tag:theconversation.com,2011:/us/topics/retail-sector-13698/articlesRetail sector – The Conversation2024-01-05T13:46:13Ztag:theconversation.com,2011:article/2201812024-01-05T13:46:13Z2024-01-05T13:46:13ZThe US invented shopping malls, but China is writing their next chapter<figure><img src="https://images.theconversation.com/files/567756/original/file-20240103-29-8zgelg.jpg?ixlib=rb-1.1.0&rect=32%2C0%2C5449%2C3641&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">People walk under a light projection at a shopping mall in Beijing. </span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/people-walk-under-a-light-projection-at-a-shopping-mall-in-news-photo/1782952230">(Photo by Jade Gao / AFPJade Gao/AFP via Getty Images)</a></span></figcaption></figure><p>On a recent research trip to China, I wandered through the Oasis Mall in suburban Shanghai. Like many Chinese shopping centers, this complex was filled with empty stores that reflected the <a href="https://www.bloomberg.com/news/features/2020-02-07/ghost-malls-in-china-s-once-teeming-megacities?embedded-checkout=true">end of China’s 30-year-long economic expansion</a>. But there also were surprises. </p>
<p>Along a stretch of the mall’s interior walkway, a cluster of parents and grandparents sat on chairs. They were looking through a plate glass window, watching a dozen 5- to 7-year-old girls practice ballet steps, carefully following their teacher’s choreography. A space initially designed for retail had been turned into a dance studio.</p>
<p>From 1990 through 2020, <a href="https://www.taylorfrancis.com/books/mono/10.4324/9781315609065/shopping-malls-public-space-modern-china-nicholas-jewell">large, shiny shopping malls</a> embodied China’s spectacular economic growth. They sprouted in cities large and small to meet consumer demand from an emerging middle class that was keen to express its newfound affluence. These centers look familiar to American eyes, which isn’t surprising: U.S. architectural firms <a href="https://doi.org/10.1080/13467581.2023.2182639">built 170 malls in China during this period</a>.</p>
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<a href="https://images.theconversation.com/files/567757/original/file-20240103-15-n9ojl6.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A curved modern building labeled Oasis, with towers in the background." src="https://images.theconversation.com/files/567757/original/file-20240103-15-n9ojl6.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/567757/original/file-20240103-15-n9ojl6.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=232&fit=crop&dpr=1 600w, https://images.theconversation.com/files/567757/original/file-20240103-15-n9ojl6.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=232&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/567757/original/file-20240103-15-n9ojl6.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=232&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/567757/original/file-20240103-15-n9ojl6.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=291&fit=crop&dpr=1 754w, https://images.theconversation.com/files/567757/original/file-20240103-15-n9ojl6.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=291&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/567757/original/file-20240103-15-n9ojl6.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=291&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">The Oasis (blue building) is one of some 6,700 shopping malls in Chinese cities. Hundreds of new centers open yearly.</span>
<span class="attribution"><span class="source">John Rennie Short</span>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
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<p>Like their <a href="https://www.businessinsider.com/shopping-mall-rise-fall-timeline-1950s-to-today-2023-1">U.S. counterparts</a>, many Chinese malls have fallen on hard times. The COVID-19 pandemic and the rise of online shopping have devastated foot traffic, leaving the nation with a huge overhang of retail space. But many Chinese malls are being re-imagined by owners and users as palaces of experience – civic areas for communities to meet and interact, with new configurations of public and private space. </p>
<p>As a <a href="https://scholar.google.com/citations?user=oMPNYhQAAAAJ&hl=en">longtime urban policy scholar</a>, I was fascinated by the new uses I saw for malls in China. In my view, these experiments could become models for new, creative uses of retail space in the U.S., where the mall was invented. </p>
<h2>Serving a new consumer class</h2>
<p>China <a href="https://www.brookings.edu/books/how-china-opened-its-door/">opened up to foreign trade and investment</a> less than 50 years ago. Since then, it has become the <a href="https://www.forbesindia.com/article/explainers/top-10-largest-economies-in-the-world/86159/1">world’s second-largest economy</a>, surpassed only by the U.S. </p>
<p>Rising incomes and a massive population shift from rural areas to cities have created a <a href="https://www.goldmansachs.com/intelligence/macroeconomic-insights/growth-of-china/chinese-consumer/">growing middle class</a> with significant purchasing power. GDP per capita increased <a href="https://finance.yahoo.com/news/china-squandered-golden-opportunity-overtake-110000713.html">from US$293 in 1985 to $12,500 by 2021</a>. </p>
<p>Today, approximately 350 million Chinese – 25% of the total population – <a href="https://onlinelibrary.wiley.com/doi/epdf/10.1111/cwe.12400">can be considered middle class</a>. More recent economic growth has generated growing income inequality that now is <a href="https://sccei.fsi.stanford.edu/china-briefs/rise-wealth-private-property-and-income-inequality-china">equivalent to U.S. levels</a>.</p>
<p>Malls became a motif of modernity during the country’s economic expansion. They offered consumers year-round protection from heat, humidity, cold and frost, as well as from busy streets and polluting traffic. Malls were safe environments where the steadily increasing numbers of more affluent Chinese families could shop and eat, stroll and meet.</p>
<p>Over the past 30 years, China’s malls have <a href="https://discovery.ucl.ac.uk/id/eprint/10154812/">faced economic booms and slumps</a>. For example, the <a href="https://www.atlasobscura.com/places/new-south-china-mall">New South China Mall</a> in Dongguan – which is twice the size of Minnesota’s Mall of America, its largest U.S. counterpart – opened in 2005. But most of its 2,300 storefronts remained closed for over a decade as China <a href="https://www.imf.org/external/pubs/ft/fandd/2010/06/yueh.htm">fought off recession</a> after the 2008 world financial crisis. </p>
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<figcaption><span class="caption">This 2013 news report takes viewers inside the then-deserted New South China Mall in Dongguan.</span></figcaption>
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<p>China weathered that downturn through <a href="https://insight.kellogg.northwestern.edu/article/china-credit-expansion-unintended-consequences">aggressive economic stimulus policies</a>, and within a decade it replaced the U.S. as the <a href="https://www.reuters.com/article/idUSKBN1XF218/">world’s top driver of economic growth</a>. This expansion buoyed its retail sector, including <a href="https://www.chinadaily.com.cn/a/201901/11/WS5c380388a3106c65c34e3e65.html">shopping centers</a>. By 2018, a renovated and modernized New South China Mall was <a href="https://theculturetrip.com/asia/china/articles/worlds-biggest-shopping-mall-china-no-longer-ghost-mall">near full occupancy</a>. </p>
<p>Then COVID-19 struck in 2020. The Chinese government adopted a rigid <a href="https://www.voanews.com/a/what-is-china-s-zero-covid-policy-/6854291.html">zero-COVID policy</a>, in which local governments could impose lockdowns after detecting just a few cases. Hundreds of millions of people were restricted to their homes for weeks or months at a stretch. </p>
<p>This policy was lifted only <a href="https://publichealth.jhu.edu/2023/no-more-lockdowns-chinas-new-covid-landscape">in late 2022</a>. China’s economy has yet to fully recover, and many experts argue that it <a href="https://www.wsj.com/world/china/china-economy-debt-slowdown-recession-622a3be4">will never again reach its previous rates of growth</a>. An <a href="https://asia.nikkei.com/Spotlight/The-Big-Story/China-s-aging-population-threatens-a-Japan-style-lost-decade">aging population</a>, <a href="https://www.reuters.com/article/idUSKBN1ZF2YQ/">trade wars with the U.S.</a> and a government focused on centralizing power under the Communist Party are all acting as drags on the economy, and online shopping is drawing consumers away from stores. </p>
<p>As a result, Chinese media reports abound with stories about <a href="https://new.qq.com/rain/a/20230720A06YQI00">well-known stores</a> and <a href="https://www.jiemian.com/article/9356769.html">venerable malls</a> closing. In China, as in the U.S., what scholars once described as the “<a href="https://doi.org/10.1111/j.1467-8306.1993.tb01921.x">magic of the mall</a>” has become an “<a href="https://www.discoursemagazine.com/p/the-allure-of-ruins">allure of ruins</a>.” </p>
<h2>Malls with Chinese characteristics</h2>
<p>But the Chinese are making creative use of excess mall space. New users are filling nonretail areas, such as indoor walkways and atriums that now house café tables. Others have become children’s play spaces filled with giant inflatable figures. The <a href="https://www.capitaland.com/en/find-a-property/global-property-listing/retail/raffles-city-shenzhen.html">Raffles City Mall</a> in Shenzen has a rooftop pet playground, a stage, an art display area and a sun-shaded lawn. </p>
<p>China’s informal economy of food stalls and sidewalk merchants is also filling the void. Although street vending has a long history in China, government officials sought to suppress it in recent years, calling it <a href="https://epaper.chinadaily.com.cn/a/202009/18/WS5f63fbf0a31099a2343506f3.html">unsanitary and a throwback to pre-modern times</a>. Now, however, they are encouraging it as a way to reduce growing unemployment, especially among young people, which <a href="https://theconversation.com/chinas-youth-unemployment-problem-has-become-a-crisis-we-can-no-longer-ignore-213751">currently exceeds 20%</a>. </p>
<p>During my trip, I saw small-scale entrepreneurs selling produce, street food and crafts in mall parking lots and around public entrances. The <a href="https://www.routledge.com/Pseudo-Public-Spaces-in-Chinese-Shopping-Malls-Rise-Publicness-and-Consequences/Wang/p/book/9781032177991">distinction between public and private spaces</a> is being reconfigured as vendors set up stalls in areas that once were open space. </p>
<p>Empty store spaces are also being repurposed. Some have been converted into <a href="https://www.bloomberg.com/news/articles/2021-03-08/luxury-malls-are-the-new-car-showrooms-for-chinese-ev-makers?sref=Hjm5biAW">electric vehicle showrooms</a>, <a href="https://doi.org/10.1080/14702029.2022.2061750">art museums</a> and <a href="https://doi.org/10.1080/14733285.2022.2050675">children’s play centers</a> with dance studios, paddling pools, small skating rinks, gyms and yoga centers. Others have been redesigned as sites for art or cooking classes, or for <a href="https://thebusinessofesports.com/2021/07/02/china-opens-countrys-first-esports-themed-shopping-mall/">multiplayer electronic gaming</a> and <a href="https://franchise.sandboxvr.com/what-u-s-franchisees-can-learn-from-the-chinese-mall-experience/">virtual reality experiences</a>. The Dream Time Mall in Wuhan contains <a href="https://indoorsnownews.com/2023/03/03/wuhan-opens-indoor-snow-centre-as-part-of-worlds-new-largest-mall/">an indoor snow center</a> that offers ski lessons, ice mazes and tubing.</p>
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<a href="https://images.theconversation.com/files/567752/original/file-20240103-15-8btgm3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="People crowd into a curved atrium around a giant screen." src="https://images.theconversation.com/files/567752/original/file-20240103-15-8btgm3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/567752/original/file-20240103-15-8btgm3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/567752/original/file-20240103-15-8btgm3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/567752/original/file-20240103-15-8btgm3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/567752/original/file-20240103-15-8btgm3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/567752/original/file-20240103-15-8btgm3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/567752/original/file-20240103-15-8btgm3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">People at Joy City Shopping Complex in Yantai, China, watch a live broadcast of the 2023 League of Legends world championship final on Nov. 19, 2023. League of Legends is a multiplayer online battle arena video game.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/people-gather-at-joy-city-shopping-complex-to-watch-a-giant-news-photo/1802127612">Tang Ke/VCG via Getty Images</a></span>
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<p>I see these experiments as a shift in the meaning of the mall. What began as a cathedral of retail consumerism is becoming a place where people can connect and enjoy individual and collective experiences that aren’t available online. </p>
<p>Some U.S. malls are <a href="https://www.retaildive.com/news/5-creative-ways-malls-are-repurposing-their-space/594580/">moving in this direction</a>, but China is doing it on a much larger scale. Just as former Chinese leader Deng Xiaoping once asserted that his government was pursuing <a href="https://www.cgtn.com/how-china-works/feature/What-does-path-of-socialism-with-Chinese-characteristics-mean.html">its own version of socialism, with “Chinese characteristics</a>,” the U.S.-designed mall is being rewritten with Chinese characters.</p><img src="https://counter.theconversation.com/content/220181/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Rennie Short does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>China has a lot of vacant retail space, including many underused shopping malls. An urban policy scholar describes how the Chinese are rethinking what the mall is for.John Rennie Short, Professor Emeritus of Public Policy, University of Maryland, Baltimore CountyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2144772023-12-26T20:29:43Z2023-12-26T20:29:43ZHow the retailing contest between CBDs, shopping centres and online will reshape our cities<figure><img src="https://images.theconversation.com/files/560940/original/file-20231122-15-dign1s.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C4000%2C2652&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Paul J. Maginn/@Planographer</span></span></figcaption></figure><p>Retail activity has been a defining facet of cities since antiquity. The Greek Agora and Roman Forum may be viewed as the original CBDs – central business districts, or what urban planners call activity centres.</p>
<p>Retail spaces have <a href="https://www.routledge.com/Managing-the-Marketplace-Reinventing-Shopping-Centres-in-Post-War-Australia/Bailey/p/book/9780367500559">evolved</a> over time. Urbanisation, mass production and the rise of conspicuous consumption led to the <a href="https://www.tandfonline.com/doi/full/10.1080/00049182.2019.1682317">high street</a> and CBD dominating the retail landscape across the Western world from the late 19th century until the mid-20th century.</p>
<p>The 21st-century retail landscape has become more diverse and competitive. The range of physical and virtual retail spaces, retailers, products and prices leaves consumers spoilt for choice. </p>
<p>Retailing is more than just about consumption. It’s Australia’s fourth-largest employment sector and plays a major role in shaping our cities. Retail helps define a city’s identity and brand and thus attract visitors. But the retail landscape and consumer behaviour are changing, and changing fast!</p>
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Read more:
<a href="https://theconversation.com/what-makes-an-ideal-main-street-this-is-what-shoppers-told-us-214554">What makes an ideal main street? This is what shoppers told us</a>
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<h2>The place to be and be seen</h2>
<p>In Australia (and elsewhere), the CBD was at the epicentre of the evolution of discrete retail spaces. It offered a smorgasbord of independently owned shops, national and international chain stores and department stores. These were located in laneways, shopping arcades, main streets and multistorey shopping centres. </p>
<p>Centrality, easy public transport access and a largely suburban-based commuter workforce explain the dominance of the CBD in the 20th century. </p>
<p>A visit to the CBD on a Saturday was <a href="https://www.watoday.com.au/national/western-australia/the-karrinyup-creep-how-mega-malls-took-over-retail-and-changed-perth-20230913-p5e4do.html">more than just a utilitarian shopping trip</a>. It could be an urban exploration, a leisure pursuit, a pleasure-seeking adventure, a social event. </p>
<p>Children accompanying their parents were mesmerised by the intensity of urbanism and retail choice. Teenagers and young people, much like 19th-century <a href="https://www.theparisreview.org/blog/2013/10/17/in-praise-of-the-flaneur/">flaneurs</a>, paraded with their peers, their fashion denoting their subcultural affiliation.</p>
<p>For adults, the CBD offered a chance to indulge in retail therapy via window shopping and pleasurable consumption. For others a trip to the CBD allowed them to treat themselves and meet friends at the department store cafe. </p>
<p>In short, the CBD was the place to see and be seen.</p>
<h2>CBD’s retail crown slips</h2>
<p>The dominance of the CBD began to slip with the emergence of suburban shopping centres in the late 1950s – thank you, <a href="https://theconversation.com/triumph-of-the-mall-how-victor-gruens-grand-urban-vision-became-our-suburban-shopping-reality-172393">Victor Gruen</a>. Rapid suburban growth, social mobility and increased car use drove an explosion in suburban shopping centres from the 1960s through to the 1980s. </p>
<p>According to the <a href="https://scca.org.au/industry-information/australian-shopping-centre-industry/#:%7E:text=The%20first%20modern%20shopping%20centre,in%20a%20lake%20of%20parking%E2%80%9D.">Shopping Centre Council of Australia</a>, an average of 22 shopping centres a year have been built since the first centre, Brisbane’s Chermside, appeared in 1957.</p>
<p>Competition between CBD retailers and shopping centres intensified in the 1980s and 1990s. With the rise of online retailing in the past decade or so, these bricks-and-mortar retailers have had to lift their game again. </p>
<p>Retailing matters. Aussie consumers spent a whopping <a href="https://auspost.com.au/content/dam/auspost_corp/media/documents/ecommerce-industry-report-2023.pdf">A$353 billion on retail goods in 2022</a> compared with <a href="https://auspost.com.au/content/dam/auspost_corp/media/documents/inside-australian-online-shopping-ecommerce-report.pdf">$275.3 billion in 2018</a> – a 28.2% increase. </p>
<p>Over the same period, online retail spending increased by 132% from $27.5 billion to $63.8 billion. It now accounts for just over 18% of retail spending in Australia, up from 10% in 2018.</p>
<p>The “4 Cs” underpin the rise of online shopping: convenience, choice, competitive prices and COVID-19 (which ramped up the shift). </p>
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Read more:
<a href="https://theconversation.com/big-bigger-biggest-black-friday-cyber-monday-and-singles-day-107492">Big, bigger, biggest: Black Friday, Cyber Monday and Singles Day</a>
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<p>COVID and working from home led to Australian CBDs, especially Melbourne and Sydney, losing considerable ground, while suburban shopping centres gained in terms of shopper numbers and spending.</p>
<p>Although <a href="https://www.afr.com/policy/economy/zombified-business-districts-are-getting-their-lives-back-20210408-p57hk1">zombified CBDs</a> at the height of pandemic restrictions are in the rear-view mirror, working from home lingers. This is especially true for Melbourne where <a href="https://www.afr.com/property/commercial/only-just-over-half-of-melbourne-has-returned-to-the-office-20231121-p5elk3">office occupancy averages 53%</a> – way behind Perth (91%), Adelaide (85%), Sydney and Brisbane (both 75%).</p>
<p><a href="https://www.melbourne.vic.gov.au/about-melbourne/melbourne-is-open/Pages/covid-19-recovery.aspx#:%7E:text=Melbourne%20City%20Recovery%20Fund,-%E2%80%8BIn%20partnership&text=It%20will%20invest%20in%20programs,visitors%20back%20to%20the%20city.">Capital city councils</a>, <a href="https://www.dlgsc.wa.gov.au/funding/cbd-revitalisation-grant-program">state governments</a> and bodies such as the <a href="https://sydney.org.au/FutureSydneyCBD/findings/">Committee for Sydney</a>, <a href="https://udiavic.com.au/wp-content/uploads/2020/10/200924-Revive-Melbourne-CBD-Final.pdf">Urban Development Institute of Australia</a> and the <a href="https://www.propertycouncil.com.au/submissions/cbd-vip">Property Council of Australia</a> have taken or advocated action to draw people back to the CBD. </p>
<p>Actions include everything from free parking and public transport, <a href="https://msd.unimelb.edu.au/informal-urbanism/projects/temporary-and-tactical-urbanism">tactical urbanism</a> or temporary changes to the streetscape such as pedestrian plazas, pop-up bike lanes, and parklets, outdoor dining, public events and vouchers, through to changes in planning regulations to speed up high-density residential development.</p>
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Read more:
<a href="https://theconversation.com/how-covid-all-but-killed-the-australian-cbd-147848">How COVID all but killed the Australian CBD</a>
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<h2>Cathedrals of consumption … and then some</h2>
<p>Before and since COVID-19 major shopping centres across Australia have undergone multi-million-dollar refurbishments and redesign. They include centres in Adelaide (<a href="http://westfield.com.au/marion/">Marion</a>), Brisbane (<a href="https://www.westfield.com.au/chermside">Chermside</a>, <a href="http://pacificfair.com.au/">Pacific Fair</a>), Melbourne (<a href="https://www.chadstone.com.au/,">Chadstone</a>, <a href="http://westfield.com.au/fountaingate">Fountain Gate</a>), Perth (<a href="https://www.westfield.com.au/carousel">Carousel</a>, <a href="https://www.karrinyupcentre.com.au/">Karrinyup</a>) and Sydney (<a href="http://westfield.com.au/">Parramatta</a>, <a href="http://macquariecentre.com.au/">Macquarie Centre</a>). The centres have increased floorspace and diversified retail, entertainment and food and beverage offerings.</p>
<p>Suburban shopping centres are more than <a href="https://sk.sagepub.com/books/enchanting-a-disenchanted-world-3e">cathedrals of consumption</a>. Mega-malls such as Chadstone (215,000m²), Fountain Gate (178,000m²) and Chermside (177,000m²) <a href="https://journals.sagepub.com/doi/full/10.1177/00420980221135418">stand out as major hubs</a> of economic activity and employment, tourist attractions and social and community spaces. </p>
<p>To help secure a ready customer base, <a href="https://www.chadstone.com.au/hotel-chadstone">upmarket hotels</a> and <a href="https://www.blackburne.com.au/collection/west-village/">luxury residential developments</a> have been built, or are earmarked for development, as part of major shopping centres. Many more such <a href="https://www.forbes.com/sites/pamdanziger/2017/12/04/why-malls-should-add-residential-to-their-repurposing-plans/">residential developments</a> in Australia (and the US) are likely over the next decade or so.</p>
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Read more:
<a href="https://theconversation.com/the-suburbs-are-the-future-of-post-covid-retail-148802">The suburbs are the future of post-COVID retail</a>
</strong>
</em>
</p>
<hr>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/565917/original/file-20231214-23-8rfikh.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/565917/original/file-20231214-23-8rfikh.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/565917/original/file-20231214-23-8rfikh.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/565917/original/file-20231214-23-8rfikh.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/565917/original/file-20231214-23-8rfikh.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/565917/original/file-20231214-23-8rfikh.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/565917/original/file-20231214-23-8rfikh.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A proposed luxury apartment development, West Village, next to Karrinyup Shopping Centre in Perth, WA.</span>
<span class="attribution"><span class="source">Paul J. Maginn/@Planographer</span></span>
</figcaption>
</figure>
<h2>Devil in the retail</h2>
<p>The competition between bricks-and-mortar retailers in CBDs, suburban shopping centres and online retailers peaks each year with the onset of Black Friday and Cyber Monday in late November, closely followed by the Christmas shopping season and New Year sales.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/really-need-those-new-shoes-why-you-might-spend-up-big-at-the-black-friday-sales-218241">Really need those new shoes? Why you might spend up big at the Black Friday sales</a>
</strong>
</em>
</p>
<hr>
<p>Whatever big changes come next – in terms of what we buy, where and how – will have implications well beyond the retail sector. The structure and function of cities, plus our relationship with the city and retail spaces, are likely to change. </p>
<p>With the rise of online shopping and on-demand delivery, can we, for example, expect to see our streets and skies soon filled with autonomous robots and drones?</p>
<p>Autonomous delivery raises major questions about retail, urban and residential design, infrastructure provision, employment, human behaviour and, ultimately, regulation. Therein lies the devil in the retail.</p><img src="https://counter.theconversation.com/content/214477/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The four Cs – convenience, choice, competitive prices and COVID-19 – will decide the retail battle and how it affects the structure and function of our cities.Paul J. Maginn, Interim Director, UWA Public Policy Institute; Associate Professor & Programme Co-ordinator (Masters of Public Policy), The University of Western AustraliaLouise Grimmer, Senior Lecturer in Retail Marketing, University of TasmaniaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2038852023-04-25T20:44:40Z2023-04-25T20:44:40ZNew research reveals how a single consumer group has the power to influence product pricing<figure><img src="https://images.theconversation.com/files/522235/original/file-20230420-14-6zv0jr.jpg?ixlib=rb-1.1.0&rect=119%2C0%2C7821%2C5202&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">More and more consumers are engaging in showrooming, the practice of visiting brick-and-mortar retail stores to research a product before buying it elsewhere at a lower price.</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><p>Have you ever gone to a store to try on shoes before going on to buy them elsewhere? Or had a salesperson talk you through the advantages of different models of printers before buying a cheaper version online? If so, you have engaged in “showrooming.”</p>
<p>Showrooming is the practice of visiting brick-and-mortar retail stores to research a product before buying it elsewhere at a lower price. It allows consumers to look and test out products before spending their money on them.</p>
<p>Showrooming, along with online shopping, has <a href="https://www.wsj.com/articles/SB10001424052702304587704577334370670243032">long been predicted to be a threat to retailers</a>. It’s easy to understand the concern — some have argued that showrooming is what led to the <a href="https://www.forbes.com/sites/greatspeculations/2015/05/08/what-could-radioshacks-bankruptcy-mean-for-best-buy/">demise of RadioShack and Circuit City</a>.</p>
<p>In addition, research has found that <a href="https://doi.org/10.1111/poms.12165">brick-and-mortar businesses do indeed suffer</a> from this type of consumer behaviour. Showrooming puts retailers under price pressure by intensifying competition and squeezing margins.</p>
<p>But this isn’t always the case. Recent years have seen stores that encourage showrooming, <a href="https://www.fool.com/investing/2019/03/19/call-it-reverse-showrooming-these-companies-are-ca.aspx">like Best Buy,</a> and companies like <a href="https://www.wsj.com/articles/amazon-retail-department-stores-11629330842">Amazon, that have invested in bricks-and-mortar stores,</a> to flourish. This suggests the reality of showrooming might be a little more complicated than initially thought.</p>
<h2>How consumers affect prices</h2>
<p>Our recent research dispels <a href="https://doi.org/10.1111/1756-2171.12305">the assumption that showrooming always drives prices down in retail</a>. Rather, <a href="https://doi.org/10.1287/mksc.2022.1376">our study found</a> the opposite can occur: showrooming can actually <em>increase</em> prices. </p>
<p>Our research took into account several different types of consumers. Some consumers were pickier than others and preferred to shop at stores with more product variety, while others engaged in showrooming. </p>
<p>Crucially, those who showroomed didn’t engage in price-comparison shopping — they did their research ahead of time and knew exactly what products and prices to seek out.</p>
<p>Some shoppers didn’t engage in showrooming because they felt guilty about buying a product elsewhere after a salesperson spent time marketing a product to them, or had no time to visit many different venues.</p>
<p>But other consumers were not-so-choosy and opted to shop at stores with less variety, with the intent of making a purchase, so long as they found a product that was a good enough fit. If they didn’t find an acceptable fit, they moved onto another store.</p>
<figure class="align-center ">
<img alt="A man trying on a pair of shoes in a shoe store." src="https://images.theconversation.com/files/521402/original/file-20230417-24-rgtpjv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/521402/original/file-20230417-24-rgtpjv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/521402/original/file-20230417-24-rgtpjv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/521402/original/file-20230417-24-rgtpjv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/521402/original/file-20230417-24-rgtpjv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/521402/original/file-20230417-24-rgtpjv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/521402/original/file-20230417-24-rgtpjv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Customers that showroom don’t typically engage in price-comparison shopping.</span>
<span class="attribution"><span class="source">(Shutterstock)</span></span>
</figcaption>
</figure>
<p>Our research found that only this last kind of consumer — the not-so-choosy consumer who doesn’t showroom — was the key to determining prices. Their choices and behaviours determine product prices in any given sector.</p>
<p>The reason why showrooming can increase prices is because most consumers — including showroomers — do not compare prices. This leads stores to increase their prices (even just slightly) to make more profit.</p>
<h2>Stores and consumer behaviour</h2>
<p>Our research differs from past studies in a crucial way. Instead of assuming <a href="https://doi.org/10.1287/mnsc.2015.2384">there is only one kind of store</a> where consumers can discover how suitable a product is, our research accounted for three different types of stores. </p>
<p>The first type, known as deep stores, carry many varieties of products within a certain category. Best Buy, for example, carries many types of television to allow consumers to find the product that suits them best. Deep stores tend to charge higher prices because their shoppers are more likely to make a purchase. Picky consumers tend to shop here.</p>
<p>The second type, known as shallow stores, carry many different types of products, but fewer brands within each product category. Walmart and Costco are examples of shallow stores. These types of stores tend to have lower prices, and less picky consumers tend to shop there.</p>
<figure class="align-center ">
<img alt="A hand holding a credit card up while another hand navigates an online store on an open laptop." src="https://images.theconversation.com/files/522234/original/file-20230420-21-tpp99u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/522234/original/file-20230420-21-tpp99u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/522234/original/file-20230420-21-tpp99u.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/522234/original/file-20230420-21-tpp99u.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/522234/original/file-20230420-21-tpp99u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/522234/original/file-20230420-21-tpp99u.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/522234/original/file-20230420-21-tpp99u.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Online shopping and consumer behaviours like showrooming have changed the way the retail industry works.</span>
<span class="attribution"><span class="source">(Shutterstock)</span></span>
</figcaption>
</figure>
<p>Lastly, online stores offer the widest variety of goods (and usually at the lowest prices), but don’t allow consumers to test out products. The mix of consumers at these three store types affects how retailers price their products by shaping the shopping experience.</p>
<h2>Broader implications</h2>
<p>As <a href="https://www.retailitinsights.com/doc/showrooming-a-threat-or-an-opportunity-0001">showrooming becomes more widespread</a> — and easier to do thanks to online shopping — prices across the retail industry could increase, depending on price sensitivities and the overall mix of different kinds of consumers. </p>
<p>Ultimately, the range of different kinds of stores determines how people shop. Consumers’ shopping patterns and behaviours, in turn, determine prices.</p>
<p>While the perceived threat of showrooming has led to strong policy proposals — like one minister in Spain that <a href="https://www.thelocal.es/20180920/spain-wants-to-charge-shoppers-for-trying-on-clothes">proposed retailers should charge shoppers for using changing rooms</a> — our study suggests the effects of showrooming are more subtle than initially thought.</p>
<p>Understanding showrooming requires thinking about the impact the practice has on consumer shopping patterns and how stores respond to them. Retailers, policymakers and observers should be wary of over-emphasizing the role showrooming plays in bringing down prices and changing the retail landscape.</p><img src="https://counter.theconversation.com/content/203885/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Heski Bar-Isaac has in the past few years received funding from SSHRC, the David and Sharon Johnston Centre for Corporate Governance Innovation at the Rotman School of Management, and the Fundacion BBVA. </span></em></p><p class="fine-print"><em><span>Sandro Shelegia receives funding from European Research Council, Spanish Ministry of Economy and Competitiveness, and BBVA Foundation.</span></em></p>Retail stores change the prices of their products based on the shopping habits of consumers. But consumers come in a variety of types, and not all of them influence prices equally.Heski Bar-Isaac, Distinguished Professor of Economics and Finance, University of TorontoSandro Shelegia, Associate Professor, Department of Economics and Business, Universitat Pompeu FabraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2027012023-03-29T18:11:34Z2023-03-29T18:11:34ZFirst Target, then Nordstrom — why do big retailers keep failing in Canada?<figure><img src="https://images.theconversation.com/files/517793/original/file-20230327-14-cx5a6z.JPG?ixlib=rb-1.1.0&rect=14%2C28%2C4778%2C3039&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Nordstrom Inc. is closing all of its Canadian stores and cutting 2,500 jobs as it winds down operations in the country. </span> <span class="attribution"><span class="source">THE CANADIAN PRESS/Nathan Denette</span></span></figcaption></figure><p>Since <a href="https://www.cbc.ca/news/business/nordstrom-canada-1.6766073">Nordstrom announced it was pulling out of Canada</a>, there has been a maelstrom of articles about the <a href="https://toronto.citynews.ca/2023/03/21/american-retailers-canadian-market-big-story-podcast/">pervasive failure and exodus of U.S. retailers from Canada</a>. Aside from Nordstrom, American retailers that have failed in Canada include <a href="https://www.cbc.ca/news/business/bed-bath-beyond-canada-going-out-of-business-closing-54-stores-1.6745092">Bed Bath and Beyond</a> and <a href="https://www.cnbc.com/2022/09/22/why-target-canada-could-not-beat-walmart-costco-and-giant-tiger.html">Target</a>.</p>
<p>But the list of Canadian retail failures is almost as long as the U.S. list, and includes well-known names such as <a href="https://www.cbc.ca/news/canada/toronto/zellers-closing-memorabilia-1.5425471">Zellers</a>, <a href="https://www.cbc.ca/news/canada/eaton-s-closing-doors-for-last-time-1.175747">Eaton’s</a> and all of the <a href="https://www.theglobeandmail.com/technology/dylex-dies-a-lingering-death/article769446/">Dylex brands</a>. Meanwhile, <a href="https://www.statista.com/statistics/1243350/ranking-of-the-top-ten-retail-chains-in-canada-by-revenue/">some of the most successful retailers in Canada</a> — including Home Depot, Walmart and Costco — are also American.</p>
<p>So the perspective that U.S. retailers are somehow more prone to failure than Canadian retail chains is unconvincing. However, something is going on that makes retailing in Canada more challenging than ever.</p>
<h2>Online shift isn’t the reason</h2>
<p><a href="https://financialpost.com/news/retail-marketing/nordstrom-canada-exodus-retailers-internet-landlords-economy">One of the key explanations given by pundits</a> for why retail is so challenging in Canada is the switch to online buying. For many, the advantages of online shopping are multifaceted, including convenience, 24/7 availability and a wider selection of products compared to traditional retailers.</p>
<p>According to Statistics Canada, the proportion of retail e-commerce sales <a href="https://www150.statcan.gc.ca/n1/pub/11-621-m/11-621-m2023002-eng.htm">rose to 6.2 per cent in 2022</a> from 3.9 per cent in 2019. </p>
<p>In the U.S., <a href="https://www.zippia.com/advice/what-percentage-of-retail-sales-are-online/">14.8 per cent of all retails sales were online</a> in 2022. This was a slight decrease from the height of the pandemic, when close to 16 per cent of sales were online. In other words, online retailing has more than doubled in less than six years. Amazon is reported to have a <a href="https://www.repricerexpress.com/amazon-statistics/">45 per cent share of online retail sales</a>.</p>
<p>But this doesn’t explain why the Canadian marketplace is more affected by retail failures than other countries. The shift to online buying <a href="https://www.oecd.org/digital/ieconomy/unpacking-ecommerce.pdf">has affected all Organisation for Economic Co-operation and Development countries</a>, but the level of retail failures and closures in Canada seems disproportionately high.</p>
<figure class="align-center ">
<img alt="A person walks by a Zellers storefront" src="https://images.theconversation.com/files/517800/original/file-20230327-18-qh55tj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/517800/original/file-20230327-18-qh55tj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=341&fit=crop&dpr=1 600w, https://images.theconversation.com/files/517800/original/file-20230327-18-qh55tj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=341&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/517800/original/file-20230327-18-qh55tj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=341&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/517800/original/file-20230327-18-qh55tj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=429&fit=crop&dpr=1 754w, https://images.theconversation.com/files/517800/original/file-20230327-18-qh55tj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=429&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/517800/original/file-20230327-18-qh55tj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=429&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Zellers’ parent company, the Hudson’s Bay Company, closed almost all the original Zellers stores in 2013, with the final two stores closing in 2020.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Jonathan Hayward</span></span>
</figcaption>
</figure>
<h2>The Canadian marketplace</h2>
<p>There are four factors that make the Canadian retailing environment difficult for newcomers to break into.</p>
<p><strong>1. Economies of scale.</strong> <a href="https://www150.statcan.gc.ca/n1/pub/71-607-x/71-607-x2018005-eng.htm">Canada has a population of 39 million</a> spread across a very large geographic area. Compared to other G-7 countries, <a href="https://www.retailcouncil.org/wp-content/uploads/2018/08/Rise_in_Canada_de_minimis_threshold.pdf">retailers don’t benefit from economies of scale in Canada </a> unless they operate across the entire country. A regional operator in the northeast U.S., for example, has a potential market of more than 125 million, while a regional operator in Canada is lucky to have a potential market of 15 million.</p>
<p>When it comes to ordering sufficient quantities of products from overseas manufacturers, Canadian retailers are at a massive disadvantage. With online retailers like Amazon that operate across borders, this disadvantage is amplified. The economies of scale also hamper Canadian firms due to smaller sales volumes. Smaller volumes mean that fixed business costs, like salaries and marketing, are higher on a per product basis.</p>
<p><strong>2. Supply chain challenges.</strong> Because Canada is not a densely populated country, the distances that products need to travel to make it to consumers are high, compared to other countries. Regional distribution centres can overcome this challenge, but they could increase the cost and complexity of <a href="https://www.weforum.org/agenda/2022/09/5-challenges-global-supply-chains-trade">already-strained supply chains</a>.</p>
<p><strong>3. Tough regulatory environment.</strong> Compared to the U.S., Canada has a more regulated environment for retailers. Whether it is employment laws, building permits, environmental regulations or health and safety rules, Canada is more demanding. This creates added cost for retailers in terms of startup, operations and compliance. <a href="https://www.bdo.ca/en-ca/insights/advisory/human-resources/operating-in-canada-laws-you-need-to-know">Canadian compliance laws are tough for good reason</a> — corporations play a key role in the standard of living and are therefore held to a high standard.</p>
<p><strong>4. Canadian identity.</strong> While Canadians buy and consume products imported from everywhere, there is a segment of the population that is <a href="https://digitalcommons.lsu.edu/cgi/viewcontent.cgi?article=1052&context=taboo">concerned about Canadian identity</a>. For this group, Canadianess is important. They see Canada as a small country living in the shadow of the U.S., trying to make its mark in the world.</p>
<p><a href="https://www.acrwebsite.org/volumes/7985">The segment is small</a>, but it still reduces the potential market for foreign retailers that need to compete against an existing retailer with a strong Canadian identity. Because Canada is the smallest of the G-7 countries, this issue is more important in Canada. There are Canadians who don’t want to see <a href="https://www.cbc.ca/news/business/buy-american-canada-1.4718355">more dollars than necessary going south of the border</a>.</p>
<h2>Strategies for success</h2>
<p>So how can new retailers maximize their chances of success? There are three strategies that, if followed carefully, increase the likelihood of newcomers’ success in Canada.</p>
<p><strong>1. Go big or go home.</strong> Because the Canadian marketplace is substantially smaller in size, a newcomer needs to commit to succeed. The perceived advantage of opening a small number of stores is that is reduces risk, but this strategy poses a problem: the economies needed for a company to succeed never materialize.</p>
<p>Going big means more than just having a bricks and mortar footprint across the country. It also means building a strong online presence that allows synergy between online ordering and in-person browsing to flourish. Many consumers who order from the Walmart or Canadian Tire online stores <a href="https://www.divante.com/blog/ecommerce-versus-retail-and-why-you-should-integrate-them">inspect the goods at the physical stores beforehand</a>.</p>
<figure class="align-center ">
<img alt="Shoppers pushing shopping carts down the aisles of a retail store" src="https://images.theconversation.com/files/518019/original/file-20230328-485-k12nr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/518019/original/file-20230328-485-k12nr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=388&fit=crop&dpr=1 600w, https://images.theconversation.com/files/518019/original/file-20230328-485-k12nr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=388&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/518019/original/file-20230328-485-k12nr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=388&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/518019/original/file-20230328-485-k12nr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=488&fit=crop&dpr=1 754w, https://images.theconversation.com/files/518019/original/file-20230328-485-k12nr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=488&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/518019/original/file-20230328-485-k12nr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=488&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Target expanded into Canada in March 2013, eventually opening 133 stores across the country. But by April 2015, the venture failed and Target shut down all its Canadian stores.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Colin Perkel</span></span>
</figcaption>
</figure>
<p><strong>2. Be true to yourself.</strong> If a retailer has enjoyed success in another market, it needs to figure out how to replicate that in Canada. This is especially true for big U.S. retailers. Ninety per cent of the Canadian population <a href="https://www.vox.com/2016/5/5/11584064/canada-population-map">lives within 160 km of the U.S. border</a> and many Canadians cross the border to go shopping.</p>
<p>Long before Target entered Canada, Canadians knew it to be a more stylish alternative to Walmart with competitive, if not slightly higher, prices. This is what Canadians expected when they went to Target in Canada for the first time. <a href="https://www.startribune.com/target-canada-marred-by-poor-management-experts-say/288762571/">But it was not what they found</a>. Instead, they found empty shelves and prices that were inconsistent with those at U.S. Targets and non-competitive with Canadian Walmarts.</p>
<p><strong>3. Understand the market.</strong> The biggest challenge for a new Canadian retailer is recognizing regional differences despite the smaller population. One-size-fits-all is something retailers need to leave behind. Beyond the obvious challenge of <a href="https://retail-insider.com/retail-insider/2014/09/target-in-quebec/">developing a specific Québecois retail strategy</a>, the differences across Canada in terms of <a href="https://www.thecanadianencyclopedia.ca/en/article/climate">climate</a>, leisure activities and <a href="https://lop.parl.ca/sites/PublicWebsite/default/en_CA/ResearchPublications/200920E">culture</a> are significant. There are cities in Canada where Chinese New Year and Diwali are as important as Thanksgiving and Christmas, for example.</p>
<p>In Canada, most retailing initiatives that fail can be attributed to a lack of recognition of the importance of critical mass to compete effectively. By incorporating these three strategies into both launch and operating plans, newcomers may find Canada to be more welcoming than recent history suggests.</p><img src="https://counter.theconversation.com/content/202701/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Soberman does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The perspective that U.S. retailers are somehow more prone to failure than Canadian retail chains is unconvincing, but the Canadian retail landscape is challenging for newcomers.David Soberman, Professor of Marketing, University of TorontoLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1585022021-04-21T19:39:57Z2021-04-21T19:39:57ZPandemic-era retail: No shoes, no shirt, no mask — no service?<figure><img src="https://images.theconversation.com/files/396063/original/file-20210420-15-1dajzzk.jpg?ixlib=rb-1.1.0&rect=0%2C144%2C4200%2C2760&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">People in masks shop for essential items at Costco in Mississauga, Ont., on April 18, 2021. Costco insists its in-store customers wear masks even if they claim exemptions.</span> <span class="attribution"><span class="source"> THE CANADIAN PRESS/Nathan Denette</span></span></figcaption></figure><p>Masking is currently required to access retail stores across Canada amid the COVID-19 pandemic. Presently, every province has regulations in place that require customers to wear masks before entering stores to shop.</p>
<p>All such regulations include exemptions for those unable to mask owing to a disability. However, <a href="https://www.cbc.ca/news/canada/london/her-daughter-has-a-mask-exemption-but-chapters-indigo-wouldn-t-let-her-in-1.5942044">not all store masking policies include these exemptions</a>. </p>
<p>The inability to mask for medical reasons raises important questions about the application of well-established principles of human rights law to the retail sector.</p>
<h2>Accommodation a shared responsibility</h2>
<p>Many human rights principles were developed around employment, including, for example, the employer’s <a href="https://www.canlii.org/en/ca/scc/doc/1999/1999canlii652/1999canlii652.html">duty to accommodate workers to the point of undue hardship.</a></p>
<p>In the accommodation process, employees have a right to privacy — they don’t need to disclose their diagnoses or provide more information than is necessary to establish their work-related limitations. How much information is sufficient varies with the circumstances. However, it usually involves <a href="http://www.ohrc.on.ca/en/ohrc-policy-position-medical-documentation-be-provided-when-disability-related-accommodation-request">documentation from a medical professional</a> that substantiates and explains these limitations.</p>
<p>Both parties have a duty to participate in the process; it’s a shared responsibility. There can be several exchanges before an accommodation is agreed upon, often including requests for further medical information. Accommodation is highly discretionary, and parties are encouraged to be creative when exploring various accommodation measures.</p>
<h2>Square peg in a round hole</h2>
<p>This process, with its back-and-forth nature, is suited to a situation in which the parties have an ongoing relationship. But in a retail setting, there’s no such relationship, so established principles of accommodation are an awkward fit.</p>
<p>Take, for example, a <a href="https://www.canlii.org/en/on/onhrt/doc/2020/2020hrto949/2020hrto949.html?resultIndex=1">case at the Ontario Human Rights Tribunal</a>. A claimant took the City of Toronto to task, alleging that he was discriminated against at various local businesses owing to the city’s <a href="https://www.toronto.ca/legdocs/bylaws/2020/law0541.pdf">masking bylaw</a>. The bylaw directs organizations to create a policy mandating mask wearing with exemptions for those with an “underlying medical condition,” further stating that no proof of such condition will be required. </p>
<hr>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/scientists-heres-how-to-fight-back-against-anti-maskers-climate-deniers-and-anti-vaxxers-145989">Scientists: Here's how to fight back against anti-maskers, climate deniers and anti-vaxxers</a>
</strong>
</em>
</p>
<hr>
<p>Ultimately, the tribunal dismissed the complaint, saying the city “cannot be faulted” for others’ misapplication of its bylaw. In doing so, the tribunal acknowledged that accommodation is a “shared responsibility.” In a retail setting, according to the tribunal, that means that a customer must “identify to a business” that they have an exemption-qualifying condition, but don’t have to provide proof.</p>
<p>Merely identifying a condition, however, falls short of the exchange that usually accompanies requests for accommodation in settings where parties have an ongoing relationship. A business and a customer can hardly share responsibility for accommodation in the same way an employee and a supervisor do.</p>
<h2>Proof, what proof?</h2>
<p>The question about how much information a customer should supply to retailers was also relevant to a <a href="https://www.canlii.org/en/bc/bchrt/doc/2021/2021bchrt39/2021bchrt39.html?resultIndex=1">recent case in British Columbia</a>. A person was denied entry to a store for refusing to wear a mask, even after identifying a medical condition to the security guard. Since the claimant declined to provide details to the B.C. Human Rights Tribunal about their alleged disability, the claim was dismissed.</p>
<figure class="align-center ">
<img alt="A man wearing a mask shops at a store in Chinatown in Vancouver. The cashier is behind a plastic sheet." src="https://images.theconversation.com/files/396087/original/file-20210420-17-bw4dnj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/396087/original/file-20210420-17-bw4dnj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=394&fit=crop&dpr=1 600w, https://images.theconversation.com/files/396087/original/file-20210420-17-bw4dnj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=394&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/396087/original/file-20210420-17-bw4dnj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=394&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/396087/original/file-20210420-17-bw4dnj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=495&fit=crop&dpr=1 754w, https://images.theconversation.com/files/396087/original/file-20210420-17-bw4dnj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=495&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/396087/original/file-20210420-17-bw4dnj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=495&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">People shop in Chinatown in Vancouver in February 2021.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Jonathan Hayward</span></span>
</figcaption>
</figure>
<p>The B.C. tribunal, unusually, made public its decision to make clear that claims <a href="https://www.cbc.ca/news/canada/british-columbia/bc-anti-mask-human-rights-tribunal-1.5972326">require evidence of a disability</a> because, as it rightly stated, the Human Rights Code “does not protect people who refuse to wear a mask as a matter of personal preference.”</p>
<p>However, this doesn’t answer the most pertinent question: What information is a customer required to supply to an organization <em>before</em> the fact, rather than to a human rights tribunal <em>after</em> the fact. </p>
<p>The B.C. tribunal is awaiting a more suitable complaint to determine how much medical information customers must give retailers to be exempt. But are exemptions the only answer? </p>
<h2>Exemptions ripe for abuse</h2>
<p>The need to substantiate mask-exemption claims in the retail sector is genuine, more so <a href="https://globalnews.ca/news/7748430/covid-19-variants-safety-measures/">as the pandemic worsens</a>. Masking <a href="https://www.vice.com/en/article/xgzpxd/anti-maskers-protests-police-arrests-canada">has been politicized</a>, and merely claiming an exemption <a href="https://globalnews.ca/video/7751085/covid-19-anti-mask-protesters-try-to-enter-calgary-grocery-store">can be ripe for abuse</a>. Possibly in response to this reality, Costco <a href="https://www.costco.ca/coronavirus.html">altered its masking policy</a> in November by removing medically based exemptions. Other retailers followed suit. Removing exemptions has proven controversial, and it’s unclear whether it’s lawful.</p>
<p><a href="https://www.costco.ca/coronavirus-response.html">Both Costco</a> <a href="https://www.chapters.indigo.ca/en-ca/covid-frequently-asked-questions/">and Indigo</a> identify alternatives to in-store shopping for those unable to mask. These include shopping online and curbside pickup. </p>
<figure class="align-center ">
<img alt="A woman in a mask walks by an Indigo store." src="https://images.theconversation.com/files/396090/original/file-20210420-19-12v5lhp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/396090/original/file-20210420-19-12v5lhp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=426&fit=crop&dpr=1 600w, https://images.theconversation.com/files/396090/original/file-20210420-19-12v5lhp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=426&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/396090/original/file-20210420-19-12v5lhp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=426&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/396090/original/file-20210420-19-12v5lhp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=535&fit=crop&dpr=1 754w, https://images.theconversation.com/files/396090/original/file-20210420-19-12v5lhp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=535&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/396090/original/file-20210420-19-12v5lhp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=535&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">An Indigo bookstore is seen in November 2020 in Laval, Que.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Ryan Remiorz</span></span>
</figcaption>
</figure>
<p>This appears consistent with advice from some human rights commissions. The Ontario Human Rights Commission, for example, in its non-binding policy role, suggests “offering curbside pickup” as a possible accommodation measure since this “<a href="http://www.ohrc.on.ca/en/news_centre/covid-19-and-ontario%E2%80%99s-human-rights-code-%E2%80%93-questions-and-answers">would generally allow a person to receive a retail service</a>.” The Saskatchewan Human Rights Commission has offered <a href="https://saskatchewanhumanrights.ca/education-resources/information-sheets/covid-19-public-services-and-nonmedical-masks-or-face-coverings/">a similar view</a>.</p>
<p>Alternative accommodation measures short of exemptions aren’t ideal for some. However, another principle of accommodation is that people have a right to an adequate accommodation — but not necessarily their preferred accommodation. </p>
<h2>Accommodation or exemption?</h2>
<p>Current alternatives to in-store shopping are arguably consistent with human rights accommodation principles. Even prior to the masking regulations, some businesses had already insisted their customers wear masks when they enter their stores, in response to the pandemic. </p>
<p>They could do so, as long as they were abiding by those accommodation principles. And given the potential for abusing masking exemptions, the in-store shopping alternatives may also better coincide with legal duties under <a href="https://www.ccohs.ca/oshanswers/legisl/responsi.html">health and safety legislation</a> across the country.</p>
<figure class="align-center ">
<img alt="Customers in masks look at shoes in a shoe store." src="https://images.theconversation.com/files/396084/original/file-20210420-19-78ld1p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/396084/original/file-20210420-19-78ld1p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=442&fit=crop&dpr=1 600w, https://images.theconversation.com/files/396084/original/file-20210420-19-78ld1p.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=442&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/396084/original/file-20210420-19-78ld1p.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=442&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/396084/original/file-20210420-19-78ld1p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=555&fit=crop&dpr=1 754w, https://images.theconversation.com/files/396084/original/file-20210420-19-78ld1p.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=555&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/396084/original/file-20210420-19-78ld1p.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=555&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Customers shop for shoes during an easing of COVID-19 restrictions that allowed non-essential stores to reopen in Québec in February.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Ryan Remiorz</span></span>
</figcaption>
</figure>
<p>But consumers and retailers are understandably confused. Indigo, for example, maintains that despite their store policy, they are “mindful” of their “<a href="https://globalnews.ca/news/7520912/mask-exemption-b-c-woman-files-complaint-after-autistic-son-denied-entry-at-indigo-store/">legal obligations, especially those relating to customer human rights</a>.”</p>
<p>As vaccination efforts roll out across the country, the end of the COVID-19 pandemic may finally be in view. Issues of mask-wearing exemptions and accommodations by retailers may soon be moot and the situation could remain unresolved — until the next public health crisis.</p><img src="https://counter.theconversation.com/content/158502/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Alison Braley-Rattai does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Retailers are grappling with anti-maskers during the pandemic. That’s because of the complicated relationship between businesses and customers when it comes to accommodating health conditions.Alison Braley-Rattai, Assistant Professor, Labour studies, Brock UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1450942020-08-26T07:58:19Z2020-08-26T07:58:19ZTrouble at the mall as landlords and tenants ponder mutually assured destruction<figure><img src="https://images.theconversation.com/files/354785/original/file-20200826-24-m1fbnq.jpg?ixlib=rb-1.1.0&rect=0%2C114%2C5079%2C3261&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A department store employee wheels clothes across Melbourne's Bourke Street Mall on August 5 2020, as retailers prepared to close their doors to customers.</span> <span class="attribution"><span class="source">Asanka Brendon Ratnayake/AP</span></span></figcaption></figure><p>“This is not a bluff,” <a href="https://www.theaustralian.com.au/business/companies/mosaic-could-shut-between-300-500-stores-amid-rent-disputes-online-switch/news-story/8868980e1be2de4048b93b17b9da3880">Scott Evans</a>, the chief executive of Mosaic Brands, has said of his threat to permanently close 300 to 500 stores in Australia unless landlords reduce rents.</p>
<p>Mosiac’s network of about 1,300 apparel stores includes Katies, Noni B, Rivers, Rockmans, Millers and Crossroads. With stores shuttered temporarily due to COVID-19 restrictions, it posted a <a href="https://www.afr.com/companies/retail/mosaic-brands-to-close-stores-after-170m-loss-20200824-p55ovi">A$170.5 million loss</a> in the year to June. </p>
<p>It and other retailers such as <a href="https://www.premierinvestments.com.au/our-brands/">Premier Investments</a> (owner of Just Jeans, Portmans and Jacqui E brands) <a href="https://www.smh.com.au/business/companies/westfield-locks-retailers-out-of-stores-as-rent-battle-escalates-20200820-p55ns2.html">have reportedly</a> been paying lower or no rent to landlords, on the basis their rents should reflect revenue and landlords should share the pain.</p>
<p>Last week Mosiac’s stalled rent negotiations with Australia’s biggest shopping centre landlord, Scentre Group, led to a <a href="https://www.afr.com/companies/retail/retailers-landlords-in-open-warfare-over-rents-20200825-p55p5f">lockout of 129 Mosaic stores</a>. Scentre also locked the doors to 38 stores owned by luggage retailer Strandbags.</p>
<p>According to <a href="https://www.theaustralian.com.au/business/companies/mosaic-could-shut-between-300-500-stores-amid-rent-disputes-online-switch/news-story/8868980e1be2de4048b93b17b9da3880">Evans</a>:</p>
<blockquote>
<p>The retail rental market in Australia is not paused because of the pandemic. It is fundamentally changed for the future. </p>
</blockquote>
<h2>A history of growth, conflict and negotiation</h2>
<p>Though the coronavirus crisis has brought things to a boil, tensions between shopping centre tenants and landlords have simmered for more than 40 years.</p>
<p>Behind Mosaic’s standoff with Scentre are the underlying power dynamics between tenants and landlords. Mutually dependent on one another, they have always fought over the spoils of shopping centre profits. With the COVID-19 crisis, strained relationships are starting to break down. </p>
<p>Australia’s first American-style <a href="https://australianfoodtimeline.com.au/first-australian-shopping-mall/">shopping centre opened in 1957</a>, in the Brisbane suburb of Chermside. It had space for one department store, one supermarket, 24 specialty stores and parking for 650 cars.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/354805/original/file-20200826-7037-1mlvfdc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="The Westfield Chermside shopping centre in 2017." src="https://images.theconversation.com/files/354805/original/file-20200826-7037-1mlvfdc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/354805/original/file-20200826-7037-1mlvfdc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/354805/original/file-20200826-7037-1mlvfdc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/354805/original/file-20200826-7037-1mlvfdc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/354805/original/file-20200826-7037-1mlvfdc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/354805/original/file-20200826-7037-1mlvfdc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/354805/original/file-20200826-7037-1mlvfdc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The Westfield Chermside shopping centre in 2017.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<p>As the rise of the private motor car reshaped cities and suburbs, <a href="https://www.routledge.com/Managing-the-Marketplace-Reinventing-Shopping-Centres-in-Post-War-Australia/Bailey/p/book/9781138323025">shoppers embraced</a> the convenience and comforts and comforts of the mall.</p>
<p>By the late 1970s they were the dominant shopping experience, outstripping many established “high streets”. They became <a href="https://epress.lib.uts.edu.au/index.php/sydney_journal/article/view/2817">social as well as commercial hubs</a>. </p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/westfields-history-tracks-the-rise-of-the-australian-shopping-centre-and-shows-whats-to-come-89073">Westfield's history tracks the rise of the Australian shopping centre and shows what's to come</a>
</strong>
</em>
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<p>They were also protected by planning legislation intended to constrain sprawling development, but which also created geographic monopolies by blocking competition nearby. </p>
<p>This all produced highly sought after and valuable retail space. </p>
<p>Naturally owners were keen to increase their profits by <a href="https://www.google.com.au/books/edition/Managing_the_Marketplace/ZbXjDwAAQBAJ?hl=en&gbpv=0">expanding these spaces</a> to attract even more shoppers. </p>
<h2>Calls for government intervention</h2>
<p>But as centres got bigger and more and more specialty retailers signed leases, complaints began to emerge about exploitation and steep rent hikes. By the early 1980s tenants’ complaints had become an issue for both sides of politics. </p>
<p>Intense lobbying led to government inquiries around the country, which found sufficient evidence to recommend industry self-regulation and then <a href="https://www.legislation.nsw.gov.au/#/view/act/1994/46">retail tenancy legislation</a>. </p>
<p>But the fundamental power dynamics remain. Landlords still have the most convenient and attractive locations for stores. They have control over entire retail environments, and even collect the sales data of their tenants. Their bargaining position in leasing negotiations is invariably very strong.</p>
<figure class="align-center ">
<img alt="A closed Noni B store in Brisbane." src="https://images.theconversation.com/files/354806/original/file-20200826-16-yosulv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/354806/original/file-20200826-16-yosulv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/354806/original/file-20200826-16-yosulv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/354806/original/file-20200826-16-yosulv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/354806/original/file-20200826-16-yosulv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/354806/original/file-20200826-16-yosulv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/354806/original/file-20200826-16-yosulv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A Noni B store in Brisbane on August 25 2020.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<h2>Sharing profits and costs</h2>
<p>In 2008 a <a href="https://www.pc.gov.au/inquiries/completed/retail-tenancies/report/retail-tenancy-market.pdf">Productivity Commission inquiry</a> noted:</p>
<blockquote>
<p>Well-managed shopping centres can unify a large and divergent group of tenants and help centre trade. In return, tenants in centres generally pay higher rents and outgoing expenses than similar tenants in a shopping strip and forego some independence in operating their business.</p>
</blockquote>
<p>It has often been a mutually advantageous relationship, but there has always been a contest between tenants and landlords over how they share both benefits and costs.</p>
<p>The retailers’ argument is rent should be based on the value of the customer traffic the shopping centre delivers to their stores, and those customers have evaporated with COVID-19. As analyst <a href="https://www.abc.net.au/news/2020-05-21/shopping-centre-landlords-among-biggest-coronavirus-losers/12271266">Bill Mooney put it</a>:</p>
<blockquote>
<p>With a lease agreement there’s an expectation of a certain amount of customers coming through into the shopping mall and if that nexus is broken, then yes, the landlord can insist on his rights, but which retailer is going to continue to pay rent and go broke?</p>
</blockquote>
<p>Mosaic’s projection of store closures emphasises this point. </p>
<p>No one will come out of this a winner. The fight to minimise losses will be bitter. The first casualties will be the most vulnerable: the smallest tenants, with the least bargaining power, in the most precarious financial situations. This echoes the broader pattern of the pandemic’s impact.</p>
<p>For landlords there are longer-term questions. Will the current standoff push retailers towards a permanently smaller physical footprint and greater investment in online shopfronts? Has it created even more uncertainty about retail’s future? How deeply has trust been eroded?</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/covid-19-has-changed-the-future-of-retail-theres-plenty-more-automation-in-store-139025">COVID-19 has changed the future of retail: there's plenty more automation in store</a>
</strong>
</em>
</p>
<hr>
<p>Whatever happens, when there is any sort of return to normal, both sides will enter fresh leasing negotiations with an acrid taste from what is rapidly becoming their most vitriolic fight to date.</p>
<hr>
<p><em>This article has been co-published with <a href="https://lighthouse.mq.edu.au/">The Lighthouse</a>, Macquarie University’s multimedia news platform.</em></p><img src="https://counter.theconversation.com/content/145094/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Matthew Bailey does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The COVID-19 crisis is stretching long strained relations between shopping centre landlords and tenants to breaking point.Matthew Bailey, Lecturer, Retail History, Macquarie UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1399772020-06-14T19:56:26Z2020-06-14T19:56:26ZWatch yourself: the self-surveillance strategy to keep supermarket shoppers honest<figure><img src="https://images.theconversation.com/files/339978/original/file-20200605-176550-4d7423.jpg?ixlib=rb-1.1.0&rect=0%2C84%2C5143%2C3333&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Retailers have tried many overt tactics to limit theft, such as signs that display images of CCTV cameras, threats to prosecute offenders, bag checks, <a href="https://www.news.com.au/finance/business/retail/woolworths-have-begun-weighing-items-in-the-bagging-area-again-at-selfservice-checkouts/news-story/6586309715eed2778dafdb86be027a46">checkout weighing plates</a> and <a href="https://www.news.com.au/finance/business/retail/coles-installs-imposing-new-security-screens/news-story/64a0a7fd5e67848fc38d9791bc80a0f9">electronic security gates</a>. </p>
<p>These tactics are extremely costly and have failed to stamp out retail theft. </p>
<p>Now supermarkets are trying a different tactic, that’s part overt surveillance but also encourages “self-reflection” on any impulse to exploit loopholes in the bagging and payment systems. </p>
<p>In late May Australian supermarket giant Woolworths confirmed it is trialling self-service checkout terminals with <a href="https://www.news.com.au/lifestyle/food/eat/woolworths-trialling-video-surveillance-at-selfservice-checkouts/news-story/29b75c97c5fba310071318b6ef87a459">built-in cameras</a>. They display your image as you scan your items. Rival <a href="https://au.news.yahoo.com/coles-installs-massive-cameras-stop-self-checkout-thefts-005944366.html">Coles</a> started trying the technology in <a href="https://www.news.com.au/finance/business/retail/coles-installs-cameras-at-selfserve-checkouts-to-stop-people-stealing-items/news-story/a54d11e0984e5ce07845c7eba46fe973">April 2019</a>.</p>
<p>The idea is that watching yourself scan your own groceries will reduce the temptation to steal. It is supported by research that shows the effectiveness of cues that cause us to self-focus and self-regulate. </p>
<h2>Retail theft continues to grow</h2>
<p>Since 1990, when the Australian Insitute of Criminology published extensive research on retail crime <a href="https://www.aic.gov.au/publications/crimprev/retail">and its prevention</a>, it has been widely accepted crime-related losses account for about 1% of all retail revenue. Estimates of customer theft were woolier. </p>
<p>In August 2019 the <a href="https://blog.retail.org.au/newsandinsights/customer-theft-hits-new-heights-as-retail-industry-crime-costs-businesses-3.37-billion">Australia and New Zealand Retail Crime Survey</a> came up with a specific number. It reported total crime-related retail losses amounted to 0.92% of revenue. Customer crime was 58% of that – or 0.53% of total revenue.</p>
<p>Though funded by retail technology company Checkpoint Systems, the survey sample is robust – almost a quarter of the retail industry in Australia and New Zealand. Also, the lead researcher, Emmeline Taylor, is a criminologist in the Department of Sociology at City, University of London respected for her expertise in retail crime.</p>
<h2>Costs of loss prevention</h2>
<p>Writing about her research <a href="https://theconversation.com/how-shoplifters-justify-theft-at-supermarket-self-service-checkouts-97029">in 2018</a>, Taylor tells the story of a major Australian supermarket discovering it was selling more carrots than it had in stock.</p>
<blockquote>
<p>Unfortunately this wasn’t a sudden switch to healthy eating or a desire to increase vitamin C intake, it was an early sign of a new type of shoplifter. Otherwise honest shoppers were using the self-service checkout to transact more expensive items – typically avocados – and put them through as carrots. </p>
</blockquote>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/341398/original/file-20200612-38707-1m8vk5z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/341398/original/file-20200612-38707-1m8vk5z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=338&fit=crop&dpr=1 600w, https://images.theconversation.com/files/341398/original/file-20200612-38707-1m8vk5z.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=338&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/341398/original/file-20200612-38707-1m8vk5z.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=338&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/341398/original/file-20200612-38707-1m8vk5z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=424&fit=crop&dpr=1 754w, https://images.theconversation.com/files/341398/original/file-20200612-38707-1m8vk5z.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=424&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/341398/original/file-20200612-38707-1m8vk5z.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=424&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Self-service checkouts have enabled ‘swipers’ – seemingly well-intentioned patrons engaging in routine shoplifting, says criminologist Emmeline Taylor.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<p>She termed these self-service checkout thieves “SWIPERS” – seemingly well-
intentioned patrons engaging in routine shoplifting. As the Australia and New Zealand Retail Crime Survey states: </p>
<blockquote>
<p>Their behaviour and motivations (that are often interlinked) fall into four main groups: the accidental thieves, the switchers of labels, those compensating themselves, and those that steal because they claim to have become frustrated with the process of self-checkout (e.g. triggering alerts or purchasing age-restricted items that require assistance from an employee). </p>
</blockquote>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-economics-of-self-service-checkouts-78593">The economics of self-service checkouts</a>
</strong>
</em>
</p>
<hr>
<h2>Prevention techniques</h2>
<p>The traditional approach to loss prevention involves attendants and security guards, specialised display fixtures, reinforced packaging, training, in-store signage, display alarms and more cameras. </p>
<p>More of these can prove counter-productive, as highlighted by the Australian Institute of Criminology’s analysis of <a href="https://aic.gov.au/publications/rpp/rpp120/stealing-retail-stores">local crime prevention strategies</a> in 2014. It found, for example, that introducing surveillance systems or security guards made <a href="https://aic.gov.au/publications/rpp/rpp120/stealing-retail-stores">shop staff less likely</a> to approach suspicious shoppers. </p>
<h2>Getting away with it</h2>
<p>The research by Taylor and others into the motivators of shoplifting points to the potential of another way to reinforce honest behaviour.</p>
<p>While some forms of stealing might be considered irrational – such as <a href="https://www.researchgate.net/publication/286070683_The_psychopathology_of_shoplifting_and_kleptomania">kleptomania</a> – shoplifters often rationalise their thefts. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/how-shoplifters-justify-theft-at-supermarket-self-service-checkouts-97029">How shoplifters justify theft at supermarket self-service checkouts</a>
</strong>
</em>
</p>
<hr>
<p>How much they steal comes down to their own “deviance threshold” – the point at which they can no longer justify their behaviour alongside a self-perception as a good person. This helps explains the greater frequency of shoplifting lower value items. It’s easier to justify a small “discount” on your bill. </p>
<p>If it’s just a small theft, also, the chances of getting caught are smaller. If caught, the chance of getting away – passing it off as an honest mistake, perhaps – is higher. This semi-conscious calculation is known as the “<a href="https://eprints.qut.edu.au/91385/7/91385.pdf">denial of punishment probability</a>”.</p>
<h2>You are being watched</h2>
<p>An obvious strategy for retailers is to make shoppers more aware they are being watched.</p>
<p>Research has demonstrated “eyes” images do this more effectively than images of security cameras or written reminders such as “you are being observed”. This is due to eyes triggering <a href="https://www.atlasobscura.com/articles/why-sticking-a-pair-of-eyeballs-on-a-sign-actually-changes-behavior">instincts connected to</a> our evolutionary capacity for gaze detection – sensitivity to being watched.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/super-recognisers-accurately-pick-out-a-face-in-a-crowd-but-can-this-skill-be-taught-112003">Super-recognisers accurately pick out a face in a crowd – but can this skill be taught?</a>
</strong>
</em>
</p>
<hr>
<p>But eyes signs also have their limitations. </p>
<p>Newcastle University researchers Max Ernest-Jonesa, Daniel Nettleb and Melissa Bateson did an experiment in a campus cafeteria and <a href="https://www.sciencedirect.com/science/article/pii/S1090513810001224">found</a> that posters featuring eye images resulted in less litter being left on tables than images of flowers, but less so when the café was busier.</p>
<hr>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/341438/original/file-20200612-153858-19ogbgo.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/341438/original/file-20200612-153858-19ogbgo.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/341438/original/file-20200612-153858-19ogbgo.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=419&fit=crop&dpr=1 600w, https://images.theconversation.com/files/341438/original/file-20200612-153858-19ogbgo.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=419&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/341438/original/file-20200612-153858-19ogbgo.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=419&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/341438/original/file-20200612-153858-19ogbgo.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=527&fit=crop&dpr=1 754w, https://images.theconversation.com/files/341438/original/file-20200612-153858-19ogbgo.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=527&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/341438/original/file-20200612-153858-19ogbgo.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=527&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Proportion of tables with litter left by quintile of number of people in the café at the time (1=fewest people, 5=most) under eye-image and flower-image conditions.</span>
<span class="attribution"><a class="source" href="https://www.staff.ncl.ac.uk/daniel.nettle/ernestjonesnettlebateson.pdf">Max Ernest-Jones, Daniel Nettle, Melissa Bateson</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span>
</figcaption>
</figure>
<hr>
<p>The more people around the more we relax. Those “eyes” can’t be watching everyone. </p>
<h2>Think of yourself</h2>
<p>A more effective tactic might be appealing to another honed evolutionary instinct: a “think of yourself” focus.</p>
<p>University of East Anglia researcher Rose Melaeady and colleagues demonstrated this with experiments using signs to encourage drivers to <a href="https://journals.sagepub.com/doi/full/10.1177/0013916517691324">turn off their engines</a> at a busy rail crossing with a two-minute average wait.</p>
<p>After an experiment just using an “watching eyes” image (with no discernible effect) they tried two signs.</p>
<p>One with set of human eyes and the words: “When barriers are down, switch off your engine”</p>
<p>The other with just the words: “Think of yourself: When barriers are down, switch off your engine.”</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/341428/original/file-20200612-93551-wl1a25.gif?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/341428/original/file-20200612-93551-wl1a25.gif?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/341428/original/file-20200612-93551-wl1a25.gif?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=781&fit=crop&dpr=1 600w, https://images.theconversation.com/files/341428/original/file-20200612-93551-wl1a25.gif?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=781&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/341428/original/file-20200612-93551-wl1a25.gif?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=781&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/341428/original/file-20200612-93551-wl1a25.gif?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=982&fit=crop&dpr=1 754w, https://images.theconversation.com/files/341428/original/file-20200612-93551-wl1a25.gif?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=982&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/341428/original/file-20200612-93551-wl1a25.gif?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=982&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="https://journals.sagepub.com/doi/full/10.1177/0013916517691324">Rose Meleady et al, Environment and Behavior, February 10 2017.</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span>
</figcaption>
</figure>
<p>With no sign, 20% of drivers switched off their engines. With the watching eyes sign, 30% switched off. With the “think of yourself” sign, 51% did so.</p>
<h2>Self-surveillance</h2>
<p>So the supermarkets’ self-surveillance strategy combines two tactics. First, a “traditional” external motivation to do the right thing – amplifying the <a href="https://www.researchgate.net/publication/12609065_The_Spotlight_Effect_in_Social_Judgment_An_Egocentric_Bias_in_Estimates_of_the_Salience_of_One's_Own_Actions_and_Appearance#:%7E:text=The%20Spotlight%20Effect%20in%20Social%20Judgment%3A%20An%20Egocentric%20Bias%20in,One's%20Own%20Actions%20and%20Appearance&text=This%20research%20provides%20evidence%20that,phenomenon%20dubbed%20the%20spotlight%20effect.">spotlight effect</a> with an overt reminder we are being watched. Second, it is also intended to evoke self-reflection and <a href="https://journals.sagepub.com/doi/full/10.1177/0013916517691324">self-regulation</a>. </p>
<p>These steps will likely add to concerns about personal privacy, though Woolworths and Coles say no recordings are being made.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/from-fare-evasion-to-illegal-downloads-the-cost-of-defiance-27978">From fare evasion to illegal downloads: the cost of defiance </a>
</strong>
</em>
</p>
<hr>
<p>Even if they were, though, the embrace of cashless transactions – with <a href="https://www.abc.net.au/news/2020-05-18/are-we-headed-to-a-cashless-economy-post-coronavirus/12244846">just 27% of all payments now made with cash</a> – suggests most customers aren’t overtly concerned about how much others know about their shopping habits.</p><img src="https://counter.theconversation.com/content/139977/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>To curb opportunistic shoplifting, supermarkets want you to know you are being watched. But they’re also hoping for self-reflection.Gary Mortimer, Professor of Marketing and Consumer Behaviour, Queensland University of TechnologyPaula Dootson, Senior Lecturer, Queensland University of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1389382020-05-24T20:04:48Z2020-05-24T20:04:48ZCan’t resist splurging on online shopping? Here’s why<figure><img src="https://images.theconversation.com/files/336947/original/file-20200522-57679-z3eq42.jpg?ixlib=rb-1.1.0&rect=169%2C285%2C5783%2C3498&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/happy-woman-doing-online-shopping-home-192063296">Shutterstock</a></span></figcaption></figure><p>The demand for online shopping has obviously increased since COVID-19 restrictions were put in place. </p>
<p>But less obvious are the subtle psychological drivers behind our collective online shopping splurge. In fact, online shopping can relieve stress, provide entertainment and offers the reduced “pain” of paying online. </p>
<p>In the last week of April, <a href="https://www.news.com.au/finance/work/posties-ditch-bikes-and-jump-in-vans-to-keep-up-with-demand-at-australia-post/news-story/67a18bcdebf223b5fbeb9dbcbe2957de">more than two million parcels a day</a> were delivered across the Australia Post network. This is 90% more than the same time last year. </p>
<p>More recently, data based on a weekly sample (from May 11-17) of transactions <a href="https://www.alphabeta.com/illiontracking">revealed</a> food delivery increased by 230%, furniture and office goods purchases rose 140% and alcohol and tobacco sales rose 45%.</p>
<p>Meanwhile, we’ve seen thousands of retail job losses, with Wesfarmers <a href="https://www.smh.com.au/business/companies/wesfarmers-to-close-or-convert-up-to-167-target-stores-in-massive-restructure-20200522-p54vex.html">announcing plans</a> on Friday to close up to 75 Target stores around the country, and Myer finally <a href="https://insideretail.com.au/news/myer-to-reopen-all-stores-next-week-202005">reopening stores</a> after nearly two months of closure. </p>
<h2>Why the shopping frenzy?</h2>
<p>Online sales of many product categories have increased, including for <a href="https://www.smh.com.au/business/companies/beauty-brains-and-brawn-what-we-are-buying-during-the-pandemic-20200403-p54gve.html">food, winter clothes and toys</a>. This isn’t surprising given people still need to eat, winter is coming and we’re bored at home.</p>
<p>But beyond the fact most people are spending more time at home, there are a range of psychological factors behind the online shopping upheaval. </p>
<p>Recent months have been stressful due to <a href="https://www.abc.net.au/news/2020-05-05/almost-one-million-australians-lose-jobs-due-to-coronavirus/12215494">financial uncertainty</a>, the inability to <a href="https://www.sbs.com.au/news/how-long-will-australia-s-borders-remain-closed">visit loved ones</a> and changes to our daily routines. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/coronavirus-could-spark-a-revolution-in-working-from-home-are-we-ready-133070">Coronavirus could spark a revolution in working from home. Are we ready?</a>
</strong>
</em>
</p>
<hr>
<p>Shopping can be a way to cope with stress. In fact, higher levels of distress have been linked with <a href="https://doi.org/10.1016/S0022-4359(99)00002-0">higher purchase intentions</a>. And this compulsion to buy is often part of an effort to reduce <a href="https://doi.org/10.1016/j.jcps.2017.07.006">negative emotions</a>.</p>
<p>In other words, shopping is <a href="https://doi.org/10.1037/gpr0000078">an escape</a>.</p>
<p>A <a href="https://doi.org/10.1080/15325024.2013.794670">2013 study</a> compared people living close to the Gaza-Israel border during a period of conflict with those from a central Israeli town that wasn’t under duress. The researchers found those living in the high-stress environment reported a higher degree of “materialism” and a desire to shop to relieve stress.</p>
<h2>When mall trips aren’t an option</h2>
<p>Indeed, in a time when typical forms of entertainment such as restaurants and cinemas are inaccessible, <a href="https://books.google.com.au/books?id=ojIoeYe8a1sC&printsec=frontcover&dq=Shopping+as+an+Entertainment+Experience&hl=en&sa=X&ved=0ahUKEwj-naSGlcHpAhV_73MBHarfBO0Q6AEIKDAA#v=onepage&q&f=false">shopping becomes a form of entertainment</a>. The act of shopping alone produces <a href="https://www.jstor.org/stable/2489765">increased arousal, heightened involvement, perceived freedom, and fantasy fulfillment</a>. </p>
<p>It seems the stress and boredom brought on by this pandemic has intensified our will to spend. </p>
<p>What’s more, psychology research has demonstrated humans’ <a href="https://science.sciencemag.org/content/244/4907/933">inability to delay gratification</a>. </p>
<p>We want things <em>now</em>. Even with stay-at-home orders, we still want new makeup, clothes, shoes, electronics and housewares.</p>
<p>Another pleasant aspect of online shopping is it avoids the typical “pain of paying” experienced during in-person transactions. </p>
<p>Most people don’t enjoy parting with their money. But research has shown the psychological pain produced from spending money <a href="https://doi.org/10.1287/mksc.17.1.4">depends on the transaction type</a>. The more tangible the transaction, the stronger the pain. </p>
<p>Simply, paying for a product by physically giving cash <a href="https://doi.org/10.1023/A:1027444717586">hurts more than clicking a “buy now” button</a>.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/90-out-of-work-with-one-weeks-notice-these-8-charts-show-the-unemployment-impacts-of-coronavirus-in-australia-136946">90% out of work with one week’s notice. These 8 charts show the unemployment impacts of coronavirus in Australia</a>
</strong>
</em>
</p>
<hr>
<h2>Clear browsing history</h2>
<p>Interestingly, online shopping also allows high levels of anonymity. While you may have to enter your name, address and card details – no one can see you. </p>
<p>It’s easier to buy “<a href="https://www.sciencedirect.com/science/article/abs/pii/S1057740815000200">embarrassing</a>” products <a href="https://www.jstor.org/stable/10.1086/671761">when no one is looking</a>. Apart from lockdown restrictions making it more <a href="https://www.insider.com/personal-advice-for-virtual-dating-in-coronavirus-lockdown-uk-2020-3">difficult to date</a>, this may also help explain why sex toy sales <a href="https://www.westernadvocate.com.au/story/6702036/panic-buying-switches-to-lubricants-and-sex-toys-says-flirt-bathurst-owner/">have surged</a> during the pandemic.</p>
<p>Sales of lingerie and other intimate apparel have also reportedly <a href="https://www.smh.com.au/business/companies/beauty-brains-and-brawn-what-we-are-buying-during-the-pandemic-20200403-p54gve.html">jumped 400%</a>. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/336955/original/file-20200522-22168-17b66mq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/336955/original/file-20200522-22168-17b66mq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/336955/original/file-20200522-22168-17b66mq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=390&fit=crop&dpr=1 600w, https://images.theconversation.com/files/336955/original/file-20200522-22168-17b66mq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=390&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/336955/original/file-20200522-22168-17b66mq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=390&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/336955/original/file-20200522-22168-17b66mq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=490&fit=crop&dpr=1 754w, https://images.theconversation.com/files/336955/original/file-20200522-22168-17b66mq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=490&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/336955/original/file-20200522-22168-17b66mq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=490&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">COVID-19 aside, shopping addiction (formally known as compulsive buying disorder) is a real disorder that may affect as many as 1 out of 20 people in developed countries.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/shopping-black-friday-cyber-monday-concept-1236791269">Shutterstock</a></span>
</figcaption>
</figure>
<h2>How have businesses responded?</h2>
<p>With <a href="https://www.cmo.com.au/article/672354/advertising-marketing-spend-significantly-impacted-by-covid-19/">advertising spend down</a>, businesses have responded in different ways to recent changes in online shopping. </p>
<p>Many are offering discounts to encourage spending. Last week’s <a href="https://www.clickfrenzy.com.au/">Click Frenzy</a> became a central hub for thousands of deals across dozens of retailers such as Telstra, Target and Dell.</p>
<p>Others have moved operations online for the first time. If you scroll through any major food delivery app, you’ll see offers from restaurants that <a href="https://www.broadsheet.com.au/sydney/guides/live-list-sydney-restaurants-pivoting-takeaway">previously specialised in dine-in services</a>. </p>
<p>Meanwhile, existing meal delivery services such as <a href="https://www.hellofresh.com.au/about/covid-19-updates">HelloFresh</a> and <a href="https://www.liteneasy.com.au/how-it-works/faqs/#faq-group-coronavirus_update">Lite n’ Easy</a> are updating their methods to guarantee hygienic packing and transport.</p>
<p>Several small Australian businesses have also <a href="https://au.finance.yahoo.com/news/rochford-winery-turns-into-gourmet-grocer-to-survive-003630325.html">pivoted</a>. <a href="http://www.clarkemurphyprint.com.au/">Clarke Murphy Print</a> responded to slowing print jobs by starting <a href="https://www.buildadesk.com.au/">Build-a-Desks</a>.</p>
<p>Even established brands are getting creative. For example, Burger King outlets in the US <a href="https://www.contagious.com/news-and-views/burger-king-zoom-billboard-conference-call-campaign-of-the-wee">are offering</a> free burgers to customers who use one of their billboards as a virtual backdrop during conference calls.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1259994949560328192"}"></div></p>
<h2>Don’t buy better, be better</h2>
<p>Unfortunately, with the ease of online purchasing, and our increased motivation to give in to improve our mood or seek entertainment, many people are now at risk of <a href="https://doi.org/10.1521/jscp.2007.26.3.334">overspending and landing in financial stress</a>. </p>
<p>It’s important to control spending during this fraught time. Simple ways to do this <a href="https://www.abc.net.au/life/how-to-control-online-shopping-during-coronavirus-pandemic/12119332">include</a> creating a budget, avoiding “buy now, pay later” schemes, recognising your spending “triggers” and planning ahead. </p>
<p>As isolation <a href="https://doi.org/10.1086/671564">increases materialism</a>, it’s also important to keep in touch with family and friends, whether that’s in person (<a href="https://www.theguardian.com/australia-news/2020/may/20/coronavirus-australia-lockdown-rules-travel-restrictions-nsw-victoria-queensland-qld-wa-sa-act-how-far-can-you-drive-visit-friends-family-parents-covid-19-guidelines">if allowed in your area</a>), via video calls or phone. </p>
<p>So the next time you’re thinking of pulling out your credit card, why not get Skype up on the screen and play a virtual game of <a href="https://www.wired.com/gallery/board-games-for-remote-play/">Pictionary instead</a>?</p><img src="https://counter.theconversation.com/content/138938/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>There are strong psychological drivers underpinning the impulse to splurge hard-earned money online. There are also some simple ways to stop.Adrian R. Camilleri, Senior Lecturer in Marketing, University of Technology SydneyEugene Y. Chan, Associate Professor, Purdue UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1392052020-05-22T06:57:37Z2020-05-22T06:57:37ZDon’t blame COVID-19: Target’s decline is part of a deeper trend<p>Wesfarmers’ decision to close or rebrand up to 167 of its 284 Target and Target Country stores should not come as too much of a surprise. </p>
<p>The once popular store has been ailing for years, outmanoeuvred by its successful and popular <a href="https://www.wesfarmers.com.au/our-businesses/kmart-group">sister business</a>, Kmart. </p>
<p>Up to 75 Target and Target Country stores will be closed, with the balance being converted to Kmart stores.</p>
<p>Its decline is due to a combination of poor market positioning, confusing product strategies, a declining middle class consumer market and too much similarity with Kmart. The impacts of COVID-19 are just the icing on the cake.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/how-kmart-ate-target-a-story-of-retail-cannibalism-60052">How Kmart ate Target: a story of retail cannibalism</a>
</strong>
</em>
</p>
<hr>
<h2>Spiralling sales and profit</h2>
<p>Wesfarmers acquired both retail chains when it took over the Coles Group in 2007. At the time Target looked the stronger business, and Wesfarmers <a href="https://www.reuters.com/article/us-wesfarmers-coles/wesfarmers-plans-coles-investment-restructuring-idUSSYD11087920070816?sp=true">considered selling all or part of Kmart</a>, or converting stores to the Target brand. </p>
<p>Just as well it decided to invest in Kmart instead.</p>
<p>Since 2012, Target’s profits and sales have deteriorated with Target realising its first <a href="https://www.wesfarmers.com.au/docs/default-source/reports/2016-annual-report.pdf?sfvrsn=4">loss of A$195 million in 2016</a>. </p>
<hr>
<p><iframe id="GLkNe" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/GLkNe/2/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
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<p>How Target has performed since then has been obscured by Wesfarmers combining the business into a <a href="https://www.wesfarmers.com.au/docs/default-source/asx-announcements/2018-annual-report.pdf?sfvrsn=0">Department Stores Division</a> including Kmart and Kmart Tyre and Auto Service. Target’s results were thus no longer reported separately. </p>
<p>But Wesfarmers’ <a href="https://www.wesfarmers.com.au/docs/default-source/asx-announcements/2019-annual-report.pdf?sfvrsn=0">2019 annual report</a> noted its trading performance highlighted “the need for ongoing repositioning to further elevate quality and style, expand its digital capabilities, and differentiate the business from Kmart and other competitors”.</p>
<h2>High couture and cheap kettles</h2>
<p>One way Target confused shoppers was to offer collaborations with high-end fashion designers like Missoni, Stella McCartney, Dion Lee and <a href="https://insideretail.com.au/news/targets-next-designer-partnership-revealed-201511">Dannii Minogue</a>, alongside $2 kids’ tops and <a href="http://www.target-catalogue.com/target-catalogue-february-2015-back-to-school/">cheap kitchenware</a>. </p>
<p>The move frustrated customers unable to secure designer pieces and disenfranchised “value-seeking” customers. Many voted with their wallets, moving to Kmart. </p>
<p>Wesfarmers’ <a href="https://insideretail.com.au/news/wesfarmers-to-reposition-target-cuts-head-office-roles-201908">plans to differentiate Target</a> from Kmart involved focusing on higher quality apparel, soft homewares and toys to compete against more specialty and middle market offerings. </p>
<p>But the middle market is a challenging sector. It is now dominated by “fast fashion” players offering on-trend clothing and home furnishing. The pressures have led to the collapse of other middle market chains. </p>
<p>Wesfarmers was very aware of the risks associated with this strategy.<br>
Its 2017 <a href="https://www.wesfarmers.com.au/docs/default-source/default-document-library/2017-annual-report.pdf?sfvrsn=0">annual report</a> stated: </p>
<blockquote>
<p>“Target’s strategy has been reset and the business is now focused on progressing changes to the operating model to better position the business to grow earnings into the future. This journey will be undertaken in an increasingly competitive apparel and general merchandise environment”. </p>
</blockquote>
<h2>Death of department stores</h2>
<p>The attempted shift in focus to a middle market department store only created more problems. </p>
<p>Department stores worldwide have faced challenging times in recent years. The past year alone has seen department store icons including Barney’s, Debenhams and JCPenney <a href="https://www.forbes.com/sites/laurendebter/2020/05/14/jcpenney-bankruptcy-protection-coronavirus/#5c84870521c8">file for bankruptcy or close for good</a>. Closer to home, Harris Scarfe <a href="https://www.afr.com/companies/retail/fallen-icon-the-undoing-of-harris-scarfe-20200109-p53q7j">went into receivership</a> in December 2019, while Myer and David Jones <a href="https://10daily.com.au/news/australia/a190829aclgz/david-jones-to-shrink-stores-as-profits-fall-20190830">have looked to consolidate stores</a>. </p>
<p>Department stores face many challenges from competition and changing consumer behaviour. However, a broader challenge is a <a href="https://www.oecd.org/social/under-pressure-the-squeezed-middle-class-689afed1-en.htm">declining middle class</a> that has been the cornerstone of the sector’s customer base. </p>
<p>Target’s strategy to move further into the middle market was always doomed for limited success. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/death-of-the-department-store-dont-just-blame-the-internet-its-to-do-with-a-dwindling-middle-class-121499">Death of the department store: don't just blame the internet, it's to do with a dwindling middle class</a>
</strong>
</em>
</p>
<hr>
<h2>Pandemic impacts</h2>
<p>Adding to department store woes is the COVID-19 pandemic. </p>
<p>Already reeling from a <a href="https://www.abc.net.au/news/2020-02-06/retail-sales-december/11937224">weak Christmas period</a> and the effects of the bushfires, retailers were hoping for a return to spending. Instead, they have been faced with store closures and possibly permanent shifts in consumer behaviour. </p>
<p>While some retailers have simply tried to survive the lockdowns, others are <a href="https://insideretail.com.au/news/ive-spoken-to-dozens-of-retail-execs-in-the-last-two-weeks-heres-what-i-learned-202004">re-evaluating their future</a>. For Wesfarmers, this means shifting focus from the struggling Target to the more popular and profitable Kmart. </p>
<p>But though the pandemic has undoubtedly had an unprecedented and substantial impact on the retail industry, in some cases it only accelerating outcomes already on the cards.</p>
<p>So Target is unlikely to be the last retailer to undergo radical surgery. Retailers like the <a href="https://www.smh.com.au/business/companies/hype-dc-platypus-owner-to-shut-stores-after-big-leap-in-online-sales-20200427-p54ni0.html">Accent Group</a> and <a href="https://insideretail.com.au/news/pas-group-may-shutter-underperforming-stores-in-restructure-202004">PAS Group</a> have flagged similar plans. </p>
<p>Expect further announcements as retailers evaluate how to survive.</p><img src="https://counter.theconversation.com/content/139205/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Target’s fall from grace involves poor market positioning, confusing strategies, and a declining middle class consumer market.Jason Pallant, Lecturer of Marketing, Swinburne University of TechnologyGary Mortimer, Professor of Marketing and Consumer Behaviour, Queensland University of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1334192020-03-12T15:20:27Z2020-03-12T15:20:27ZWhen the coronavirus gets tough, the tough get stockpiling<figure><img src="https://images.theconversation.com/files/319964/original/file-20200311-116232-y7rtcr.jpg?ixlib=rb-1.1.0&rect=36%2C0%2C4115%2C2574&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Shelves that held hand sanitizer and hand soap are mostly empty at a Target in Jersey City, N.J. on March 2, 2020. As fears of the pandemic grow, consumers are stockpiling goods in case they're quarantined.</span> <span class="attribution"><span class="source">(AP Photo/Seth Wenig)</span></span></figcaption></figure><p>As the fear of <a href="https://www.arcgis.com/apps/opsdashboard/index.html#/bda7594740fd40299423467b48e9ecf6">the coronavirus spreads</a>, consumers have been flocking to stores to stockpile emergency supplies, resulting in empty shelves as retailers can’t keep up with demand. This situation will likely intensify.</p>
<p><a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3309457">Our research on consumer stockpiling in emergency situations, and the response of retail managers to stockpiling behavior</a>, has crucial information for retailers and policy-makers on how to plan for the coronavirus pandemic.</p>
<h2>The psychology behind consumer stockpiling</h2>
<p>Consumers accumulate goods for various reasons: It can be <a href="https://link.springer.com/article/10.1007/BF02729724">for profit-seeking or loss avoidance purposes, and the goods may be meant for conventional consumption or unconventional use</a>. </p>
<p>Consumer stockpiling in the face of the COVID-19 pandemic can be viewed as unconventional inventory accumulation, mainly meant to minimize a perceived threat of loss or fear of going without.</p>
<p>Consumer stockpiling can also be explained using commodity theory and prospect theory. Commodity theory proposes that the value of a product is positively related to its scarcity, <a href="https://dictionary.apa.org/commodity-theory">so perceived shortages may stimulate stockpiling behaviour</a>. Prospect theory describes how people are <a href="https://dictionary.apa.org/prospect-theory">risk-averse when choosing between uncertain alternatives</a>. To avoid potential losses in the face of uncertainty from the coronavirus outbreak, consumers may stockpile or hoard essential items.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/320160/original/file-20200312-111277-nckrzj.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/320160/original/file-20200312-111277-nckrzj.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=491&fit=crop&dpr=1 600w, https://images.theconversation.com/files/320160/original/file-20200312-111277-nckrzj.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=491&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/320160/original/file-20200312-111277-nckrzj.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=491&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/320160/original/file-20200312-111277-nckrzj.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=617&fit=crop&dpr=1 754w, https://images.theconversation.com/files/320160/original/file-20200312-111277-nckrzj.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=617&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/320160/original/file-20200312-111277-nckrzj.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=617&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Classifications for inventory holdings.</span>
<span class="attribution"><span class="license">Author provided</span></span>
</figcaption>
</figure>
<h2>Consequences of stockpiling</h2>
<p>Consumer stockpiling has immediate and long-term effects on retail operations. At the early stage of an outbreak, retailers may <a href="https://www.nytimes.com/2020/02/08/opinion/coronavirus-hong-kong.html">increase product availability in anticipation of stockpiling behaviour</a>. However, depending on supply readiness, stockpiling can soon lead to retailers selling out, with shortages persisting for several order cycles. </p>
<p>For example, our research on stockpiling by consumers in the path of hurricanes finds that <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3309457">stockpiling impacts in-store availability of bottled water even weeks after the hurricane has passed</a>. Other researchers have found that retailers took considerable time <a href="https://onlinelibrary.wiley.com/doi/pdf/10.1111/roiw.12141">to recover from product supply disruptions following the 2010 earthquake in Chile and the 2011 earthquake in Japan</a>.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/319968/original/file-20200311-116291-g8wlnz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/319968/original/file-20200311-116291-g8wlnz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/319968/original/file-20200311-116291-g8wlnz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/319968/original/file-20200311-116291-g8wlnz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/319968/original/file-20200311-116291-g8wlnz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/319968/original/file-20200311-116291-g8wlnz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/319968/original/file-20200311-116291-g8wlnz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Shelves stand empty in the aisle for toilet paper at the Waitrose supermarket in Surbiton, south west London, on March 11, 2020.</span>
<span class="attribution"><span class="source">(AP Photo/Matt Dunham)</span></span>
</figcaption>
</figure>
<p>Consumers should be aware of <a href="https://www.cbc.ca/news/business/coronavirus-price-gouging-hand-sanitizer-amazon-ebay-1.5492887">rising prices when accumulating emergency supplies</a>. </p>
<p>As retail stocks dwindle, prices rise for at least two reasons. </p>
<p>Firstly, because lower-priced products are sold out, consumers must purchase higher-priced alternatives, also known as the product substitution effect. </p>
<p>Secondly, sellers can capitalize on the imbalance of supply and demand and boost prices. Retailers may also hike prices because their suppliers have, thus driving up costs throughout the supply chain. </p>
<p>Overall, under the stress from the coronavirus, scarcity of supply may induce consumers to pay higher prices.</p>
<h2>Different types of retailers</h2>
<p>When it comes to consumer stockpiling, <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3309457">our study uncovers significant differences among retailers</a>. </p>
<p>We find that drug stores are associated with the highest consumer stockpiling propensity prior to hurricanes. They carry a large array of essential items that consumers may stockpile in advance of emergencies, such as bottled water, prescriptions and personal hygiene products.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/319970/original/file-20200311-116255-1hhpuoq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/319970/original/file-20200311-116255-1hhpuoq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/319970/original/file-20200311-116255-1hhpuoq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/319970/original/file-20200311-116255-1hhpuoq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/319970/original/file-20200311-116255-1hhpuoq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/319970/original/file-20200311-116255-1hhpuoq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/319970/original/file-20200311-116255-1hhpuoq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Shelves where disinfectant wipes and sprays are usually displayed sit empty in a pharmacy in Providence, R.I.</span>
<span class="attribution"><span class="source">(AP Photo/David Goldman)</span></span>
</figcaption>
</figure>
<p>However, after the hurricane passes, consumers may find the best product availability in grocery stores and warehouse clubs. By contrast, discount and dollar stores are associated with the lowest availability of emergency essentials in the weeks after a hurricane. </p>
<p>When demand exceeds supply, distributors may allocate products to their best and most reliable retail customers, leaving low-margin retailers without stock. </p>
<p>In general, high in-store product availability is associated with fast <a href="https://wrds-www.wharton.upenn.edu/pages/grid-items/financial-ratios-firm-level/">inventory turnover</a> and short processing lead times, characteristics of retailers with quick recovery capabilities.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/319746/original/file-20200310-20898-pkdvtt.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/319746/original/file-20200310-20898-pkdvtt.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=218&fit=crop&dpr=1 600w, https://images.theconversation.com/files/319746/original/file-20200310-20898-pkdvtt.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=218&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/319746/original/file-20200310-20898-pkdvtt.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=218&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/319746/original/file-20200310-20898-pkdvtt.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=274&fit=crop&dpr=1 754w, https://images.theconversation.com/files/319746/original/file-20200310-20898-pkdvtt.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=274&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/319746/original/file-20200310-20898-pkdvtt.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=274&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Inventory turnover ratio and processing lead time by types of retailer.</span>
<span class="attribution"><span class="source">Wharton Research Data</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>As they stockpile essential products, consumers exhibit another interesting behaviour. They tend to purchase from national retailers with extensive retail networks. National retailers carry greater inventory across their networks, meaning they may respond to regional demand shocks by shipping in inventory from outside the affected regions.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/319965/original/file-20200311-116236-1fe4be1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/319965/original/file-20200311-116236-1fe4be1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/319965/original/file-20200311-116236-1fe4be1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/319965/original/file-20200311-116236-1fe4be1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/319965/original/file-20200311-116236-1fe4be1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/319965/original/file-20200311-116236-1fe4be1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/319965/original/file-20200311-116236-1fe4be1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Shoppers rush to pick up toilet paper that had just arrived at a Costco store on March 7, 2020, in Tacoma, Wash.</span>
<span class="attribution"><span class="source">(AP Photo/Ted S. Warren)</span></span>
</figcaption>
</figure>
<p>For example, using data from the United States, our research finds that as the national store network increases from about 600 to 7,300 stores across the country, consumer stockpiling propensity prior to hurricanes more than doubles. So a store from a chain with 7,300 stores experiences double the amount of consumer stockpiling relative to its operations in normal time compared to a store from a chain with 600 stores.</p>
<p>However, shipping costs may limit a retailer’s inclination to accommodate regional shortages, so affected retail outlets from these national chains may sell out of needed products, even if other stores in the chain have excess inventory of the same goods.</p>
<h2>Unique coronavirus challenges</h2>
<p>Both retailers and local governments face challenges caused by consumer stockpiling when emergencies such as the coronavirus pandemic hit. </p>
<p>Compared to more predictable environmental emergencies such as hurricanes, the diffusion process of the coronavirus pandemic is difficult to forecast. The widespread outbreak of the coronavirus may also lead to global shortages on a larger scale than the hurricane events, thus making it more difficult for retailers to shift inventory around their networks to accommodate regional demands. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/319985/original/file-20200311-116232-1hsx3sq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/319985/original/file-20200311-116232-1hsx3sq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/319985/original/file-20200311-116232-1hsx3sq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/319985/original/file-20200311-116232-1hsx3sq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/319985/original/file-20200311-116232-1hsx3sq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/319985/original/file-20200311-116232-1hsx3sq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/319985/original/file-20200311-116232-1hsx3sq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Empty shelves where water is sold at a grocery store are shown in August 2019, in North Miami, Fla. as Hurricane Dorian approached.</span>
<span class="attribution"><span class="source">(AP Photo/Wilfredo Lee)</span></span>
</figcaption>
</figure>
<p>On the plus side, hurricane forecasts may only be made days in advance. The progression of the coronavirus can be measured in weeks or months, thus providing retailers and their suppliers with additional time to prepare for potential stockpiling behaviour.</p>
<p>Policy-makers may be able to influence both the supply and demand for critical products through public announcements and advisories, thereby altering stockpiling behaviour and retail stocking habits.</p>
<p>Retail supply chain managers can pay close attention to <a href="https://www.arcgis.com/apps/opsdashboard/index.html#/bda7594740fd40299423467b48e9ecf6">developments in the coronavirus pandemic, such as the number of diagnosed cases and the number of deaths, as they make stocking decisions</a>. And consumers, especially older people, can be encouraged to stockpile supplies at the early stages of a coronavirus outbreak <a href="https://www.businessinsider.com/cdc-americans-over-60-stock-up-on-groceries-stay-home-2020-3">to avoid unnecessary trips outside the home when the virus spreads</a>. </p>
