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Changing landscape has retailers reassess

New York — Change for the remainder of this decade will be driven by sharply morphing consumer demographics against a rapidly maturing retail environment, forcing merchants to reassess and reinvent their formats and market positions.

"You have the whole Gen Y generation that has graduated from high school, graduated from college, and they are in the family formation stages of their life cycle," offered Thomas Rubel, president and CEO of Retail Forward, based in Columbus, Ohio.

Speaking to retailers, suppliers and bankers at Retail Forward's 2004 Strategic Outlook Conference here, Rubel and other members of his group outlined a series of countervailing trends and pressures that will shape consumer goods industries for the remainder of this decade.

"You have the Baby Boom generation that is clearly looking for second homes and retirement homes. So we think the market for home goods is going to experience continued growth and exuberance over the next five years," he said.

That's the good news. The bad news is home textiles will lag in terms of growth.

At the same time, some of the most powerful retail drivers of the past 40 years will continue to age. National retailers, catalog operations, department stores and discount stores are on the backend of their lifecycles and, as formats go, are either well into or entering a period of decline, according to research presented during Retail Forwards 2004 Strategic Outlook Conference, held here and in Chicago before Memorial Day.

On the upside, online retailing, supercenters, and dollar store-type operations are in a period of acceleration, according to the research.

Through it all, Wal-Mart will get stronger, the research suggested, continuing to increase its share of sales among the world's top 100 retailers. Retail Forward calculated that share at 12.1 percent in 2002; a year in which the top 100 globally controlled 22.5 percent of consumers' retail dollars. That, despite the "backlash against Bentonville," stated the research.

Rubel said: "One of the backlashes against big box retailing across the U.S. is we see an ever-increasing level of stridency and noise against (it). It's not just Wal-Mart, it's affecting all large box retailers, especially in California. But Wal-Mart has become the lightning rod for everything evil in the world. They are responsible for all the low wages, and they're bankrupting suppliers, and they're bankrupting competitors, and they're sending all the jobs overseas … obviously all that's not true.

"But it begs the question of what would happen if Wal-Mart stumbled. It accounts for 10 percent of U.S. sales, but for a lot of suppliers in this room, it accounts for 30 or 40 or 50 percent of their sales. It would be a major hiccup," he added.

Hiccup or not, big boxes will continue to be a force through the end of the decade and, of course, Wal-Mart will lead. But evolving customer bases are already becoming bored with the shopping experience. Rubel cited the ability to shop a 250-count sheet in Wal-Mart.

"It saps the excitement of buying a similar product in another channel," he argued.

All those factors will require retailers to redeploy their attention and assets. For example, retailers offering convenience formats will also boom with the boxes, complementing more than challenging the other format.

The convenience format, he explained, offers immediate gratification, the opportunity for quick fill-in purchases and easy access — of course for a slightly higher price.

Entire industries will be challenged to reassess their assets from inventory, factories, real estate and equipment in the "old world," to brands, information, people and customer relationships in the 2010 world, said Rubel.

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