When the Shift Hits the Fan: The Future of the Big-Box Discounter

Fifty Years After Kmart, Target and Kohl's Opened Their Doors, the Retail World Is a Much Different Place

By Published on .

If it seems coincidental that some of the world's-largest general merchants, including Walmart, Target , Kohl's and Kmart, all opened their doors in 1962, it's not. With an exploding middle class, largely homogeneous consumer segments and plenty of cheap suburban asphalt, it can be argued that no other time in history offered as much potential for the growth of retailers as the early 1960s did. They simply couldn't lose.

Fifty years on, the world is a very different place. The middle-class catalyst for astronomical growth is evaporating. The once easily targeted white, married couple with children are now the minority of U.S. families and in their place is a variety of family compositions, lifestyles and ethnicities. And conventional media, once so predictably productive, are becoming increasingly ineffective.

Today, the once-invincible Walmart is scrambling to recover its competitive edge. Target is setting up shop outside the U.S. in search of growth, Kohl's is building significantly smaller stores and Kmart is on deathwatch.

So what does the future hold, not only for these retailers, but for the industry in general?

From big box to big blanket
In a pre-internet world, big-box formats offered selection, value and one-stop convenience. Today, however, the internet is the biggest box of all. The very concept of "destination" in retail is shifting as consumers become accustomed to getting anything they want, wherever they want it and at the best price available. Convenience has been redefined.

We can expect complete fragmentation of the big-box into touch points across multiple channels, with the goal of blanketing the marketplace. Retailers will seek to become ever-present in our lives, to be there the instant we realize we need something or, better yet, before we realize it.

Stores anywhere
A recent experiment by European retailer Tesco allowed Korean subway riders to shop for groceries using their smartphones by scanning high-resolution images of fully stocked store shelves displayed on the subway platform. They could buy what they needed and schedule delivery.

Similarly, Net-A-Porter's launch of its Karl Lagerfeld line was executed using augmented-reality installations whereby consumers could view and transact with a virtual store simply by viewing branded images through their smart devices.

There is no reason Target couldn't have a similar virtual store on New York's Fifth Avenue, or any other location for that matter.

Connected appliances
A number of major appliances at this year's Consumer Electronics Show were internet-connected. These included everything from refrigerators that are capable of tracking the diets of household members to washer/dryers that are able to source specific garment-care instructions.

Appliances will take stock of food, laundry items and other household needs, add them automatically to a consumer's shopping list and, if desired, order from the preferred store for home delivery. Walmart's renewed interest in radio-frequency-identification tracking tags on its products almost certainly anticipates this.

Brands as content
In 1965, three TV commercials in prime time reached 80% of the viewing public; today, a feat like that requires upward of 117 spots. Consequently, more brands are choosing to create program content. Ford, for example, has just announced a collaboration with NBC to produce "Escape Routes," a reality show featuring the Ford Escape.

Expect retailers to follow suit. It's even conceivable that larger retailers such as Target , Walmart and Home Depot could develop their own cable networks.

Serendipitous shopping
Increasingly, products will seek us out. As we move through our day, we'll be seamlessly presented with logical product and service recommendations based on everything from our location and activity to the current weather conditions.

Walmart's pursuit of this Utopia is evident in its recent formation of Walmart Labs: an amalgam of acquired startups in the social, mobile and point-of -sale technology fields, whose sole purpose is to collect, decipher and deploy vast amounts of social and mobile data to anticipate consumer needs. Labs has already begun experimenting with applications that offer prescient gift suggestions for Facebook friends by analyzing their social data and then auto-searching Walmart.com and other sites for the ideal item.

The next 50 years
None of this suggests the complete eradication of brick-and-mortar stores. It does mean, however, that the discount retailer of tomorrow will look very different from today's, and that the strategic purpose of the live store experience must change. Ultimately, in a world where products are everywhere, the most important thing retailers will need to focus on selling in-store is their unique brand experience.

If they get that wrong, nothing else really matters.

Doug Stephens is the president of Retail Prophet, a future-focused specialty consultancy.
Most Popular
In this article: