Embrace change to tap 2007 trends

The experts and trend watchers have delivered their retail industry forecasts for 2007, mostly involving mega merchants.

Can smaller independents—who have markedly different budget levels, supply chains, inventory controls and staffing—benefit from these same crystal-ball gazings?

“Absolutely,” say several forecasters contacted by Michigan Retailer who know small business. They advise independents to be willing to embrace change and pay special attention in 2007 to such trends as:
• The comeback of the department store
• E-marketing and e-commerce
• The cell phone phenomenon
• Fast fashion
• The green revolution.

They point out that gaining an edge on the competition by capitalizing on these major trends may take a lot of work and a willingness to adapt, but the alternative isn’t pretty.

“To put it bluntly, failure rates of businesses that refuse to change are going to accelerate—perhaps dramatically,” says Bob Negen of Whizbang! Training in Grand Haven.

Comeback kids
Emily Schmall, retail editor at Forbes.com, calls department stores “the comeback kids” in her look ahead to 2007. She reports that same-store sales in the sector last year were up 6–8 percent over the previous year.

Because of this revival, Schmall says, independent retailers seeking new locations may want to reconsider malls, since department store popularity is likely to increase mall traffic.

Doug Fleener, a retail consultant and author of the newly released book The Profitable Retailer, says independent retailers also can capitalize on this trend by looking at what brought the department store back from the brink.

“One thing department stores got much better at in the past year or two was building the customer relationship,” said Fleener. “Through targeted e-mail and direct-mail marketing, they remembered how to identify and cater to their core customer base.”

While there are other factors involved in the department stores’ comeback, it’s the dedication to customer relationship management that is most easily adopted by smaller retailers, he says.

Build loyalty
The primary marketing trend affecting small retailers in 2007, according to Negen, is the weakness of traditional advertising in bringing in business—and the related need to build lasting customer relationships in innovative ways. Negen believes e-mail and the Internet will be the dominant means of building and maintaining relationships with customers.

“Savvy retailers are replacing traditional marketing methods, such as yellow page ads, with new ones. Rather than constantly or exclusively chasing new customers, ‘new millennium merchants’ recognize the very high value of their current customer base and work to build lasting relationships with that customer base.”

Loyalty programs are one approach, but these days even a loyalty program has to be superb.

“It has to be a no-brainer that makes every customer who hears about it want to participate,” said Negen. The point of a loyalty program is not so much to bring customers back for another sale, he says, but as a vehicle for gathering e-mail addresses and other valuable information, such as birthdays or favorite product lines, that can be used to strengthen the customer-retailer relationship.

“Building customer e-mail lists is critical, because e-mail will continue to be the most effective means of increasing your contact and building relationships with your customers—if it’s done right.”

As for other ways to collect data, Fleener suggests: “If you add value to people’s lives, they will give you permission to talk to them often.”

Loyalty, increasing “share of wallet,” customer relationship management (CRM)—all these buzzwords are just ways of focusing on the importance of strengthening the customer relationship, which both Fleener and Negen describe as the single most important strategy that independents must use.

“A retailer once told me: ‘They’re not my customers until I’m their retailer,’” said Fleener. “That’s a powerful insight. Until they think of your business as the obvious first choice, you’ve still got work to do.”

“I would extend that concept—they’re not your customers until you have their contact information and can proactively communicate with them,” he added.

Retail technology
Susan Reda, executive editor of Stores magazine and author of its December article on retail trends, calls cell phones “the ‘it’ technology for 2007.”

Reda cites Meijer’s use of text-messaging technology to alert participating customers whenever Meijer was about to raise the price of gas by five cents or more, giving them two to four hours to fill up at the lower price. “The high-tech game of beat the price lifted sales and spirits,” stated Reda.

Can independents get in on this game? The technologically savvy ones can, and some already have, at least on their own cell phones.

Mobile transaction terminals—which use cell phone technology to swipe cards and process transactions away from the store—were a rarity five years ago. Now they can be spotted at most outdoor art fairs, and as other retailers recognize their value, sales of mobile terminals are expected to continue to rise, capturing more nontraditional retailers and service providers.

Competition among POS systems is fiercer than ever, and every system now has an affordable customer module for creating and getting the most out of a customer database. In the past, the high cost of such systems put independent retailers at a disadvantage, but the technology is now widely affordable by retailers of all sizes.

“Among independent and small retailers, the cost of technology is often not the sticking point,” said Fleener. “The sticking point is making that first move to do it, and being disciplined to keep it going.”

Fast fashion
The concept of “fast fashion” was cited by Stores, trendwatching.com and Womens Wear Daily as a trend to watch. The term refers to the increasing speed at which fashions make it from runway models or celebrities to large retailers’ racks. In the past, a “hot” style or look might be available at national chains in a matter of six months—now it takes six weeks.

“National chains bring new fashions to market extremely fast, and at a competitive price, which means that everyone, not just the luxury niche, is expecting to own it,” explained Fleener. He also advises all retailers to pay attention—the product life cycle is shortening in every retail category.

Fleener proposes that the “fast fashion” trend simply means that the national chains are becoming better at what the best independent retailers have always done—moving nimbly to supply consumers with what they want when they want it. The advantage independents once had is not their exclusive domain in the era of fast fashion.

So how do independents stay in the game?

“Instead of one or two major buying trips a year, you might need to do several a year so you’re able to move more nimbly,” said Fleener.

“For those who can’t fly to Italy or Vegas three times a year, smart retailers are always watching the culture carefully—using online tools to listen to customer buzz, watching everything around them. Retailers have to be great cultural detectives.”

Of course that comes with higher risk. You might—you will—bet wrong occasionally and have hard-to-move product cluttering your racks or shelves, explains Fleener. But while that’s bad, it’s not necessarily a disaster to a retailer who knows how to manage the entire product cycle.

“The best retailers don’t let their pride get in the way,” said Fleener. “They unload quickly and make room for the next hot merchandise.”

Going green
Stores states: “Green is the new black.”

Green can be defined broadly. It can mean healthier or safer for the consumer, as in organic food or chemical-free mattresses and furniture; environmentally sound, as in biodegradable products and the eco-fashion trend (witness Levi’s $160 organic jeans); socially responsible (as in sweatshop-free apparel, fair trade coffee and crafts, conflict-free diamonds and whatever the next social issue becomes)—or any combination of the above.

Clothing Matters in Grand Rapids is one of the area’s largest collections of responsibly manufactured apparel and accessories. Owner Marta Swain refers to this trend as “conscious commerce.” She invites her discerning clientele to “indulge their integrity” in a niche that delivers the satisfaction of purchases that “positively impact the environment and social equity.”

Since starting her businesses in 1998, Swain has watched larger retailers take small steps in this direction.

“Greenwashing is real; buyers beware,” she advises. “Greenwashing,” a term that has turned up recently in marketing discussions, describes a deceptive marketing strategy that attempts to portray a product (or store) as more ecologically friendly or pure than it can honestly claim.

The takeaway for independents: Find and offer responsible, healthy, “sustainable,” local or otherwise more ethical products that appeal to your customer base, but steer clear of phony claims and products that don’t pass the smell test. Today’s consumers are too discerning to be fooled for long.

This article was written by staff writer Amy Buttery.