Milwaukee Biz Blog: Our changing consumer habits

Retailers must adapt, or die

Why do we shop?

The first answer is obvious – to add to basics such as gas to fuel our cars & SUVs, to get groceries and to get prescription drugs, although prescriptions are now on line, with much to be desired.

But we also shop for entertainment. Some shoppers are “hunter gatherers” and seek bargains and unique items. Part of this is social interaction.

Our society is changing. I am almost 76 years old and have been in the investment business for 46 years. When I came into the business, we would have 2 hour lunches with our clients at restaurants like Karl Ratzsch’s, now long gone. Now I start at 6:30 a.m. and work to 4:30 p.m., and rarely take lunch; if I take a client to lunch it is at most once a month, unless I am visiting clients out of state.

Restaurants that served my industry are no longer thriving. Times and business have changed.

My daughter, a former union organizer is currently the director of special projects for the Center for Popular Democracy. She works long hours, six days a week. She lives in Chicago. She often has her dinner delivered to her and her 2-year-old daughter, rather than picking the dinner up. She’d have to bundle up my grandchild, find a parking space, and take her child out to pick up her dinner.

There is a trend for people to place orders at grocery stores and then pick up their orders at Walmart or Pick ‘n Save. Some stores even deliver.

Convenience is no longer a luxury. Time is no longer abundant.

Another challenge that shopping has is helping you find what you need or want.

Years ago, I’d spend hours in used bookstores and would find a book I wanted on occasion. It was fun and I still like to browse in these stores. But now I can go to sites like Abebooks.com and locate the title, authors or subjects I want. I order 2 to 4 titles a week.

We have less time, less leisure. We are busy and have alternatives, often less costly and more vibrant than stores.

Do retailers understand this? A few do, like Costco and Walmart, but there is a graveyard filled with Toys ‘R’ Us, Sears, Boston Store, Shopko, to name a few that couldn’t adapt.

Why do most retailers have a blind eye as to the trends and changes they face and see?

I am guessing that they have never defined what they are doing or who their market is or what they are selling. Theodor Levitt wrote a classic essay “Marketing Myopia” in the 1950s. I am updating the main question he asked: what does McDonald’s sell? Hamburgers and fries? Or a specific product at a certain price in a standard store? Does Exxon sell gasoline, or the ability to fuel a car from one point to another? If you could fuel your car with a safer, cheaper fuel, you would buy it.

Why is there great resistance to change? One of my favorite essays is by the historian Elting Morrison called, “A Case Study of Innovation.”

Morrison tells the story of how continuous aim firing from a rolling platform at sea was adopted. It took years although the proof of success was evident.

Resistance to this new device came from the belief that the proof of success was too good to be true. But the protection of the status quo was also a big part. Navy personnel and politicians were vested in the past and these same men got their identity from the old ways of doing things.

But, please note, that retailing has been innovative in the past.

Sears and Montgomery Ward used catalogs. Department stores came into existence in the late 18th century and some (then all) offered specific prices (so you didn’t have to bargain).

The first real regional shopping center was Randhurst in Mt. Prospect. Illinois. That was 63 years ago! What, you say? You never heard of it? That is no surprise; it no longer exists. The three “anchor” tenants were Wieboldt’s, Montgomery Ward, and Carson Pirie Scott. None of these retailers still exist.

Perhaps it is obvious, but the idea behind a regional shopping center is to pull folks in from surrounding communities. When there is a lot of competition with other regionals, it reduces your value. That is what happened to Randhurst. “Discount” centers also compete.

There are innovations now. Food halls are showing up. One will be at the Shops of Grand Avenue in Milwaukee. Other food halls in Milwaukee include Sherman Phoenix in Sherman Park and Crossroads Collective (across from the old Oriental Drug building on the East Side).

If you have shopped at Bayshore in Glendale, you know that it is not enclosed, but that you are in a “village of shops” with apartments/condo and office space. After a period of mismanagement and deferred investment, they plan to shrink the retail space there and create office and apartment units.

IKEA is moving into large urban areas, but not with the big warehouses they have elsewhere. They use smaller stores where people can order and be shipped the product. IKEA has also set up a system to get their products assembled and to give advice on furnishing. Will we have a world where we can’t make assembly jokes about IKEA?

Etsy deals in hand crafted products and artisan goods. They are attempting to bring an experience for the shopper. Orvis has been doing something similar for years. They have free fly fishing clinics and follow-up training at reasonable costs. Recently they began to have events for owners and their dogs.

In some so-called emerging markets, companies like Alibaba have started on the Internet and now are building stores. In China populations are centered in the cities which makes delivery less costly than in the U.S. In addition, department stores have not been developed in China so that this reversal is easy to understand.

In Latin America, only 3% of retail sales are on the Internet vs. 10% in the U.S. For example, a large Latin American clothing retailer is producing products that customers want and can seek out in stores or online.

In Sweden, ReTuna in Eskilistuna has an entire shopping mall just for recycled products. Everything is recycled, reused or sustainably made.

We are in the world of EBay, Amazon and the Internet. This has changed the way we shop.

Shoppers are seeking experiences now and Virtual Reality is what is used. Alibaba lets customers walk the aisles of a virtual store. IKEA uses it to help design rooms, as does Home Depot. Some stores are “fitting” customers at their stores and having the clothing delivered.

Another trend is from the Japanese consultant Marie Kondo. She has started the organizing craze where people are discarding stuff that does not bring them joy. Do you think this reduces new purchases? If so, think again.

One important, but dull area to look at is the shipping or delivery of product. Federal Express joined forces with the U.S. Post Office in a win- win arrangement. But drones may be used in the future.

Does that mean the end of the shopping mall or center? I don’t want to issue a death knell for them, but looking at the future, they will differ from what we have now; where overbuilding has been prevalent.

Bob Chernow is a Milwaukee businessman and a futurist. He is former vice chair of the World Future Society. This column is from remarks he made at the Women’s Court & Civic Conference in April at the Italian Community Center.

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