<p>Overall, collaboration and communication among government officials, emergency organizations, retail managers and consumers can allow for better allocation of essential supplies amid the coronavirus pandemic.</p><img src="https://counter.theconversation.com/content/133419/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Amid the coronavirus pandemic, people are stockpiling essential supplies. But policy-makers may be able to influence both the supply and demand through public announcements and advisories.Xiaodan Pan, Assistant Professor, Supply Chain and Business Technology Management, John Molson School of Business, Concordia UniversityBenny Mantin, Professor of Logistics and Supply Chain Management, Director of the Luxembourg Centre for Logistics and Supply Chain Management, University of LuxembourgMartin Dresner, Professor, Logistics, Business and Public Policy, University of MarylandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1290322019-12-24T12:01:17Z2019-12-24T12:01:17ZDon’t feel guilty about a commercial Christmas – it provides the economy with a vital boost<figure><img src="https://images.theconversation.com/files/307814/original/file-20191218-11900-dughfc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/london-uk-december-2018-westfield-stratford-1473909782">Shutterstock/Dragan Jovanovic</a></span></figcaption></figure><p>The <a href="https://theconversation.com/christmas-and-commerce-have-long-gone-together-like-two-turtle-doves-34719">“commercialisation” of Christmas</a> has long been a feature of the season. Although there have been significant changes in seasonal shopping habits over the past decade (such as online stores and the introduction to the UK of “<a href="https://www.drapersonline.com/business-operations/how-black-friday-has-become-retails-grey-area/7038453.article">Black Friday</a>) the practice of buying gifts, bringing a commercial element to festivities, is a well established tradition. </p>
<p>The <a href="https://www.bl.uk/learning/timeline/item106129.html">Great Exhibition of 1851</a> in London was a showcase of consumer goods from around the world, and a catalyst for a new style of consumerism. In particular, this was the <a href="http://www.bbc.com/culture/bespoke/story/20150326-a-history-of-the-department-store/index.html">golden age</a> of the "department store”, which coincided with the development of other Victorian habits that encouraged the commercialisation of Christmas. </p>
<p>Christmas crackers, for example, <a href="https://metro.co.uk/2017/12/23/why-do-we-have-christmas-crackers-and-where-do-they-come-from-7180670/">were invented</a> by a Victorian confectioner in 1848, as a new way to sell sweets. And in the 1880s, the practice of sending Christmas cards had become so popular that <a href="http://www.bbc.co.uk/victorianchristmas/history.shtml">11.5 million cards were produced</a> every year. Gift giving, which had traditionally been a way of celebrating the New Year, also moved to Christmas.</p>
<p>Department stores including Harrods and Selfridges embraced this idea, with lavish window displays and opportunities to <a href="https://londonist.com/london/christmas-in-london/what-are-london-s-christmas-traditions">visit Santa in a grotto</a>. (It was also Harry Selfridge who reputedly came up with the idea of counting down the number of shopping days until Christmas.)</p>
<p>So shopping for gifts at Christmas time is clearly a well established tradition. And it has also long been something that provides a real boost to both the retail sector and the wider economy. </p>
<p>In the UK, the retail sector represents <a href="https://brc.org.uk/media/602552/brc-retail-manifesto-2019.pdf">5% of the UK’s economy</a>, contributing £98.4 billion GVA (<a href="https://www.ons.gov.uk/economy/grossvalueaddedgva">gross value added</a>), as well as providing <a href="https://www.prospects.ac.uk/jobs-and-work-experience/job-sectors/retail/overview-of-the-retail-sector-in-the-uk">almost 3 million jobs</a>. Many of those in retail often describe the three trading months from October to the end of December as the “golden quarter”, when the industry hopes to make the most profit. (Although this does not apply to all retailers, due to the high level of discounting, particularly in fashion.) </p>
<p>According to the <a href="https://www.prospects.ac.uk/jobs-and-work-experience/job-sectors/retail/overview-of-the-retail-sector-in-the-uk">ONS Retail Sales Index</a>, November and December account for more than a fifth of the year’s retail sales, with food sales representing around 44% of money spent in December 2018. According to the Bank of England, shoppers spend an estimated 16% more on food, and 39% more on alcohol over the Christmas period.</p>
<p>The <a href="https://brc.org.uk/media/628831/brc-festive-faqs-2019.pdf">British Retail Consortium expects</a> total spending of about £82 billion in November and December 2019. This would be a modest 2% increase from the same two months in 2018 when the ONS reported sales of over £80 billion.</p>
<p>But not all shopping traditions work in retail’s favour. “Christmas creep” describes the increasing trend of major retailers moving the start of their advertising and promotional activities ever earlier to exploit the commercialised status of Christmas – in some cases as early as the first week of November. </p>
<p>Much of this is linked to the Black Friday concept started in the US. The fourth Friday of November has become a focal point of significant discounts both online and in-store. In recent years this has grown to become one of the major discounting periods of the UK retail calendar. </p>
<p>But the increase in discounted sales over Black Friday weekend has effectively just pulled forward sales from the following weeks and the immediate run up to Christmas. Back in 2013, retail spending grew steadily throughout November until mid-December and then fell away. But in the past <a href="https://brc.org.uk/media/628831/brc-festive-faqs-2019.pdf">two festive periods</a> the Black Friday effect has redistributed, and brought forward, significant levels of Christmas purchasing into November. </p>
<h2>Sale and return</h2>
<p>For Christmas 2018, <a href="http://www.deloitte-uk-christmas-survey-2018.pdf">research showed</a> that pre-Christmas discounting was averaging 43.6% across all retail, rising to 48% by Christmas Eve – a new record. Much of this was in the fashion sector, caused partly by the mild winter weather, business uncertainty and oversupply of stock.</p>
<p>However, <a href="https://www.thetimes.co.uk/article/black-friday-proves-brief-respite-as-retail-sales-drop-in-december-dsc68pf96">a survey in January 2019</a> released by the British Retail Consortium showed that retailers had failed to increase the overall Christmas spend for the first time since the depths of the global financial crisis over a decade ago. </p>
<p>Figures reflected the heavy discounting by retailers, both in the run-up to Christmas and Boxing Day sales. The real impact of this on profit margins, as well as the additional costs involved in managing Christmas gift returns, became clear when major retailers subsequently announced their sales and profit results. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/307815/original/file-20191218-11929-1awggtz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/307815/original/file-20191218-11929-1awggtz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=416&fit=crop&dpr=1 600w, https://images.theconversation.com/files/307815/original/file-20191218-11929-1awggtz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=416&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/307815/original/file-20191218-11929-1awggtz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=416&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/307815/original/file-20191218-11929-1awggtz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=523&fit=crop&dpr=1 754w, https://images.theconversation.com/files/307815/original/file-20191218-11929-1awggtz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=523&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/307815/original/file-20191218-11929-1awggtz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=523&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Christmas sales in November.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/london-uk-november-25-2017-black-1171084078">Shutterstock/Patrick Shutterstock</a></span>
</figcaption>
</figure>
<p>The end of 2018 saw <a href="https://www.telegraph.co.uk/fashion/news/87-drop-profits-asos-royally-fashion/">bad news for fashion retailer ASOS</a>, as it reported weak profits and a share price drop of 40% due to the heavy discounting of its clothes throughout November and December. It then posted an 87% fall in pre-tax profit year on year to £4 million in the six months to the end of February 2019. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-hidden-costs-of-online-shopping-for-customers-and-retailers-109694">The hidden costs of online shopping – for customers and retailers</a>
</strong>
</em>
</p>
<hr>
<p>The expectation that we can return unwanted items bought online comes at considerable <a href="https://theconversation.com/the-hidden-costs-of-online-shopping-for-customers-and-retailers-109694">expense to retailers</a>. In fact, <a href="https://www.laybuy.com/nz/">research shows</a> that the average returned purchase in the UK passes through seven pairs of retail hands before it’s put out for sale again.</p>
<p>As far as Christmas 2019 is concerned, <a href="https://www.retail-week.com/golden-quarter/data-shoppers-spent-2bn-on-christmas-gifts-during-black-friday/7033722.article">recent research</a> indicates that the struggling UK retail sector may not get the Christmas sales boost it really needs, as once again many customers did the majority of their festive shopping during November’s Black Friday sales. So if you are shopping for last minute bargains, or splashing out on Boxing Day or New Year sales, don’t feel too guilty. Your seasonal spending spree provides vital support to the retail sector and the wider economy.</p><img src="https://counter.theconversation.com/content/129032/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Nelson Blackley does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The retail sector relies on a little festive excess.Nelson Blackley, Senior Research Associate, Nottingham Business School, Nottingham Trent UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1146302019-04-03T02:48:40Z2019-04-03T02:48:40ZThe trouble with Big W: don’t blame online for killing discount department stores<p>After weeks of <a href="https://www.insideretail.com.au/news/macquarie-report-says-up-to-60-big-w-stores-may-need-to-close-201903">speculation</a>, Woolworths has confirmed it will close 30 of its Big W stores in Australia, as well as two distribution centres. This represents <a href="https://www.woolworthsgroup.com.au/page/media/Press_Releases/woolworths-group-market-update/">about 16%</a> of its 183-strong network.</p>
<p>The obvious culprit, and the one identified by many analysts, is online shopping. </p>
<p>As one <a href="https://www.news.com.au/finance/business/retail/woolworths-announces-closure-of-30-big-w-stores-after-slow-profit-improvement/news-story/f8ff7222fded595ec627dd7d9a45e7e8%5D">industry analyst explained</a>: “The physical department store footprint is likely to continue to shrink as online sales penetration increases further.”</p>
<p>Online shopping is certainly a factor, but it is not the primary reason for Big W’s troubles. </p>
<p>Though online shopping in the department and variety stores category is growing fast (by 29.6% in 2018 according to the NAB <a href="https://business.nab.com.au/wp-content/uploads/2019/03/NAB-Online-Retail-Sales-Index-January-19.pdf">Online Retail Sales Index</a>, the total amount of money spent online by Australian shoppers – A$28.8 billion – is still only about about 9% of what is spent in traditional bricks-and-mortar stores. </p>
<hr>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/267227/original/file-20190402-177163-y5vxk8.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/267227/original/file-20190402-177163-y5vxk8.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/267227/original/file-20190402-177163-y5vxk8.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=370&fit=crop&dpr=1 600w, https://images.theconversation.com/files/267227/original/file-20190402-177163-y5vxk8.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=370&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/267227/original/file-20190402-177163-y5vxk8.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=370&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/267227/original/file-20190402-177163-y5vxk8.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=465&fit=crop&dpr=1 754w, https://images.theconversation.com/files/267227/original/file-20190402-177163-y5vxk8.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=465&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/267227/original/file-20190402-177163-y5vxk8.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=465&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Online retail sales growth by industry in the 12 months to December 2018,</span>
<span class="attribution"><a class="source" href="https://business.nab.com.au/nab-online-retail-sales-index-quarterly-update-december-2018-33296/">NAB Online Retail Sales Index</a></span>
</figcaption>
</figure>
<hr>
<p>More important to Big W’s woes is the growth of the so-called category killers, which are disrupting the entire discount department store business model. It a threat to which Big W has failed to respond with the same agility of rival <a href="https://www.cmo.com.au/article/658773/kmart-turnaround-king-takes-chairman-post-gyg/">Kmart</a>.</p>
<h2>Departed departments</h2>
<p>If you’re old enough you may remember getting your wall paint mixed in the Big W hardware department, or buying car accessories from its automotive department. There was also a large “sight and sound” department filled with televisions, sound systems, videos and CDs. Discount department stores truly lived up to the idea of a variety store.</p>
<figure>
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<figcaption><span class="caption">‘You know the price is low, everyday’: A television advertisement for Big W in 1994.</span></figcaption>
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<p>But the profitability of all these market segments for department stores has been eroded by the growth of “<a href="https://www.insideretail.com.au/news/category-killers-breaking-hearts-everywhere-201709">category killers</a>” – retailers specialising in the same product categories. </p>
<p>Examples include Office Works for office supplies, Rebel for sports equipment, JB Hi-Fi for audiovisual, Super Cheap Auto for car parts, and Bunnings for hardware. All have taken market share from the discounters. These stores compete on price and have superior range, and shoppers trust the expertise of staff working in a specialist shop. </p>
<h2>Speed of change</h2>
<p>The popularity of category killers explains in large part the stagnant sales and talk of store closures throughout the department store segment. </p>
<p>Harris Scarfe and Best and Less <a href="https://www.insideretail.com.au/news/greenlit-brands-holds-off-disaster-201810">are reportedly</a> struggling. The Reject Shop’s net profit for the first half fell from an expected A$17 million to less than <a href="https://www.afr.com/business/retail/reject-shop-shares-plunge-40pc-after-profit-downgrade-20181017-h16qqu">A$11 million</a>.
<a href="https://www.afr.com/business/retail/david-jones-interim-profits-plunge-39pc-20190221-h1bisz">David Jones’</a> half-year profit fell 39% to A$36 million. <a href="https://www.powerretail.com.au/multichannel/myer-1h2019-results/">Myer</a> reported a 2.8% drop in total sales for the same time frame. </p>
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Read more:
<a href="https://theconversation.com/what-does-the-future-hold-for-our-traditional-department-stores-22626">What does the future hold for our traditional department stores?</a>
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<p>Wesfarmers expects earnings from its department store brands Kmart and Target to fall about 8% this financial year. Eight Target stores closed during the first half of the financial year, with another six closures expected by the <a href="https://www.wesfarmers.com.au/docs/default-source/asx-announcements/2019-half-year-report-(incorporating-appendix-4d).pdf?sfvrsn=0">end of June</a>. </p>
<h2>Cutting losses</h2>
<p>Kmart is considered Australia’s discount department store “darling”. A decade ago it was on life support. Under the direction of chief executive Guy Russo <a href="https://www.afr.com/business/retail/wesfarmers-sticking-with-its-strategy-despite-setbacks-for-target-and-coal-20160624-gpr87n">it doubled it profits by 2015</a>.</p>
<p>A key to the turnaround was recognition it needed to quickly reduce or exit categories it could not compete in, such as hardware, automotive, fishing, consumer electronics and sporting goods. It has <a href="https://www.news.com.au/lifestyle/home/interiors/meet-the-woman-behind-discount-retailers-cheap-homewares/news-story/c3b87320cea433d89b2d894f34438c4a">turned to</a> homeware, soft furnishings, manchester and kitchenware. </p>
<p>There appears no such swiftness in Big W’s moves. </p>
<p>Big W’s chief executive from January to November 2016, Sally MacDonald, reportedly wanted to closes stores and make other major changes but <a href="https://www.afr.com/business/retail/woolworths-to-shut-30-big-w-stores-20190401-p519jr">was thwarted by the board of Woolworths Group</a>, owner of Big W. </p>
<p>Such differences in strategic vision explain why MacDonald left the role within the year. </p>
<p>This process of “right-sizing” therefore seems long overdue. To what extent it makes Woolworths a sustainable business, however, will depend on future response to changing circumstances. </p>
<p>What is certain is that discount department stores aren’t what they used to be; and if they want to be around in future, they probably can’t be what they are now.</p><img src="https://counter.theconversation.com/content/114630/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Gary Mortimer does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Big W store closures signal deeper problems for the discount department store sector.Gary Mortimer, Associate Professor in Marketing and Consumer Behaviour, Queensland University of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1075062019-01-06T19:05:34Z2019-01-06T19:05:34ZBrick-bait: three tricks up retailers’ sleeves to lure you back to physical shops<figure><img src="https://images.theconversation.com/files/251410/original/file-20181219-27764-1sm82xd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Department stores and clothing retailers are drawing on consumer behaviour and psychological research to compete with online shopping.</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Bricks-and-mortar retail stores are under intense pressure from online competition. Feeling the most heat are clothes shops and department stores. </p>
<p>This year David Jones’s profit halved, to A$64 million. Myer declared a “disappointing” <a href="https://www.abc.net.au/news/2018-09-12/myer-full-year-results-2018/10236074">A$486 million loss</a>. German giant Esprit, whose global sales have fallen 40% in four years, has shuttered <a href="https://www.ibisworld.com/industry-insider/analyst-insights/espirit-the-clothing-retailer-set-to-close-its-australian-stores/">its Australian operations</a>. The US-based Gap closed its <a href="https://www.news.com.au/finance/business/retail/gap-closes-final-australian-store-ending-its-disastrous-foray-down-under/news-story/c27860366c3c290e087339aaec3c8503">last Australian store</a> back in February. Other brands to have collapsed include Metalicus, Oroton, Marcs, David Lawrence and Pumpkin Patch.</p>
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<p>What to do?</p>
<p>One answer is to invest in and enhance those aspects of the shopping experience that online retailers just can’t provide. </p>
<p>To do so department stores and clothing retailers are drawing on consumer behaviour and psychological research to make themselves more appealing – sometimes without shoppers even consciously realising it. </p>
<p>Here are three of the most significant strategies.</p>
<h2>Home is where your heart is</h2>
<p>Shopping from home is comfortable. You can do it in your time. You feel no pressure to hurry up and buy something. You can do it in your pyjamas. </p>
<p>To compete against the home shopping experience, retailers are exploring how to make you feel more at home in their stores. Tactics involve evoking sensory familiarity through furnishings, lighting and even scents.</p>
<p>Men’s clothing retailer Rodd & Gunn is taking the homeliness vibe to its logical extreme, with shop fit-outs that mimic an actual home.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/247179/original/file-20181126-149311-1x3m3l0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/247179/original/file-20181126-149311-1x3m3l0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=368&fit=crop&dpr=1 600w, https://images.theconversation.com/files/247179/original/file-20181126-149311-1x3m3l0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=368&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/247179/original/file-20181126-149311-1x3m3l0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=368&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/247179/original/file-20181126-149311-1x3m3l0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=463&fit=crop&dpr=1 754w, https://images.theconversation.com/files/247179/original/file-20181126-149311-1x3m3l0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=463&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/247179/original/file-20181126-149311-1x3m3l0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=463&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Rodd & Gunn’s ‘experiential’ retail store in Chadstone, Melbourne.</span>
<span class="attribution"><span class="source">Rodd and Gunn blog</span></span>
</figcaption>
</figure>
<p>The picture above shows Rodd & Gunn’s “<a href="https://www.insideretail.com.au/news/stores-news/rodd-gunn-opens-experiential-chadstone-store-201810">experiential store</a>” in Chadstone, Melbourne. There’s a slanted wood-panelled ceiling to evoke a real house roof. In the centre of the shop floor is a “living room” space with sofa, armchairs and a coffee table. Artworks hang on the walls. It’s all intended to make you feel as relaxed (almost) as you would in your own home.</p>
<p>This approach reflects the research that shows how <a href="https://www.sciencedirect.com/science/article/pii/S096969891630577X">familiar design elements</a> help make shoppers feel comfortable. Colour and music choices apparently don’t make much difference, but layout and other sensory experiences do. </p>
<p>Familiar scents, for example, can affect your decision to go into a store, how long you stay and ultimately how much you spend. They are particularly effective when they <a href="https://www.sciencedirect.com/science/article/pii/S0969698916305483">complement</a> the brand, such as the faint smell of wood in a hardware store or a more herbal scent in a wellness store.</p>
<h2>You want space, but not too much</h2>
<p>What can make or break your experience in a shop is how the staff treat you. As <a href="https://www.researchgate.net/publication/282224094_The_Thin_Line_between_Love_and_Hate_of_Attention_The_Customer_Shopping_Experience">Sarah Alhouti and her colleagues</a> have put it, there’s a thin line between love and hate of attention. </p>
<p>An overly attentive salesperson can be perceived as desperate, pushy or aggressive and <a href="https://www.sciencedirect.com/science/article/abs/pii/S0148296304000372">drive you away</a>. Too little attention, on the other hand, can leave you feeling <a href="https://www.jstor.org/stable/pdf/2786426.pdf">ignored, unwanted and unworthy</a>, with the same result. </p>
<p>With the Goldilocks zone being different for different people, retailers are turning to technology to help get the attention levels right. </p>
<p>For example, Australia’s largest swimwear label, Seafolly, is trying out an <a href="http://www.ragtrader.com.au/news/seafolly-has-launched-a-magic-mirror">interactive mirror</a> in the fitting room of its Bondi Junction store in Sydney.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/250180/original/file-20181212-76974-17a4act.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/250180/original/file-20181212-76974-17a4act.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/250180/original/file-20181212-76974-17a4act.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/250180/original/file-20181212-76974-17a4act.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/250180/original/file-20181212-76974-17a4act.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/250180/original/file-20181212-76974-17a4act.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/250180/original/file-20181212-76974-17a4act.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">The interactive mirror in Seafolly’s Bondi Junction store.</span>
<span class="attribution"><span class="source">Seafolly</span></span>
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</figure>
<p>It allows the customer to message staff directly from the changing room for assistance only if, and when, they decide they need it.</p>
<h2>You’re so special</h2>
<p>Shopping online is highly convenient but it doesn’t necessarily make you feel special.</p>
<p>Some bricks-and-mortar retailers are positioning themselves at the premium end of the shopping market by appealing to the human desire to be pampered. It makes sense to invest in the “VIP experience”, because now every customer they get is very important.</p>
<p>Creating the VIP experience extends from personal greetings to champagne and caviar bars. </p>
<p>Department store <a href="https://www.smh.com.au/lifestyle/fashion/department-stores-are-promising-better-service-but-is-it-too-late-20181003-p507i8.html">David Jones</a> has embraced this trend as part of the A$200 million redevelopment of its Sydney premises. </p>
<p>Its revamped shoe floor – the largest shoe store in Australia – includes “shoe concierges” to greet and guide you and specialist shoe fitters recruited from around the world. And yes, there’s also a champagne bar. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/247180/original/file-20181126-149317-1nzb9wa.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/247180/original/file-20181126-149317-1nzb9wa.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/247180/original/file-20181126-149317-1nzb9wa.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/247180/original/file-20181126-149317-1nzb9wa.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/247180/original/file-20181126-149317-1nzb9wa.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=501&fit=crop&dpr=1 754w, https://images.theconversation.com/files/247180/original/file-20181126-149317-1nzb9wa.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=501&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/247180/original/file-20181126-149317-1nzb9wa.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=501&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">David Jones’ new ‘Level 7’ shoe floor in Sydney.</span>
<span class="attribution"><span class="source">David Jones media release</span></span>
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<p>Such experiences meet the desire for <a href="https://www.forbes.com/sites/njgoldston/2017/12/29/what-you-need-to-know-about-luxury-consumer-trends-for-2018/#2d19680921eb">a “luxe” experience</a> without the luxury price tag. Research has found that even the simple act of just being welcomed at the entrance of a store can influence how your <a href="https://www.sciencedirect.com/science/article/abs/pii/S0148296316304295">perceive service quality</a> as well as <a href="https://www.researchgate.net/publication/324159812_The_Social_Servicescape_A_Multidimensional_Operationalization">customer satisfaction and store loyalty</a>. </p>
<p>Whether such strategies can save bricks-and-mortar stores remains to be seen. </p>
<p>In the meantime, champagne anyone?</p><img src="https://counter.theconversation.com/content/107506/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Eloise Zoppos does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Traditional retailers want to lure you back with a shopping experience that online stores just can’t provide.Eloise Zoppos, Senior Research Consultant, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1031252018-11-09T11:42:39Z2018-11-09T11:42:39ZSingles Day shows China’s global retail power<figure><img src="https://images.theconversation.com/files/244653/original/file-20181108-74760-liy9cl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A mascot for Alibaba's online shopping site Tmall urges customers to buy on Singles Day.</span> <span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/China-Singles-Day/05c8096ec07044a88e48abf0d962d424/12/0">AP Photo/Ng Han Guan</a></span></figcaption></figure><p>Nov. 11, or 11/11, has been celebrated as Singles Day – a sort of <a href="https://en.wikipedia.org/wiki/Singles%27_Day">anti-Valentine’s Day</a> for single people – since 1993. Chosen because its date has four ones in a row, the holiday originated in China and has become the largest shopping day of the year, in both online and offline retail sales around the world. It’s a signal of shifting power in the global retail sales market, moving away from the U.S. and toward Asia – specifically China.</p>
<p>Alibaba, the giant Chinese e-retailer that promoted the day as an opportunity – or excuse – for single people to treat themselves with new purchases, has seen its revenues on Nov. 11 grow from <a href="https://www.theatlas.com/charts/EJ8yZP5Ml">US$100 million in 2009</a> to 250 times that in 2017, <a href="https://www.statista.com/statistics/364543/alibaba-singles-day-1111-gmv/">$25 billion</a>. And that was only <a href="https://www.digitalcommerce360.com/2017/11/13/chinas-singles-day-online-shopping-extravaganza-nets-38-23-billion-sales/">two-thirds of total online sales</a> that day.</p>
<p>Singles Day dwarfs the three other largest online retail mega-events. In 2017, Thanksgiving weekend online sales – <a href="https://www.statista.com/statistics/266010/online-revenue-on-thanksgiving-and-black-friday/">including Black Friday</a> and <a href="https://www.statista.com/statistics/194643/us-e-commerce-spending-on-cyber-monday-since-2005/">Cyber Monday</a> – totaled $7.3 billion. The third, Amazon’s Prime Day, in 2017 took in <a href="https://www.statista.com/statistics/728120/annual-amazon-prime-day-sales/">$100 million an hour</a> – but Alibaba raked in <a href="https://www.statista.com/statistics/364543/alibaba-singles-day-1111-gmv/">10 times that amount</a> on Singles Day that year.</p>
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<h2>Getting in on the action</h2>
