Store-Based Retailers Face Hurdles by 2015

DALLAS — The retail landscape of 2015 and beyond will be less familiar and more challenging to store-based operators, according to Dan O'Connor, president and chief executive officer of RetailNet Group.

Retailers will need to rethink their strategies because of stagnant population growth in developed countries and increasing competition from digital players, he told an audience at FMI Future Connect 2011 here.

“By 2015 we'll realize we have too many stores,” he said. “E-commerce will take more share from stores.”

O'Connor estimated that by 2020 online shopping options, including those from traditional retailers and pure plays, will represent about 20% of consumption.

Moreover, younger, affluent shoppers will increasingly move to online shopping, pulling a critical base from store-based retailers, he added.

Retailers were urged to “create on-ramps for younger consumers to shop your store before they are 25 so they get into a pattern.”

O'Connor also predicted that traditional retailers trying to compete with digital alternatives will face major hurdles because many consumer-direct models aren't profitable and it's hard to attach a delivery network to physical stores. “You can't out-Amazon Amazon.”

However, he said store-based retailers have tools at their disposal, including a history of partnering with suppliers and developing shopper insights to attract consumers.

O'Connor said store-based retailers need to rethink their strategies by asking themselves crucial questions. “How will the market of 2015 be different? What does that mean for where I locate and for the size of my stores? What does it mean for how I departmentalize my stores?”

O'Connor said brands were initially the most powerful force but gave way to retailers taking control. Within the next few years, however, “consumers will be completely in control,” he predicted.

Nevertheless, he forecasts the growth of brand-based stores, which will represent another competitive factor facing retailer-sponsored stores.