select and order their entire range of promotional products here. A high-quality, changing product range sets retailers above the rest in the eyes of the consumer and attracts new customers. In terms of product diversity, this event is unrivalled. The program embraces food and drinks, sport and leisure items, jewellery, toys, household goods, office supplies, electronic goods, small items of furniture, textiles, flowers and gardening equipment, as well as pet accessories and tools. Seasonal products – ranging from sun parasols to Christmas decorations – are recurrent favourites year after year and therefore also have a regular place in the program.
The next opportunity to visit the IAW will be from 19 to 21 September 2007 when the trade show is staged in Hall 4 at the Cologne Exhibition Grounds. More information for exhibitors and visitors is available at www.iaw-messe.de. The organizers have already started taking stand bookings and trade visitors can order free admission tickets.