<p>By 2022, Chinese middle-class shoppers as a group are projected to <a href="https://www.businessinsider.com/chinas-middle-class-is-exploding-2016-8">both outnumber and outspend U.S. customers</a>. Retailers around the world are seeking to take advantage of this growing Chinese economic power, offering their own Singles Day deals and even seeking to expand the day into a longer festival: Alibaba is keeping its discounts going for 48 hours, and its main Chinese competitor, JD.com, began an 11-day festival from Nov. 1 to Nov. 11 with a set of limited-time discounts that <a href="https://technode.com/2018/11/01/jd-com-logs-rmb-6-billion-in-sales-within-the-first-hour-of-singles-day-campaign/">grossed $865 million in its first hour</a>.</p>
<p>Global brands like <a href="https://www.adweek.com/digital/singles-day-is-the-worlds-biggest-shopping-day-but-dont-expect-to-find-it-here/">Adidas, Mattel, Mondelez, Nike and Unilever</a> participated in 2017 by offering deals on a variety of their products. <a href="https://www.fool.com/investing/2017/10/22/jdcom-tencent-and-wal-mart-join-forces-against-ali.aspx">JD.com teamed up with Tencent</a> – another Chinese e-commerce behemoth – and Walmart to offer one another’s customers the same special deals on Singles Day 2017. In 2018, Alibaba subsidiary Lazada is offering Singles Day sales <a href="https://econsultancy.com/singles-day-2018-alibaba/">in six Southeast Asian countries</a>. </p>
<h2>Online or in store?</h2>
<p>For 2018, Alibaba is promising <a href="https://www.businessinsider.com/alibaba-plans-for-singles-day-this-year-2018-11">special discounts on 1.5 million products</a> in 3,700 categories, from 180,000 brands from China and 74 other countries. The company plans to fulfill much of the enormous order volume from its <a href="https://www.cnbc.com/2018/10/30/alibaba-cainiao-chinas-biggest-robot-warehouse-for-singles-day.html">robot-automated warehouse</a> where 700 robots will automatically pick up items and assemble packages for shipping to customers.</p>
<p>Many companies are working to develop their electronic customer base, <a href="https://theconversation.com/more-businesses-are-trying-mobile-apps-to-lure-and-keep-consumers-88684">particularly with mobile apps</a>. But there is still big money in the real world.</p>
<p>Though <a href="https://theconversation.com/how-sears-helped-make-women-immigrants-and-people-of-color-feel-more-like-americans-105278">landmark retailers like Sears</a> and J.C. Penney are struggling in the U.S., the vast majority of global shopping is still <a href="https://theconversation.com/in-store-shopping-still-matters-this-holiday-season-87494">done in-person</a>, rather than online. Newer <a href="https://multichannelmerchant.com/blog/omnichannel-investments-pay-off-brick-mortar-retailers/">mega-retailers like Walmart, Target and Best Buy</a> are thriving in the U.S. and elsewhere. Even pure e-commerce retailers such as Amazon are moving offline, opening <a href="https://www.businessinsider.com/amazon-go-stores-close-on-weekends-2018-10">cashierless Amazon Go stores</a> and physical bookstores, <a href="https://theconversation.com/amazon-dives-into-groceries-with-whole-foods-five-questions-answered-79638">buying Whole Foods</a>, and partnering with Kohl’s to handle product returns. </p>
<p>In China, Alibaba has moved into physical stores, too, <a href="https://www.forbes.com/sites/greatspeculations/2017/11/21/alibaba-takes-next-step-in-new-retail-with-2-9-billion-investment/">acquiring the InTime department store and mall chain</a> and <a href="https://www.businessinsider.com/chinas-hema-market-has-two-advantages-over-amazon-go-2018-2">opening 60 Hema supermarkets</a> that don’t accept cash and where customers’ food purchases can be prepared before they check out. The company has also <a href="https://technode.com/2018/02/14/alibaba-new-retail/">set up 100,000 convenience stores</a> as places where customers can try on products in augmented reality and pay with facial recognition systems.</p>
<h2>The future of retail</h2>
<p>Shoppers around the world want to be able to buy both online and in physical space, from any device and by any payment method – all while getting a high level of customization and service experience. This goes beyond the simple mechanics of telling a smart speaker like Amazon Echo, Google Home or Apple’s HomePod to order more laundry detergent. </p>
<p>Artificial intelligence systems are analyzing customers’ behavior, which can make routine shopping for items like facial tissues and soap faster and easier, by remembering what brands a customer likes, and how often to order refills. AI can also suggest products customers might want to buy, based on their previous purchases – as <a href="https://www.wired.com/story/amazon-artificial-intelligence-flywheel/">Amazon already does</a>. That can make shopping for luxury products, splurges and gifts more fun and engaging. </p>
<p>The global retail market is adjusting to China’s rising economic power, and Chinese customers’ desire for AI-enhanced mobile shopping experiences. Singles Day’s spread across the world suggests a new chapter of computer-enhanced shopping experiences is beginning.</p><img src="https://counter.theconversation.com/content/103125/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Venkatesh Shankar does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Chinese customers spend billions on Nov. 11. Why, and what does it mean for the global retail marketplace?Venkatesh Shankar, Professor of Marketing; Director of Research, Center for Retailing Studies, Texas A&M UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1006712018-08-01T20:18:54Z2018-08-01T20:18:54ZThe secret to Aldi’s success is choosing what not to do<figure><img src="https://images.theconversation.com/files/230173/original/file-20180801-136646-1n4n4e3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The key to Aldi's strategy is a severely limited range of products.</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Dick Smith has laid <a href="https://www.dicksmithfairgo.com.au/wp-content/uploads/2018/07/25.7.18-DS-closure-of-Dick-Smith-Foods-both-letters.pdf">the blame</a> for closing his Australian-made processed food lines squarely at the feet of Aldi Australia. </p>
<p>He <a href="https://www.dicksmithfairgo.com.au/wp-content/uploads/2018/07/25.7.18-DS-closure-of-Dick-Smith-Foods-both-letters.pdf">accused</a> the German retailer of “extreme capitalism” and warned the CEOs of Woolworths and Coles that “unless your companies move towards [Aldi’s limited range and high proportion of private brands], you will very likely become uncompetitive”.</p>
<p>But this betrays a fundamental misunderstanding of Aldi’s strategy and the limits of its appeal in the Australian market.</p>
<p>An important element of Aldi’s strategy is a severely limited range of “preselected” products, overwhelmingly private brands. The company’s smaller range (some 1,500 store-keeping units as opposed to 20,000 to 30,000 in a large Coles or Woolworths outlet) <a href="https://www.thecasecentre.org/educators/products/view?id=106173">has several advantages</a> – in terms of store footprints, warehousing infrastructure and supplier discounts, to name a few.</p>
<p>A proportion of these savings are <a href="https://www.choice.com.au/shopping/everyday-shopping/supermarkets/articles/cheapest-groceries-australia">passed on to consumers</a> to ensure their appeal with households wanting to stretch their shopping dollars further. </p>
<p>This strategy and disciplined execution propelled the company’s growth.</p>
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<a href="https://theconversation.com/woolies-private-label-strategy-will-play-directly-into-the-hands-of-aldi-56914">Woolies private label strategy will play directly into the hands of Aldi</a>
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<p>From its first two stores in the Sydney suburbs of Marrickville and Bankstown, Aldi gradually expanded across the eastern seaboard. It was not until 2016 that Aldi started opening stores in South Australia and Western Australia. </p>
<p>These new territories promised significant growth opportunities while store openings in the established territories were largely restricted to gap-filling.</p>
<p><a href="http://www.roymorganonlinestore.com/Browse/Australia/Retail/Supermarket-Currency-Reports/Supermarket-Fresh-Food-Currency-Report.aspx">By 2018</a>, Aldi was operating more than 500 outlets around Australia and claiming roughly 13% of the Australian supermarket industry. Aldi’s gain in market share has overwhelmingly come at the expense of the smaller, independent supermarkets (IGA-affiliated as well as others).</p>
<p>Coles and Woolworths have chiefly <a href="https://theconversation.com/woolies-private-label-strategy-will-play-directly-into-the-hands-of-aldi-56914">responded</a> to Aldi through price cuts and by boosting their share of private brands. While competition in the Australian supermarket sector has increased, it remains a lucrative oasis in comparison to international markets.</p>
<h2>Low-hanging fruit is gone</h2>
<p>As its stores now span the entire nation, Aldi’s growth can be expected to slow down. The company is unlikely to “turn on” and overwhelm Coles and Woolworths, <a href="https://www.dicksmithfairgo.com.au/wp-content/uploads/2018/07/25.7.18-DS-closure-of-Dick-Smith-Foods-both-letters.pdf">as Smith predicts</a>, because of the inherent limitations of the Aldi formula.</p>
<p>Aldi has successfully appealed to a particular segment of the market. It is a segment of shoppers prepared to trade low prices (coupled with sound product quality) for a variety of conveniences offered by traditional supermarkets. These shoppers readily accept Aldi’s highly restrictive range of product, the lack of manufacturers’ brands, and austere stores with minimal service at the cash register or in store. </p>
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<a href="https://theconversation.com/is-aldis-move-to-woo-cashed-up-shoppers-a-risk-42113">Is Aldi's move to woo cashed-up shoppers a risk?</a>
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<p>The company has also been successful in expanding this segment, by convincing a growing number of people to do at least part of their shopping with Aldi and accept the trade-off at the heart of its offering.</p>
<p>But the majority of Australian shoppers prefer to do (the bulk of) their shopping with the two incumbents (Coles and Woolworths <a href="https://www.ibisworld.com.au/industry-trends/market-research-reports/retail-trade/food-retailing/supermarkets-grocery-stores.html">who still account for more than two-thirds of the market</a>) as well as a shrinking number of independent supermarkets and a growing set of alternative sources such as farmers’ markets or subscription-based retailers (Costco).</p>
<h2>Strategy has limits</h2>
<p>Aldi exemplifies strategy scholar Michael Porter’s <a href="https://hbr.org/1996/11/what-is-strategy">dictum</a> that the essence of strategy is choosing what not to do. In embracing the “Aldi way”, the company has made hard strategic choices. Its strategy appeals to a sizeable segment of the Australian public. </p>
<p>But it’s turning away shoppers who value things other than what’s on offer at Aldi – larger choice, established brands, more service, plusher stores, in-store bakeries and delis or expanded fresh food sections. As a result, Aldi’s growth in Australia is going to reach its limits.</p>
<p>As far back as 2016, CEO Tom Daunt <a href="https://www.afr.com/business/retail/aldi-australia-gets-fresh-as-sales-exceed-7-billion-20161101-gsfels">acknowledged</a> that growth opportunities were slowing in existing territories. He also acknowledged the onset of cannibalisation between existing Aldi stores, a sure-fire indicator that their segment was becoming saturated:</p>
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<p>Increasingly those stores on the eastern seaboard are less often in virgin catchments and more often than not for the majority of those stores there is some impact on other existing Aldi stores.</p>
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<p>A <a href="https://www.smartcompany.com.au/industries/retail/aldi-stores-cannibalising-each-other-ubs/#.WoJgTNkpwa0.twitter">recent UBS report</a> also picked up the increase in cannibalisation among Aldi stores. UBS analysts suggested Aldi store cannibalisation in South Australia and Western Australia was reaching levels not far behind the more established territories.</p>
<p>This indicates that saturation might be achieved sooner in new markets, and puts <a href="https://www.theaustralian.com.au/business/companies/aldis-onslaught-on-australian-retail-may-be-slowing/news-story/566a105ec757dc85895e1f3a7799ec23">growth objectives</a> in these states in doubt.</p>
<p>Since its arrival in 2001, the company has benefited the Australian public by injecting much-needed competition into the local grocery retail scene, thereby boosting Australian consumers’ spending power. While its success is testimony to the appeal of the Aldi formula, growth will inevitably peter out and the company will not overrun Australia’s existing retail giants. </p>
<p>Aldi’s experience in Australia exemplifies the benefits as well as the limitations of clear and focussed strategy.</p><img src="https://counter.theconversation.com/content/100671/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>ALDI appeals to a particular market segment. It is unlikely to abandon it to go after Woolworths and Coles.Tom Osegowitsch, Senior Lecturer, International Business and Strategic Management, The University of MelbourneAngela McCabe, Lecturer, Management, La Trobe UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/961752018-05-21T10:46:31Z2018-05-21T10:46:31ZWhat you see in a 3D scan of yourself could be upsetting<figure><img src="https://images.theconversation.com/files/218646/original/file-20180511-34009-1g2p5qi.jpg?ixlib=rb-1.1.0&rect=438%2C0%2C730%2C653&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">What does a machine see when it looks at you?</span> <span class="attribution"><span class="source">Jessica Ridgway</span></span></figcaption></figure><p>Amazon is reportedly looking for people who are willing to <a href="https://www.wsj.com/articles/amazon-studies-body-sizes-to-get-that-perfect-clothing-fit-1525355115">have their bodies scanned in 3D</a> in order to track and measure subtle changes in their sizes and shapes. It’s part of the company’s <a href="https://techcrunch.com/2017/10/03/amazon-has-acquired-3d-body-model-startup-body-labs-for-50m-70m/">broader push</a> to sell more clothes by more accurately predicting how garments will fit different body shapes.</p>
<p>But Amazon may not be considering the psychological effects 3D body scans can have on consumers. In April 2018, I published a study that found <a href="https://doi.org/10.1177/0887302X17749924">when a person views their body in 3D</a>, it makes them feel sadder and worse about their appearance. Increasingly sophisticated 3D scanning technologies might seem to offer retailers a competitive edge, but a customer who has just been scanned may feel bad about how they look and not be up for buying anything at all.</p>
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<a href="https://images.theconversation.com/files/218615/original/file-20180511-34006-vof8y1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/218615/original/file-20180511-34006-vof8y1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/218615/original/file-20180511-34006-vof8y1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=1195&fit=crop&dpr=1 600w, https://images.theconversation.com/files/218615/original/file-20180511-34006-vof8y1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=1195&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/218615/original/file-20180511-34006-vof8y1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=1195&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/218615/original/file-20180511-34006-vof8y1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1501&fit=crop&dpr=1 754w, https://images.theconversation.com/files/218615/original/file-20180511-34006-vof8y1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1501&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/218615/original/file-20180511-34006-vof8y1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1501&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">A 3D scan of a person’s body, with lines marking where tailors’ measurements would be taken for various garments.</span>
<span class="attribution"><span class="source">Jessica Ridgway</span>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
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<h2>Getting a 3D view</h2>
<p><a href="https://scholar.google.com/citations?user=aTJ0YzwAAAAJ&hl=en">Previous research</a> I conducted on <a href="https://doi.org/10.1177/0887302X16678335">body shape perception</a> found that people believed that a 3D body scan was an accurate depiction of their real body. That belief inspired me to further explore people’s feelings about seeing their bodies in 3D. Seeing your body in 3D is, at the moment, rare and unusual: Even mirrors and photos show only two-dimensional views. If retail stores are going to let more people see their own bodies in 3D, I reasoned, there may be wider effects on society.</p>
<p>To understand what happens when someone sees him or herself in 3D, I conducted a study of students at Florida State University, where I work. A total of 101 men and women came to my <a href="http://jimmoranschool.fsu.edu/about/faculty-staff/faculty-jessica-ridgway-clayton/">body scanning research laboratory</a>, where they participated in a survey, were body scanned and then took the same survey again. </p>
<p>The survey contained questions to measure <a href="https://doi.org/10.1080/10640260290081678">body satisfaction</a>, <a href="http://psycnet.apa.org/fulltext/1988-28581-001">mood</a> and <a href="http://doi.org/10.1177/1077727X94232002">appearance management behaviors</a>. For example, people were asked how they were currently feeling about their overall appearance and body shape and size; the degree to which they were at that moment feeling happy, sad, grouchy and other emotions; and how likely they were to engage in certain activities, like dieting and exercise. </p>
<p>Additionally, both before and after the scan, I gave participants a <a href="https://doi.org/10.1002/jclp.20526">group of line drawings of bodies</a> and asked them to select the figure that most closely represents their actual self. They then viewed the collection of figures again and were asked to <a href="https://www.researchgate.net/figure/The-17-figural-drawings-comprising-the-original-BIAS-BD-figural-drawing-scale-Gardner_fig1_221690006">select the figure</a> which most closely represents the ideal way they would like to look.</p>
<h2>Changing feelings about their bodies</h2>
<p>The difference between their indication of actual and ideal served as a measure of how differently each of them perceived who they actually were from who they wanted to be. People who chose very different real and ideal body shapes are more likely to <a href="http://psycnet.apa.org/fulltext/1987-34444-001.html">feel sad and depressed</a>.</p>
<p>I compared participants’ self-perceptions before and after they viewed their 3D body scans. After seeing their body scan, the participants – both men and women – perceived their actual selves to be almost one figure larger than what their perception had been before seeing the scan. For men and women, their ideal stayed about the same, or was in fact slightly smaller than their original choice.</p>
<p>As a result of this changed perception, participants reported feeling less satisfied with their bodies and more negative in general. These bad feelings were strong enough to increase their stated willingness to change their behaviors, including saying they were more likely to diet and exercise. Future studies could determine whether people actually followed through on those feelings.</p>
<h2>A caution for retailers</h2>
<p>If Amazon and other retailers plan to use body scanning as part of their customers’ experience, they should know how and why people respond negatively – both about themselves and in general – to seeing a 3D scan of their bodies. Those responses, like all emotional changes, are likely to affect their <a href="https://academic.oup.com/jcr/pages/emotions_and_consumer_behavior">shopping behaviors</a>. </p>
<p>Retailers might be able to use 3D scans to provide better-fitting clothes to their customers, but buyers might choose to go home and diet and exercise first. Days, weeks or months later when they return to shop, ideally in a better mood and feeling better about their bodies, will they go to a place that showed them everything that was wrong? Or will they seek out a more affirming environment? These questions and others like them will be examined in my future research. But for now, it’s hard to say whether 3D body scanning will boost forward-thinking retailers, or if it will create a new group of dissatisfied consumers.</p><img src="https://counter.theconversation.com/content/96175/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jessica Ridgway Clayton does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>When people see their bodies in 3D, they feel worse about themselves and more negative in general. That might not put shoppers in a buying mood even for clothes that fit better.Jessica Ridgway Clayton, Assistant Professor of Retail Entrepreneurship, Florida State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/927912018-03-23T18:56:55Z2018-03-23T18:56:55Z‘Big Tech’ isn’t one big monopoly – it’s 5 companies all in different businesses<figure><img src="https://images.theconversation.com/files/211745/original/file-20180323-54898-1dnsu0o.png?ixlib=rb-1.1.0&rect=1029%2C0%2C1844%2C1255&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">It may seem convenient to think of technology companies as similar, but they're really not.</span> <span class="attribution"><span class="source">The Conversation</span>, <a class="license" href="http://creativecommons.org/licenses/by-nc/4.0/">CC BY-NC</a></span></figcaption></figure><p>Public <a href="https://www.theatlantic.com/technology/archive/2018/03/facebook-cambridge-analytica/555866/">concern</a> about Facebook’s power in society – and in politics – has skyrocketed in the wake of <a href="https://www.theguardian.com/news/2018/mar/17/cambridge-analytica-facebook-influence-us-election">revelations</a> that users’ data was analyzed by a U.K.-based marketing firm and used to construct highly targeted political propaganda in advance of the 2016 U.S. presidential election. Other technology giants have also sparked concern: <a href="https://www.ft.com/content/9554a8bc-5b12-11e7-b553-e2df1b0c3220">Google</a>, <a href="https://www.cnbc.com/2017/05/08/apple-google-european-commission-spotify.html">Apple</a>, <a href="https://www.cnbc.com/2018/02/05/tech-investor-warns-amazon-against-abusing-its-power-to-influence-users.html">Amazon</a> and <a href="http://knowledge.wharton.upenn.edu/article/microsoft-a-case-of-justice-or-abuse-of-power/">Microsoft</a> have all faced objections from users, the public and even government agencies. </p>
<p>Because all of these companies provide services relating to computers, there is a tendency to lump them together, calling them “<a href="https://www.nytimes.com/2015/09/20/opinion/is-big-tech-too-powerful-ask-google.html">Big Tech</a>” or the “<a href="https://www.nytimes.com/2017/10/11/technology/the-frightful-five-want-to-rule-entertainment-they-are-hitting-limits.html">Frightful Five</a>” or even “<a href="https://qz.com/303947/us-cultural-imperialism-has-a-new-name-gafa/">GAFA</a>” – the acronym for the first four of them, leaving Microsoft out. Conceiving of “<a href="http://www.slate.com/articles/technology/technology/2017/11/how_silicon_valley_became_big_tech.html">big tech</a>” as a single industry makes the threat and influence overwhelming. </p>
<p>In the U.S., when an industry gets so large it exerts political pressure on society, people often label the industry as a whole, like “<a href="https://content.time.com/time/magazine/article/0,9171,920328,00.html">Big Oil</a>,” “<a href="https://www.huffingtonpost.com/entry/big-tobacco-is-still-in-the-business-of-deceiving-americans_us_5a202d96e4b0392a4ebbf5f3">Big Tobacco</a>” or “<a href="https://www.thedailybeast.com/big-pharma-is-americas-new-mafia">Big Pharma</a>.” The so-called big tech companies certainly are big: In 2017, they were the top five <a href="https://247wallst.com/investing/2017/10/29/market-cap-of-5-largest-us-companies-up-36-in-most-recent-year/">most valuable public companies</a> in the U.S. But, as a <a href="https://mitpress.mit.edu/books/we-now-disrupt-broadcast">scholar of the media marketplace</a> that many of these firms are beginning to explore, I know that lumping them together hides the fact they’re very separate and distinct – not just as companies, but in terms of their business models and practices.</p>
<p>Understanding these companies in their proper business contexts makes it easier to understand their power in the marketplace and society at large. It also suggests ways to assess, regulate and manage that power to protect competition and <a href="https://theconversation.com/facebook-is-killing-democracy-with-its-personality-profiling-data-93611">even democracy itself</a>. </p>
<h2>Google: Advertising revenue from searches</h2>
<p>Google and Facebook are most frequently discussed together, likely because of their domination of internet advertising. Together, the two companies <a href="https://www.emarketer.com/Article/Google-Facebook-Tighten-Grip-on-US-Digital-Ad-Market/1016494">collected 63 percent</a> of U.S. digital advertising dollars in 2017. Both companies earn most of their revenue from advertising: 97 percent for <a href="https://www.visualcapitalist.com/chart-5-tech-giants-make-billions/">Facebook</a> and 88 percent for <a href="https://www.investopedia.com/articles/investing/020515/business-google.asp">Google’s</a> parent company Alphabet in 2016. But what they offer to advertisers and what users want from them are very different.</p>
<p>Google’s value proposition is helping users find things. Many – even most – of the <a href="http://www.internetlivestats.com/google-search-statistics/">3.5 billion</a> searches Google performs each day aren’t monetized at all. Google only gets paid if a searcher clicks on a paid link; the top three results are often labeled as “Ads,” in addition to several on the right side of a computer user’s search results screen. </p>
<p>Advertisers like Google because they only pay if their <a href="https://adwords.google.com/home/pricing/">ads are clicked</a>. That is a far better deal than what is offered in traditional media advertising, where payment is for how many people are shown an ad, rather than customers’ responses. In addition, Google’s position as a <a href="https://www.thinkwithgoogle.com/consumer-insights/mobile-search-consumer-behavior-data/">leading place</a> where people look for information on products and services means an ad reaches a consumer exactly at the moment they’re looking for a product. This timing is more valuable than just showing ads to people in general – so much so that advertisers paid Google <a href="https://www.statista.com/statistics/266249/advertising-revenue-of-google/">US$79.38 billion</a> in 2016.</p>
<h2>Facebook: Ad revenue from attention-grabbing content</h2>
<p>Facebook operates more like a traditional ad-supported media company. It provides interesting content that attracts an audience, and sells their attention to advertisers – just as television, radio and print have done for decades. The key difference between Facebook and these legacy media businesses is where the content comes from: Rather than Facebook paying to create the material that draws users, the users add it themselves for free, posting personal messages and shared links. </p>
<p>Like traditional media, Facebook charges advertisers based on how many people see a message, not on how many take action by clicking. The value Facebook offers over traditional advertising is its ability to <a href="https://www.propublica.org/article/facebook-enabled-advertisers-to-reach-jew-haters">target very particular groups</a> with a <a href="https://www.marketplace.org/2010/11/26/tech/marketers-you">customized advertising message</a>. This is precisely the type of <a href="https://www.cnet.com/news/facebook-cambridge-analytica-data-mining-and-trump-what-you-need-to-know/">targeting</a> that happened during the 2016 U.S. presidential election, which generated widespread public criticism.</p>
<h2>Apple: Selling electronic hardware</h2>
<p>In contrast to the advertising businesses of Google and Facebook, Apple remains a hardware technology company, deriving <a href="https://www.visualcapitalist.com/chart-5-tech-giants-make-billions/">84 percent</a> of its 2016 revenue from the iPhone, iPad and Mac computers. The profits on those sales let Apple use <a href="https://www.fastcompany.com/1784824/great-tech-war-2012">very different strategies</a> than the non-hardware companies with which it is often compared. The profit margins on each device are so substantial it <a href="https://www.fastcompany.com/1784824/great-tech-war-2012">doesn’t have to dominate</a> the hardware market the way Google and Facebook control online advertising. Despite the seeming ubiquity of iPhones in some social circles, iPhones <a href="https://www.statista.com/statistics/216459/global-market-share-of-apple-iphone/">rarely top 20 percent</a> of worldwide phone sales, and account for <a href="https://9to5mac.com/2017/08/09/us-iphone-sales-ios-market-share-kantar/">about 30 percent</a> of U.S. sales.</p>
<p>Apple has other elements to its business, too – such as its iTunes music distribution business. But it’s important to keep the relative scale of those elements in mind. Mostly, they are <a href="https://www.thecontenttrap.com/">complementary businesses</a> that Apple uses strategically in support of its primary focus as a hardware company. Taken together, iTunes, its App Stores, iBooks Store, Apple Music, Apple Care, Apple Pay and other even more ancillary sales added up to <a href="http://investor.apple.com/secfiling.cfm?filingID=1628280-16-20309&CIK=320193#A201610-K9242016_HTM_SE78948B641FF55EDB70F7F75DDCB7673">just 11 percent</a> of the company’s revenue in 2016. Even the company’s plan to spend <a href="http://variety.com/2017/digital/news/apple-1-billion-original-tv-shows-movies-budget-1202529421/">$1 billion on original video</a> is hard to understand, except as a support to branding and marketing efforts that boost its hardware sales.</p>
