The retail industry is going through a form of evolution, maybe even a revolution. E-commerce has changed the way retailers sell, so that the major brick-and-mortar companies are looking at their individual stores, potentially closing what they consider unprofitable stores, and investing in e-commerce to continue to grow their business.
In apparel, millennials and teen consumers have different buying habits than their parents, which is reflected in millennials' preference for 'buying' one specific item, even when at a mall or a store, rather than 'shopping' for multiple items. This difference can be attributed to the fact that millennials are often accustomed to buying a specific item online rather than browsing for items in multiple stores. Consumers whose shopping behavior was established before the rise of e-commerce could be more likely to browse through a store or a mall, leading to the discovery of new items and greater sales.
Some of the other trends we're seeing in the market include:
Consumers Favoring Experiences over Products: The apparel side of the business, as well as accessories, has slowed down. In the recent past, handbags, watches and leisurewear were booming. Those areas seem to have taken a significant step back, while consumers are spending more on restaurants, vacations and health spas. Consumers are favoring experiences over products, and retailers are reengineering their businesses as a result.
Furniture Sector Remains Strong: The furniture segment continues to do well. Feedback at the furniture show in High Point, North Carolina, indicated that the show was extremely busy. A looming question in the furniture sector is whether the Asian suppliers will go direct to retail versus using furniture companies in the U.S. to distribute.
Consumer Product Companies That Sell to Retail Still Pursuing M&A: Consumer product companies that sell to retail are looking to acquire the front ends of businesses, because that gives them an increase in revenue. If the acquirer already has the back office, warehousing and sourcing in place, an acquisition can add significantly to the bottom line, especially if the company is acquiring a brand that sells to customers it doesn't presently have. Acquisition at the right price can sometimes be the key to growth.
Overall, retailers and consumer products companies that sell to retail continue to adapt in response to evolving consumer behavior.
You can read the full Executive Spotlight,
"E-commerce Drives Retail Revolution," on the Knowledge Center on CIT.com.
Marc Heller is President of
CIT Commercial Services. His responsibilities include client service and retention, ensuring client credit quality and profitability, and business development for Commercial Services. He earned a BS in Economics from Queens College.
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With e-commerce becoming increasingly prevalent, social shaking things up and brick-and-mortar-focused retailers stepping up their online game, 2017 will prove to be an interesting year for retail.