<h2>Microsoft and Amazon: Mixed retail, computing and media</h2>
<p>Much like Apple, Microsoft blends many revenue streams: It sells Surface computers, Azure cloud services, software (like the Microsoft Office Suite), gaming consoles and search engine advertising. The company once stood alone as a <a href="http://eprints.lse.ac.uk/47043/1/CentrePiece_12_1.pdf">poster child</a> for massive technology corporations. Lately, it may draw less attention because competitors like Google’s G Suite have challenged its market share. Also, Microsoft has not aggressively entered social media, a sector now under great scrutiny.</p>
<p>Finally, Amazon also operates in many different business sectors. Primarily, it is a goods retailer: That’s where <a href="https://www.visualcapitalist.com/chart-5-tech-giants-make-billions/">70 percent</a> of its annual revenue came from in 2016. Its Amazon Web Services content hosting and cloud computing business contributed 9 percent, and Amazon’s media businesses provided roughly 18 percent of the company’s $136 billion of annual revenue. That $24 billion of media revenue is nearly three times that of Netflix, but still not Amazon’s core business.</p>
<h2>Regulate markets and behavior, not ‘tech’</h2>
<p>It’s not that these companies are so different as to be unrelated or incomparable to each other. They all involve – to varying degrees – computers and services built on internet connection that provide services to customers in ways that never existed before. All five gather data on their users and analyze behavior using algorithms to create personal experiences in ways that are new and have been challenging for companies with long histories in sectors such as media, transportation or retail to match.</p>
<p>But despite simple perception of them all as “<a href="https://www.inc.com/magazine/201605/marli-guzzetta/tech-company-definition.html">tech</a>” companies, their core revenue sources are clearly different. And those distinctions suggest ways people can understand and respond to anxieties about their growing economic and cultural influence.</p>
<p>In fact, what is most concerning is the extent to which these companies aren’t in the same businesses: They’re not competing with each other, or really anyone else.</p>
<p>In prior eras, Americans learned that major industries they first viewed as innovators and economic saviors were more complicated and less magnanimous than initially believed. So now today, big tech isn’t unlike everything that came before. In fact, big tech <a href="https://al3x.net/2012/05/08/what-is-and-is-not-a-technology-company.html">isn’t really a thing</a> at all. Assessing these companies based on what they do, rather than mythologizing them, is the first step forward.</p>
<p>
<section class="inline-content">
<img src="https://images.theconversation.com/files/248895/original/file-20181204-133100-t34yqm.png?w=128&h=128">
<div>
<header>Amanda Lotz is the author of:</header>
<p><a href="https://mitpress.mit.edu/books/we-now-disrupt-broadcast">We Now Disrupt This Broadcast:
How Cable Transformed Television and the Internet Revolutionized It All</a></p>
<footer>MIT Press provides funding as a member of The Conversation US.</footer>
</div>
</section>
</p><img src="https://counter.theconversation.com/content/92791/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Amanda Lotz does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>When thinking about regulating them, it’s useful to know Facebook, Amazon, Google, Apple and Microsoft have some similarities. But generally they’re not competing with each other – or anyone else.Amanda Lotz, Fellow, Peabody Media Center; Professor of Media Studies, University of MichiganLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/929962018-03-07T05:25:15Z2018-03-07T05:25:15Z‘Down down’ and ‘cheap cheap’ are gone gone: why supermarkets are moving away from price<figure><img src="https://images.theconversation.com/files/209274/original/file-20180307-146691-1t7au5j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Coles was once the market leader thanks to its 'down down' low pricing marketing. </span> <span class="attribution"><span class="source">www.shutterstock.com</span></span></figcaption></figure><p>On January 26, 2011, Coles fired the first shot in what would soon be dubbed the <a href="http://localejournal.org/issues/n2/Locale%20n2%20-%2007%20-%20Keith.pdf">“supermarket price wars”</a> by reducing the price of its own-brand milk to A$1 per litre. Woolworths fired back, triggering seven years of intense price competition. </p>
<p>But now Coles has waved the white flag, indicating a move away <a href="http://www.afr.com/business/retail/coles-shows-its-softer-side-as-living-costs-bite-20180306-h0x2gc">from price-based marketing</a>, to a focus on other attributes, such as sustainability, local produce and community. </p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/ybo2S0R0XEk?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">Coles’ new ad campaign.</span></figcaption>
</figure>
<p>Research shows if price is the main selling point, <a href="https://www.canstarblue.com.au/food-drink/stores/supermarkets/">shopper loyalty decreases</a> and customers become more conscious of price. Price wars are also <a href="https://theconversation.com/predicting-the-last-brand-standing-in-the-supermarket-price-wars-32556">costly for retailers</a>.</p>
<p>While operational costs (wages, rent, bills) remain fixed or go up, prices can’t keep coming down. You eventually run out of margin.</p>
<p>Coles recent <a href="http://www.wesfarmers.com.au/docs/default-source/asx-announcements/2018-half-year-results-announcement.pdf?sfvrsn=0">half yearly results</a> reflect this, with a drop in earnings of 14.1% from A$920 million to A$790 million. </p>
<p>In contrast, Woolworths announced an 11.1% increase in earnings for <a href="https://www.woolworthsgroup.com.au/icms_docs/189600_2018-half-year-results-presentation.pdf">their supermarket business</a>. But Woolworths dropped their “cheap, cheap” price cutting campaign <a href="https://mumbrella.com.au/woolworths-ditches-cheap-cheap-in-favour-of-new-always-at-woolworths-tagline-325378">nearly two years ago</a>. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/down-down-but-not-different-australias-supermarkets-in-a-race-to-the-bottom-48151">Down, down but not different: Australia's supermarkets in a race to the bottom</a>
</strong>
</em>
</p>
<hr>
<p>Other retailers also get caught in the cross fire of price cutting. Case in point is Aussie Farmers Direct, which fell into administration this week <a href="https://www.aussiefarmers.com.au/">saying they were</a>:</p>
<blockquote>
<p>…no longer able to compete against the domination of the major two supermarkets.</p>
</blockquote>
<p>While it may be overly simplistic to blame the two big supermarkets for the downfall of Aussie Farmers Direct, price conscious consumers and thin grocery margins certainly contributed. </p>
<h2>How this strategy came about</h2>
<p>Supermarkets are now looking beyond price to stand out. </p>
<p>Both Coles and Woolworths are very similar in the brands they offer, prices, layouts, weekly specials and online channels. The move away from price gets shoppers thinking about what is unique to each chain. </p>
<p>So, rather than price, the focus has shifted to <a href="https://www.woolworthsgroup.com.au/page/media/Press_Releases/Free_Fruit_for_Kids_at_Woolworths/">service quality, social programs</a> and <a href="https://www.coles.com.au/sfs/assets">connecting with the community</a>. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/unit-pricing-saves-money-but-is-the-forgotten-shopping-tool-61379">Unit pricing saves money but is the forgotten shopping tool</a>
</strong>
</em>
</p>
<hr>
<p>Shoppers who are continually exposed to loyalty program logos, may eventually stop noticing these logos, or “switch off”. This is because of a behavioural tendency called <a href="https://www.verywellmind.com/what-is-habituation-2795233">“habituation”</a>. </p>
<h2>What these new strategies are trying to sell</h2>
<p>So, if Coles are no longer selling themselves on price, what are they selling?</p>
<p>Coles’ new approach is more subtle, selling themselves through aspirational stories and employing <a href="https://www.designsociety.org/publication/34585/a_theory_of_affective_experience">classic advertising techniques</a> to do it. </p>
<p>These techniques are used in advertising to convey positive feelings and emotions associated with a particular experience. A simple way to achieve this in advertising is to feature people telling their own stories – as seen in the new Coles advert launched this week. </p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/M3bbQGSw1kg?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">Woolworths ad campaign.</span></figcaption>
</figure>
<p>With the Commonwealth Games near, both supermarkets are also featuring sports stars in their marketing. Woolworths <a href="https://mumbrella.com.au/woolworths-features-apple-hungry-wheelchair-athlete-in-first-commonwealth-games-ads-500319">new campaign features</a> athletes and their connection with fresh food, positions the company, once again, as “Australia’s Fresh Food People”.</p>
<p>Meanwhile, Coles have partnered with Uncle Toby’s for their <a href="https://www.coles.com.au/sfs/assets">Sports for Schools</a> campaign. Their advertisements feature an array of young, fit, attractive and successful athletes linking the athletic success with the purchase of products from Coles.</p>
<p>By moving away from price and focusing on a story telling strategy, both supermarkets can engage consumers with a process called <a href="https://books.google.com.au/books?id=gWfVlJAp31wC&pg=PA292&lpg=PA292&dq=Internalization+endorser%E2%80%99s+position+on+an+issue+as+their+own&source=bl&ots=etMsCJ8v2H&sig=SSVql3GEe9bYINgh1T0TDjOYjA8&hl=en&sa=X&ved=0ahUKEwiG86fNmNnZAhWoiVQKHRkmCXsQ6AEIJzAA#v=onepage&q=Internalization%20endorser%E2%80%99s%20position%20on%20an%20issue%20as%20their%20own&f=false">“internalisation”</a>. This is where people accept the endorser’s position on an issue as their own. </p>
<p>Internalisation is a powerful psychological mechanism because even if the source used in the campaign is forgotten, the internalised attitude usually remains. Price doesn’t create this effect. </p>
<p>While food prices won’t necessarily go up any time soon, consumers shouldn’t expect to see any further significant price drops. Instead, Coles and Woolworths will draw attention to other important attributes. </p>
<p>Faced with the expansion of Aldi <a href="https://corporate.aldi.com.au/fileadmin/fm-dam/pdf/Press_Release/2016/ALDI_Media_Release_2016_Business_Update_311016__for_website__11_.pdf">across South Australia and Western Australia</a> and <a href="https://www.smartcompany.com.au/industries/retail/kaufland-australia-hiring-local-staff/">the entry of German supermarket Kaufland</a>, Coles has recognised they can’t keep fighting a battle on price alone.</p><img src="https://counter.theconversation.com/content/92996/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Coles plans to compete with competitors by moving away from low prices to a focus on other attributes, such as sustainability, local produce and community.Gary Mortimer, Associate Professor in Marketing and International Business, Queensland University of TechnologyLouise Grimmer, Lecturer in Marketing, Tasmanian School of Business and Economics, University of TasmaniaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/880682018-01-10T19:33:25Z2018-01-10T19:33:25ZAmazon drives a fifth city-shaping retail revolution<p>As possibly the world’s oldest economic activity, retailing didn’t venture away from the traditional street, with its congestion, grime and weather exposure, until about 1800. This resulted in new types of retail space, including enclosed shopping arcades and freestanding or anchor department stores. These are still evident in cities today.</p>
<p>It helps to visualise the evolution of modern retail activity and structures in terms of five broad revolutionary cycles. Each has lasted about 50 years, as shown in the diagram below. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/201292/original/file-20180109-83559-gskxzk.gif?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/201292/original/file-20180109-83559-gskxzk.gif?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/201292/original/file-20180109-83559-gskxzk.gif?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=236&fit=crop&dpr=1 600w, https://images.theconversation.com/files/201292/original/file-20180109-83559-gskxzk.gif?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=236&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/201292/original/file-20180109-83559-gskxzk.gif?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=236&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/201292/original/file-20180109-83559-gskxzk.gif?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=296&fit=crop&dpr=1 754w, https://images.theconversation.com/files/201292/original/file-20180109-83559-gskxzk.gif?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=296&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/201292/original/file-20180109-83559-gskxzk.gif?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=296&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Revolutionary cycles and disruptive innovations.</span>
<span class="attribution"><span class="source">Author</span></span>
</figcaption>
</figure>
<p>After the first industrial revolution of the late 18th and early 19th century, two industrial revolutions followed, from about 1850 to 1900, and then from 1900 to 1950. A consumer revolution began about 1950. Then, at the dawn of the new millennium, came an information revolution. </p>
<p>Each revolution spawned a unique set of technological innovations that shocked the status quo by replacing outdated structures with new ones. The retail sector and retail spaces were not immune to this process.</p>
<h2>Creative destruction</h2>
<p>In 1942, the economist Joseph Schumpeter called this process <a href="https://www.investopedia.com/terms/c/creativedestruction.asp">creative destruction</a>. Nowadays a comparable term, disruption, is bandied about, particularly in the retail world. Internet retailing is an obvious example. </p>
<p>So what transformations in physical retail spaces occurred during these key revolutionary periods? We need look no further than 19th-century Paris for illustrations of these changes.</p>
<h2>New shopping platforms</h2>
<p>Structural cast iron, the world’s first artificial building material, perfected in the 1790s, enabled the construction of glass skylights and large column-free spaces. In Paris, this prompted the development of shopping arcades with skylights such as the <a href="https://en.wikipedia.org/wiki/Passage_des_Panoramas">Passage des Panoramas</a> in 1800.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/201120/original/file-20180108-83574-1m0tozp.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/201120/original/file-20180108-83574-1m0tozp.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/201120/original/file-20180108-83574-1m0tozp.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/201120/original/file-20180108-83574-1m0tozp.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/201120/original/file-20180108-83574-1m0tozp.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/201120/original/file-20180108-83574-1m0tozp.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/201120/original/file-20180108-83574-1m0tozp.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/201120/original/file-20180108-83574-1m0tozp.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Passage des Panoramas, Paris.</span>
<span class="attribution"><span class="source">Author</span></span>
</figcaption>
</figure>
<p>The innovation was successfully applied in 1852 to the world’s first department store, <a href="https://www.24sevres.com/en-au/le-bon-marche/history">Le Bon Marche</a>, also in Paris. It still serves as a template for today’s department stores. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/201049/original/file-20180107-26139-t15ka4.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/201049/original/file-20180107-26139-t15ka4.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/201049/original/file-20180107-26139-t15ka4.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/201049/original/file-20180107-26139-t15ka4.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/201049/original/file-20180107-26139-t15ka4.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=501&fit=crop&dpr=1 754w, https://images.theconversation.com/files/201049/original/file-20180107-26139-t15ka4.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=501&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/201049/original/file-20180107-26139-t15ka4.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=501&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Le Bon Marche, showing cast iron colums and skylight roof.</span>
<span class="attribution"><span class="source">Author</span></span>
</figcaption>
</figure>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/201050/original/file-20180107-26151-bhtg6a.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/201050/original/file-20180107-26151-bhtg6a.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/201050/original/file-20180107-26151-bhtg6a.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=750&fit=crop&dpr=1 600w, https://images.theconversation.com/files/201050/original/file-20180107-26151-bhtg6a.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=750&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/201050/original/file-20180107-26151-bhtg6a.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=750&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/201050/original/file-20180107-26151-bhtg6a.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=943&fit=crop&dpr=1 754w, https://images.theconversation.com/files/201050/original/file-20180107-26151-bhtg6a.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=943&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/201050/original/file-20180107-26151-bhtg6a.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=943&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Royal Arcade, Melbourne.</span>
<span class="attribution"><a class="source" href="https://www.instagram.com/p/Badt71GBrkn/">Instagram/royalarcade</a></span>
</figcaption>
</figure>
<p>The diffusion of innovation was rapid. The arcade and department store formats were soon adopted in Australia, most notably in Melbourne’s <a href="http://royalarcade.com.au/history/">Royal Arcade</a> (1870), Sydney’s <a href="https://dictionaryofsydney.org/entry/grace_brothers">Grace Bros Department Store</a> (1885) and <a href="http://adelaidearcade.com.au/history/">Adelaide Arcade</a> (1885). At the time, Australia was one of the wealthiest countries in the world, with the resources and financial clout to become an early adopter of European innovations.</p>
<h2>The age of steel</h2>
<p>Spurred on by steel-making in the next revolutionary period, including the <a href="https://searchinginhistory.blogspot.com.au/2015/06/the-bessemer-process-process-that-made.html">Bessemer process</a>, railways and tramways connected cities, towns and inner and middle ring suburbs. Retailing flourished on the high streets around train stations and tram stops. In Australia, this was particularly evident in Melbourne, Sydney and Adelaide, where remnants of this historical legacy can still be seen.</p>
<h2>Mass production and preservation</h2>
<p>The third revolution included innovations in automobile mass production, steel container packaging and food preservation – thanks to refrigeration. These innovations would eventually have a profound impact on the small independent retail sector as the next revolution unfolded.</p>
<h2>Mass consumption and consumerism</h2>
<p>After the second world war, population growth, social mobility and affordable cars drove suburbanisation in Australia’s capital cities. An emerging consumerism, stimulated by advertising on television, which was introduced in 1956, was under way. </p>
<figure class="align-left zoomable">
<a href="https://images.theconversation.com/files/201104/original/file-20180108-83571-5dmucf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/201104/original/file-20180108-83571-5dmucf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/201104/original/file-20180108-83571-5dmucf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=691&fit=crop&dpr=1 600w, https://images.theconversation.com/files/201104/original/file-20180108-83571-5dmucf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=691&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/201104/original/file-20180108-83571-5dmucf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=691&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/201104/original/file-20180108-83571-5dmucf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=869&fit=crop&dpr=1 754w, https://images.theconversation.com/files/201104/original/file-20180108-83571-5dmucf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=869&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/201104/original/file-20180108-83571-5dmucf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=869&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Roselands shopping centre was described as ‘a product of the motorised age’ when it opened in 1965.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:Roselands_Facade.jpg">Wikimedia Commons</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<p>Independent retailers that retained provisioning and selling methods from earlier times found their popularity waning. The death knell of the small independent retailer that failed to keep pace with the machinery of mass consumption began with the emergence of the supermarket format in 1960. Planned suburban shopping centres with ample car parking, such as <a href="http://www.adonline.id.au/buildings/chadstone-shopping-centre/">Chadstone</a> in Melbourne (1960) and <a href="https://en.wikipedia.org/wiki/Roselands_Shopping_Centre#History">Roselands</a> in Sydney (1965), mushroomed in the nation’s capitals. </p>
<p>With the launch of the first <a href="http://www.theage.com.au/news/business/bankcard-checks-out-151-downfall-on-the-cards/2006/02/02/1138836371293.html">Bankcard</a> in 1974, the ready availability of credit drove consumerism and consumption. </p>
<p>These were to be the hallmarks of the retail landscape for the next 50 years, until the new millennium ushered in the information revolution and another retail paradigm shift. </p>
<h2>The information revolution</h2>
<p>We are almost two decades into the 21st century, and tales about damage to the traditional retail sector wrought by the digital insurgency are rife. Online retailers are engaged in cyber warfare with physical retailers and each other in a battle for the consumer dollar. Collateral damage is evident, at least partially, in shop vacancies on high streets and <a href="https://theconversation.com/history-says-department-stores-will-struggle-in-the-future-85527">declining department store sales</a>. </p>
<p>Shopping centres <a href="https://theconversation.com/how-shopping-centres-are-changing-to-fight-online-shopping-80056">have responded</a> by placing more emphasis on the shopper experience. This approach includes improved food and beverage offerings, provision of entertainment and, lately, faux main streets with integrated residential development. It is an interesting irony that the traditional high street, with its rustic quality, diverse land uses, historic character and <a href="https://collections.museumvictoria.com.au/articles/2933">cafe culture</a>, has been the inspiration for many of these ideas.</p>
<p>In conclusion, we have seen profound changes in the physical retail landscape over the last two centuries and, if history is any guide, more change is yet to come. </p>
<p>This change includes a somewhat unexpected “back to the future” scenario in online retailing. Amazon currently confines itself to an online presence in Australia, but has established bricks and mortar stores in the United States. These include the innovative <a href="http://www.businessinsider.com/amazon-go-grocery-store-future-photos-video-2017-6?IR=T">Amazon Go</a>, a competitive threat that has forced other physical competitors like <a href="http://mashable.com/2017/12/21/walmart-cashierless-shopping-amazon/#F6NZ7HvutPqF">Walmart</a> to respond. If Amazon adopts a similar strategy here, this will no doubt provoke reactions from other physical and online retailers, and thus a probable new revolution in retailing.</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/NrmMk1Myrxc?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">Amazon Go offers shoppers physical stores with no lines and no checkouts.</span></figcaption>
</figure><img src="https://counter.theconversation.com/content/88068/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Paul Drechsler does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Urban retail space is being transformed yet again. Predictions of the demise of physical retailing in the face of online competition overlook its resilience over two centuries of disruptive innovations.Paul Drechsler, Doctoral Researcher, The University of Western AustraliaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/886842017-12-20T11:27:32Z2017-12-20T11:27:32ZMore businesses are trying mobile apps to lure and keep consumers<figure><img src="https://images.theconversation.com/files/198611/original/file-20171211-27680-oj23he.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Using a store's mobile app can affect in-store purchases.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/young-beautiful-woman-using-mobile-store-498919009">Javier Arres/Shutterstock.com</a></span></figcaption></figure><p>Intense retail competition has led old standbys, such as <a href="https://www.cnbc.com/2017/08/24/here-are-the-28-stores-that-sears-is-closing-next.html">Sears</a>, to <a href="http://www.businessinsider.com/list-sears-kmart-store-closures-2017-11">close dozens of stores</a>. Walmart is <a href="https://news.walmart.com/2016/08/08/walmart-agrees-to-acquire-jetcom-one-of-the-fastest-growing-e-commerce-companies-in-the-us">venturing online more</a>. And Amazon is expanding offline, <a href="http://www.businessinsider.com/amazon-big-expansion-retail-pop-up-stores-2016-9">opening stores</a> and <a href="https://www.bloomberg.com/news/articles/2017-06-16/amazon-to-acquire-whole-foods-in-13-7-billion-bet-on-groceries">buying Whole Foods</a>. The fight for retail dollars is fierce, and the battleground will soon migrate into the palms of customers’ hands – via apps on their smartphones.</p>
<p>This isn’t just happening with mega-retailers. <a href="https://www.cinemark.com/cinemode">Movie</a> <a href="https://www.amctheatres.com/mobile/app">chains</a> and <a href="https://www.chewy.com/ci/lp/resp/chewy-app/chewy-app.html">pet supply stores</a> are increasingly connecting with their customers through their own branded apps. Zumiez, a specialty clothing chain with <a href="http://ir.zumiez.com/news-releases/news-release-details/zumiez-inc-announces-fiscal-2017-third-quarter-results">600 stores in the U.S.</a>, <a href="http://www.zumiez.com/the-stash/">has an app</a>. Scooter’s Coffee, an Omaha-based coffee chain with <a href="https://franchising.scooterscoffee.com/">200 stores</a>, <a href="https://www.scooterscoffee.com/MobileApp">has one too</a>. So does <a href="https://www.nypovt.com/">New York Pizza Oven</a>, a single pizza parlor in Vermont. </p>
<p>Mobile apps are becoming key ways for customers and retailers to interact. Our recent analysis of data from a large U.S. retailer of video games and electronics (whose name we agreed to keep confidential) found that <a href="http://www.msi.org/reports/the-effects-of-mobile-apps-on-shopper-purchases-and-product-returns/">apps can even affect consumers’ offline buying</a> habits.</p>
<h2>Growth in use – and spending</h2>
<p>The number of people who have the option to use mobile apps is skyrocketing. <a href="https://www.ericsson.com/en/press-releases/2015/6/ericsson-mobility-report-70-percent-of-worlds-population-using-smartphones-by-2020">More than 70 percent</a> of the world population will own a smartphone by 2020. And they’ll spend more than <a href="https://www.emarketer.com/Article/Smartphone-Apps-Crushing-Mobile-Web-Time/1014498">80 percent of their on-phone time</a> using task-specific apps.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/199060/original/file-20171213-27580-1w8e9rs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/199060/original/file-20171213-27580-1w8e9rs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/199060/original/file-20171213-27580-1w8e9rs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/199060/original/file-20171213-27580-1w8e9rs.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/199060/original/file-20171213-27580-1w8e9rs.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/199060/original/file-20171213-27580-1w8e9rs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/199060/original/file-20171213-27580-1w8e9rs.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/199060/original/file-20171213-27580-1w8e9rs.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Is there no line because people are ordering ahead on their mobile phones?</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/phoenix-april-19-starbucks-store-kiosk-675584989">jessicakirsh/Shutterstock.com</a></span>
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</figure>
<p>Letting buyers learn about products, discover deals, locate nearby stores and even place orders in advance is a huge business opportunity. At Starbucks, for example, an app allowing people to order and pay on the go – just swinging into the store for pickup – helped customers avoid standing in line and waiting: <a href="https://www.forbes.com/sites/greatspeculations/2015/10/30/how-mobile-ordering-can-impact-starbucks-valuation/">Over five years, 20 percent of its sales</a> shifted to online transactions.</p>
<p>Research has also begun to show that people who use mobile shopping apps buy more than they might otherwise. After individual shoppers started purchasing using eBay’s mobile app, their <a href="https://doi.org/10.1257/aer.104.5.489">purchases from eBay’s website increased</a>. Similarly, a tablet app from major Chinese e-tailer Alibaba led customers to <a href="https://doi.org/10.1287/mnsc.2015.2406">spend about US$923.5 million more each year</a> with the company than they would have without the app. Some of that increased spending is from shoppers using the app to <a href="https://doi.org/10.1287/mnsc.2015.2406">buy impulsively</a> – making one-off purchases of items they are interested in, or adding items to larger orders.</p>
<p>Our research recently found a new dimension to this app-related spending boost. Over 18 months, customers who downloaded the branded app of the retailer we studied spent <a href="http://www.msi.org/reports/the-effects-of-mobile-apps-on-shopper-purchases-and-product-returns/">30 percent more in stores</a> than they would have without the app. We can infer this by looking at data on customers’ spending before and after the app was installed, and by <a href="https://press.princeton.edu/titles/8769.html">comparing that</a> to the spending of a random sample of customers who had similar demographics and shopping behavior before the app launched.</p>
<p>We learned that most of the increase was because customers used the app to find out about products before buying them. For example, by closely analyzing the data on app use and purchases, we could see these customers started increasing purchases of lesser known video games when they started using the app.</p>
<h2>App users return products more</h2>
<p>While shoppers who use a retailer’s mobile app tend to buy more online and in stores, we find that they are also <a href="http://www.msi.org/reports/the-effects-of-mobile-apps-on-shopper-purchases-and-product-returns/">more prone to subsequently returning</a> the products they purchased. </p>
<p>In particular, customers who use a retailer’s app tend to return products most often when they purchased those products on discount, and within seven days of making the original purchase. Apps often make it easier to purchase items on impulse. When customers receive some of the items and are dissatisfied, they regret the decisions and return the items. </p>
<p>Even taking into account the high rate of returns, app users spend more both online and in physical stores. But that’s when the apps work as customers expect them to.</p>
<h2>App failures –- and consequences</h2>
<p>Apps that load information slowly or crash frequently can deter not only online purchasing, but in-person spending, too. Surveys show that <a href="https://techbeacon.com/sites/default/files/gated_asset/mobile-app-user-survey-failing-meet-user-expectations.pdf">more than 60 percent</a> of users expect an app to load within four seconds. And our ongoing research suggests that more than half of users will abandon an app that freezes or crashes frequently.</p>
<p>App slowdowns can be costly. One estimate suggests that if each Amazon webpage took just one second longer to load, the company’s sales could drop <a href="https://www.fastcompany.com/1825005/how-one-second-could-cost-amazon-16-billion-sales">as much as $1.6 billion</a> a year. For smaller retailers, a similar drop of 2 to 3 percent would be a smaller dollar amount but still a significant blow.</p>
<p>Our ongoing research with Stanford’s <a href="https://www.gsb.stanford.edu/faculty-research/faculty/sridhar-narayanan">Sridhar Narayanan</a> suggests that poor app performance reduces users’ in-store spending too. Specifically, we studied how shoppers react when an app is not accessible for five or six hours, due (users were told) to a server error. Our preliminary results suggest that in the following two weeks, those shoppers spent 3 to 4 percent less in stores than they would have otherwise. Less-frequent customers reduced their spending even more than the company’s more regular shoppers.</p>
<figure>
<iframe src="https://player.vimeo.com/video/221094371" width="500" height="281" frameborder="0" webkitallowfullscreen="" mozallowfullscreen="" allowfullscreen=""></iframe>
<figcaption><span class="caption">Unnati Narang discusses her ongoing research on failures in mobile shopping apps.</span></figcaption>
</figure>
<p>Interestingly, customers who experience app failures spend less in stores, but their online spending remains unchanged. A deeper analysis indicates that when a retailer’s app fails, shoppers often go to the retailer’s website to complete their intended transactions. But the negative experience from app failure discourages them from buying more in the retailer’s store. </p>
<p>Our research illustrates some ways mobile apps can be a double-edged sword for customers and retailers alike. Shoppers can use apps to learn more about prospective purchases, be inspired on the fly and save time at the cash register. But if the software fails, they may be frustrated, discouraged and even spend less at physical stores. Retailers can see increased sales and faster transactions, but may have to handle more returns – though they’ll still make more money. The longer-term effects of mobile apps on the retail business have yet to be seen, of course, but in an ever-changing landscape, companies and customers alike will be exploring the options.</p><img src="https://counter.theconversation.com/content/88684/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>As businesses’ branded mobile apps become more common and popular, how are they affecting shoppers’ buying habits?Venkatesh Shankar, Professor of Marketing; Director of Research, Center for Retailing Studies, Texas A&M UniversityUnnati Narang, Ph.D. student in Business Administration (Marketing), Texas A&M UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/801802017-06-29T08:30:00Z2017-06-29T08:30:00ZHow supermarket surge pricing will work to keep shoppers sweet<figure><img src="https://images.theconversation.com/files/176066/original/file-20170628-7313-1xcrqrx.jpg?ixlib=rb-1.1.0&rect=134%2C48%2C3308%2C2139&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/young-woman-putting-goods-on-counter-409302436?src=M1xBtykOU5vexbmQOMe7XQ-1-9">Photobac/Shutterstock</a></span></figcaption></figure><p>Shoppers are used to supermarket prices which stay pretty much the same. Rises or falls tend only to take place at irregular intervals and most goods stay at the same price for days, possibly for weeks or months. All that, however, might be about to change. </p>
<p><a href="http://www.telegraph.co.uk/news/2017/06/24/exclusive-end-fixed-prices-within-five-years-supermarkets-adopt/">Recent reports</a> have suggested that fixed prices in supermarkets will be gone within five years, to be replaced by ever changing prices dependent on the demand for those goods, just like share prices. This has become possible thanks to electronic shelf-edge labels which can change in real time.</p>
<p>Many consumers will baulk at this idea, but is it really that unusual? Some goods are already subject to demand pricing. We are all used to petrol prices fluctuating, especially when the price of oil is particularly volatile. Perhaps even more volatile than petrol are <a href="https://theconversation.com/off-on-holiday-heres-the-best-time-to-book-flights-and-hotels-67683">airline tickets</a>. You can logon one minute, go and check that all is well and then find the price has changed when you actually book the ticket. Electricity has been cheaper to use at night since the <a href="https://www.uswitch.com/gas-electricity/guides/economy-7/">Economy 7</a> tariff was introduced way back in 1978.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/176053/original/file-20170628-7313-r5jkl6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/176053/original/file-20170628-7313-r5jkl6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/176053/original/file-20170628-7313-r5jkl6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/176053/original/file-20170628-7313-r5jkl6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/176053/original/file-20170628-7313-r5jkl6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/176053/original/file-20170628-7313-r5jkl6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/176053/original/file-20170628-7313-r5jkl6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/176053/original/file-20170628-7313-r5jkl6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Subject to change: digital price tags in Tokyo.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/clankennedy/31364245/in/photolist-3LKuR-6FBaRZ-94NuiP-3hWST-74p3sr-RtB4YC-iNpH9k-68q98n-8LezNN-8KxFmt-hyYNr-8RVJa8-8KAHqb-92fwiM-kCnuZh-8RYPC1-6Bf4Sd-8KwGze-6n86ay-sqHhE-8KzXPY-8Lex8L-8KwMdF-8Ky3KD-8KwJUD-8RYPDA-8KzSsb-d1WKms-2N5eU-8Kx7Vi-8Kx2nt-8KA8n9-8KA9Kd-8Ky1tZ-sqGNH-8KwXbB-8Kx8Zc-8KzTyA-8Ky56x-8KzUMd-8Kx3UV-7VvRqt-6JAUdg-dJxR1L-dytwLT-5YsqK7-6DcZVr-8KwSr2-8KBbXb-8KzWRA">Ian Kennedy/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc/4.0/">CC BY-NC</a></span>
</figcaption>
</figure>
<h2>Fresh ideas</h2>
<p>In fact, supermarkets already have price fluctuations. <a href="https://www.theguardian.com/environment/2006/mar/01/food.supermarkets">Fresh goods, such as fish</a>, will change price more than most other goods, depending on what is available at the market and what fishing boats have managed to land. Many will also be familiar with bargain shelves in supermarkets, which contain goods that are getting near their sell by date. And, of course, there is the daily reduction of bread prices towards the end of each day. </p>
<p>Price changes for products such as fish are due to external market prices, and supermarkets have to react to protect their profit margin. Reducing prices on goods as they approach their shelf life is a way of protecting at least some of their investment before they have to dispose of it, with zero return on investment.</p>
<p>But the new idea of constantly fluctuating prices is a different scenario. This would enable supermarkets to charge more when goods are in greater demand. There are obvious candidates – ice cream on hot days, sandwiches at lunchtime, beer and wine during major sporting events and burgers during barbecue season. It’s <a href="https://theconversation.com/why-ubers-surge-pricing-is-naive-economics-52948">the kind of surge pricing</a> we associate with ride-hailing company Uber.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/176060/original/file-20170628-7347-3m84g4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/176060/original/file-20170628-7347-3m84g4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/176060/original/file-20170628-7347-3m84g4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/176060/original/file-20170628-7347-3m84g4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/176060/original/file-20170628-7347-3m84g4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/176060/original/file-20170628-7347-3m84g4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/176060/original/file-20170628-7347-3m84g4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/176060/original/file-20170628-7347-3m84g4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Fired up.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/hamburgers-cooking-on-grill-flames-beef-547881805?src=M6nvIWPTbvbO5VJEX7R8Fw-1-5">Abu_Zeina/Shutterstock</a></span>
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<p>The concept of prices being able to change at the touch of a button – or more likely at the whim of a computer algorithm – presents many other opportunities. Supermarkets already collect vast amounts of data on us. Loyalty cards, combined with other big data sources and analytics, reveal a lot about us. They could also know when we are in the supermarket and which aisle we are browsing by using the GPS on mobile phones or even tracking the trolleys customers use. </p>
<p>Combining this data, they know a lot about the people they have in the store at any given time. They will be able to target groups by raising the prices of goods suited to the current demographic in the supermarket. They may even be able to target individual consumers, perhaps not by changing prices on the shelf edge for each person, but by offering special offers that are unique to them. They might alert us to a deal through a screen attached to the shopping trolley or via a mobile phone app.</p>
<h2>Experience sells</h2>
<p>Some of this may seem like science fiction but electronic shelf edge labels are already available – and it opens up selling opportunities which consumers can only imagine at the moment. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/176062/original/file-20170628-7313-kfudy4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/176062/original/file-20170628-7313-kfudy4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/176062/original/file-20170628-7313-kfudy4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/176062/original/file-20170628-7313-kfudy4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/176062/original/file-20170628-7313-kfudy4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/176062/original/file-20170628-7313-kfudy4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/176062/original/file-20170628-7313-kfudy4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/176062/original/file-20170628-7313-kfudy4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">A future of digital trolleys?</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/shopping-ecommerce-concept-miniature-people-group-610636661?src=ZyZccnBTiY7ehb_oAoax-g-1-5">alexnroll/Shutterstock</a></span>
</figcaption>
</figure>
<p>The challenge for the supermarkets is how much to invest and how quickly. They also have to decide how best to exploit these new opportunities without being seen as too mercenary. Supermarkets go to great lengths to make us feel that we are having an <a href="https://theconversation.com/the-science-that-makes-us-spend-more-in-supermarkets-and-feel-good-while-we-do-it-23857">enjoyable shopping experience</a>. They do not want us to feel exploited.</p>
<p>That means there is a good chance that it will not all be one-way traffic. Marketing strategies will be put in place to make the consumer feel as if they are being offered bargains thanks to the new technology. That might include extra loyalty points, buy-one-get-one-free deals and individual special offers. Combine this with ever-better shopping experiences thanks to things like reduced queues at checkouts, technology-assisted shopping and apps to remember your shopping list, and you may even benefit from the supermarkets of the future.</p>
<p>However the supermarket business develops over the next five years, it is certain that the shopping experience will change. Some developments will be obvious to us and others will be guided by the invisible hand of the marketeers. It will be interesting to see how they make us feel good when we’re paying more for a sandwich that cost less just a few minutes earlier.</p><img src="https://counter.theconversation.com/content/80180/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Graham Kendall does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Watch out for booming burger prices in barbecue season.Graham Kendall, Professor of Computer Science and Provost/CEO/PVC, University of NottinghamLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/790652017-06-28T14:06:33Z2017-06-28T14:06:33ZM&S delivers – but is it too late?<figure><img src="https://images.theconversation.com/files/175854/original/file-20170627-24813-w8gtfv.jpg?ixlib=rb-1.1.0&rect=0%2C30%2C5116%2C3377&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/liverpool-uk-3rd-november-2016-people-511384453?src=bWVRj9_srFK-b5sdTmoUvA-1-12">Kenny1/Shutterstock</a></span></figcaption></figure><p>Over the last five years <a href="http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/11282688/How-the-UK-embraced-the-online-shopping-revolution.html">a revolution</a> on the British high street has seen businesses and their customers wholeheartedly <a href="http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/9157237/More-High-Street-shops-to-close-as-shoppers-move-online.html">embrace online</a> shopping. </p>
<p>Some companies seized the opportunity to branch out into often unfamiliar territory, while others failed to recognise how forcefully and quickly this market trend would blossom. When Marks and Spencer – the iconic socks-to-sausage rolls retailer – finally gets round to <a href="https://www.theguardian.com/business/2017/apr/27/this-is-not-just-any-online-grocer-ms-plans-food-delivery-service">trialling food deliveries</a> this autumn, it will find out if that particular lucrative ship has sailed.</p>
<p>M&S is playing catch-up with pretty much every one of its direct competitors in food retail. And the warnings are there for high street laggards. Now gone are places like <a href="https://www.theguardian.com/business/2013/nov/06/blockbuster-video-closes-remaining-stores">Blockbuster video</a> and <a href="http://edition.cnn.com/2011/US/09/12/first.borders.bookstore.closing/index.html">Borders bookshops</a>, which failed to adapt their business to the “<a href="http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/11714847/Online-shopping-is-king-high-street-stores-must-adapt-or-die.html">sofa-surfers</a>” whose shopping style was attuned to the advent of rivals such as <a href="https://www.forbes.com/sites/gregsatell/2014/09/05/a-look-back-at-why-blockbuster-really-failed-and-why-it-didnt-have-to/#759e41fa1d64">Netflix</a> and <a href="http://business.time.com/2013/03/18/amazon-prime-bigger-more-powerful-more-profitable-than-anyone-imagined/">Amazon Prime</a>. </p>
<p>It’s worth remembering that Netflix in 2000 <a href="http://www.cnet.com/news/blockbuster-laughed-at-netflix-partnership-offer/">proposed a partnership</a> to Blockbuster CEO John Antioco and his team, only to be turned down. Choosing your moment can be crucial.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/175861/original/file-20170627-24760-48qt69.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/175861/original/file-20170627-24760-48qt69.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/175861/original/file-20170627-24760-48qt69.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=397&fit=crop&dpr=1 600w, https://images.theconversation.com/files/175861/original/file-20170627-24760-48qt69.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=397&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/175861/original/file-20170627-24760-48qt69.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=397&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/175861/original/file-20170627-24760-48qt69.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=499&fit=crop&dpr=1 754w, https://images.theconversation.com/files/175861/original/file-20170627-24760-48qt69.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=499&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/175861/original/file-20170627-24760-48qt69.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=499&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Ancient history.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/chichester-england-november-10-closing-down-163045838?src=cHAnMG8TRnX4mXn1KqCaKw-1-1">JLRPhotography/Shutterstock</a></span>
</figcaption>
</figure>
<h2>Belly up</h2>
<p>Whether or not a company survives depends on a number of factors, but mostly it concerns one key objective – can it remain profitable? What this often translates to is how well a company can maintain a market presence by offering a <a href="http://www.economist.com/node/14301696">unique selling proposition</a> – what marketing types like to call a USP. This can include offering the best price, best quality, market-leading service, widest choice, best guarantee or a market-leading product. In short, anything that distinguishes it (positively) from the main competition. </p>
<p>M&S has traded on its reputation for quality and a mixed offering, but with equally mixed results. Clothing has consistently struggled, while food has <a href="http://news.sky.com/story/ms-to-trial-online-food-delivery-service-this-autumn-10853563">underpinned its performance</a>. When trying to maintain a fine balance like that, the line between thriving and failing becomes a fine one. </p>
<p>Many in the past have offered a USP, and been much-loved by the public. Once-renowned companies such as <a href="http://www.bbc.co.uk/news/av/business-36127732/three-things-bhs-got-wrong">BHS</a>, <a href="http://www.bbc.co.uk/news/business-25345257">Blockbuster</a>, <a href="https://www.theguardian.com/business/2009/nov/26/borders-closure-stores-amazon">Borders</a>, <a href="http://www.bbc.co.uk/news/business-20164228">Comet</a>, and <a href="http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/6570626/Woolworths-the-failed-struggle-to-save-a-retail-giant.html">Woolworths</a> were all once market leaders in their respective fields, but eventually they all failed. They failed to remain relevant in their respective markets and often failed to embrace technology which would have allowed them to keep up with the competition.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/175863/original/file-20170627-24776-10zt5t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/175863/original/file-20170627-24776-10zt5t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/175863/original/file-20170627-24776-10zt5t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/175863/original/file-20170627-24776-10zt5t.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/175863/original/file-20170627-24776-10zt5t.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/175863/original/file-20170627-24776-10zt5t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/175863/original/file-20170627-24776-10zt5t.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/175863/original/file-20170627-24776-10zt5t.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Hitting the wall.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/lwr/4692390873/in/photolist-89DJjV-7e6ir4-5HLdDR-6LwTFc-92NEia-7dayCk-5Lxgjk-7DEecT-7AL8xy-fxAHaS-wXrc51-7dnC8v-5UVy6C-favAL-9nWBqA-5UVKtR-5UVw8d-5UVx2Y-6gpPLH-62DRrS-5jvi5Z-5MyiK2-pNdgWn-dtGTR4-4pvgss-q5pN5p-844rKR-p8QybK-p8MYXL-5WZDRF-5NU1ti-4xAVW-q5pMcn-pNdi9T-5Xve7t-78upnz-6fXYfR-dhcFdP-6gvrvJ-6yTmKo-6fXXQx-7BiBXE-6oZYnB-jLsJF-5WFFh9-69DV6L-63fCzd-9HGreM-6g3aLA-5Ns5pq">Leo Reynolds/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-sa/4.0/">CC BY-NC-SA</a></span>
</figcaption>
</figure>
<h2>Staying alive</h2>
<p>Survival involves much more than management making the right decisions, it often involves being ahead of the curve. We can see the effect of this dynamic in the UK high street right now. It is why M&S has had its <a href="http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/11513251/Marks-and-Spencer-has-no-place-in-the-modern-world-which-is-why-its-recovery-should-be-celebrated.html">place in the modern world questioned</a> on a number of occasions. </p>
<p>M&S’ sustained issues with <a href="http://www.bbc.co.uk/news/business-35251415">its clothing range</a> have been masked by strength in food, which has made it all the more odd that the move into deliveries <a href="http://www.bbc.co.uk/news/business-39743611">has taken so long</a>, and seems so tentative, even now. At a time when retail space is no longer entirely essential, M&S is caught between <a href="http://www.telegraph.co.uk/business/2016/11/04/marks--spencer-to-shut-uk-stores-in-shop-shake-up/">closing some stores</a> and opening new food-only stores as it tries to understand changing demand.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/175865/original/file-20170627-24776-phhw5t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/175865/original/file-20170627-24776-phhw5t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/175865/original/file-20170627-24776-phhw5t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/175865/original/file-20170627-24776-phhw5t.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/175865/original/file-20170627-24776-phhw5t.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/175865/original/file-20170627-24776-phhw5t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/175865/original/file-20170627-24776-phhw5t.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/175865/original/file-20170627-24776-phhw5t.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">New benchmarks.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/london-uk-november-19-2011-ikea-422348707?src=9j2NkAzwAxMSXFxQOi3WCg-1-5">Tony Baggett/Shutterstock</a></span>
</figcaption>
</figure>
<p>The warnings from retail experts are all about failing to latch on to <a href="https://www2.deloitte.com/uk/en/pages/consumer-business/articles/retail-trends-2017.html">market movements and trends</a>, but M&S has seemed more worried about the risks of being the front runner. It is true that trends can quickly fade, but anyone watching Tesco, Asda, Ocado and Sainsbury’s vans rattling up and down our streets every day must have wondered what M&S was playing at.</p>
<p>Clicks are king for the moment, and for “bricks and mortar” retailers to thrive, they must develop a business structure that makes sense right now. If M&S wants an example to follow it could do worse than <a href="https://www.forbes.com/sites/walterloeb/2012/12/05/ikea-is-a-world-wide-wonder/#2434bd8f27b9">Ikea</a>, which has worked to get rid of inefficient practices and established teams that collaborate across all channels, not just one, a tactic that may help M&S with the challenge of running its clothing offering alongside food and homewares. </p>
<p>Food deliveries are an effort to meet new customer demands, but M&S would do well to view its all of its operations from the position of the consumer – from the outside in – to develop an environment that actually enhances brand loyalty across all products. <a href="https://www.dezeen.com/2013/01/25/apple-trademarks-design-stores/">Apple’s product showrooms</a> are world leaders in this respect.</p>
<p>M&S faces another testing year on the high street and on the internet. It no doubt hopes that a late foray into food deliveries will expose its business to more sofa-surfers and in turn help its ailing clothing division. But, a word of caution. Competition will be fierce, and if those previous company failures have taught us anything, it is that brand loyalty can vanish in the face of poorly handled strategy.</p><img src="https://counter.theconversation.com/content/79065/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Wood does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>What the lessons of failed high street brands mean as M&S finally makes a big move.John Wood, Lecturer in Law, University of Central LancashireLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/797762017-06-21T11:10:42Z2017-06-21T11:10:42ZWill Amazon’s Whole Foods deal go the same way as L'Oréal and Body Shop?<figure><img src="https://images.theconversation.com/files/174900/original/file-20170621-8977-1qf4cly.jpg?ixlib=rb-1.1.0&rect=172%2C333%2C3737%2C2321&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/london-united-kingdom-22-jun-2017-661686322?src=NOz5__An-Za3TR_sxcnCzA-1-53">EQRoy/Shutterstock</a></span></figcaption></figure><p>Online retail giant Amazon has made a decisive move into food retail. The <a href="http://www.bbc.co.uk/news/business-40306099">acquisition of US grocer Whole Foods</a>, a pioneer in organic, healthy food shopping for well-off consumers, brings together two businesses with contrasting reputations. We’ve been here before. And it didn’t work out well.</p>
<p>Amazon’s mission is to build a place where people can find “anything they might want to buy online”. In the Whole Foods mission statement, however, it promises to “<a href="http://www.wholefoodsmarket.com/our-mission-values">not sell just anything</a>” but to deliver the highest quality that encompasses the greater good. We perhaps shouldn’t judge a deal by highlighting that the corporate PR seems to be at odds, but this discrepancy does raise some profound questions about the purpose of a business and how that purpose is accomplished. </p>
<p>For years, Amazon has been criticised for its business practices. A burnout-inducing <a href="https://www.theguardian.com/sustainable-business/2015/aug/19/amazon-employee-abuse-rights-wages-walmart">work culture</a>, limited focus on <a href="https://www.theguardian.com/sustainable-business/2015/aug/05/amazon-best-buy-electronic-waste-walmart-recyling">recycling</a> and a lack of transparency on sustainability reporting have all come under fire. Compare that to Whole Foods’ value-based culture of caring for worker communities, adoption of <a href="http://www.wholefoodsmarket.com/blog/tricky-recycling-made-easy">responsible recycling</a> and its foray into <a href="https://www.fool.com/investing/general/2016/03/12/whole-foods-makes-sustainability-push-beyond-food.aspx">solar energy</a>. It feels like a strange marriage. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/174902/original/file-20170621-8977-1e7045f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/174902/original/file-20170621-8977-1e7045f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=331&fit=crop&dpr=1 600w, https://images.theconversation.com/files/174902/original/file-20170621-8977-1e7045f.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=331&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/174902/original/file-20170621-8977-1e7045f.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=331&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/174902/original/file-20170621-8977-1e7045f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=415&fit=crop&dpr=1 754w, https://images.theconversation.com/files/174902/original/file-20170621-8977-1e7045f.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=415&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/174902/original/file-20170621-8977-1e7045f.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=415&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">An Amazon distribution centre in Germany.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/rheinberg-germany-january-29-2017-amazon-566737150?src=5ZbnbP0jN73KplIpgYWfvg-1-12">Lukassek/Shutterstock</a></span>
</figcaption>
</figure>
<h2>Trojan horse</h2>
<p>In fact, it does bring to mind 2006, when L’Oréal, the corporate beauty giant with a deeply questionable <a href="https://www.theguardian.com/business/2006/mar/17/retail.animalrights">animal testing record</a>, acquired Body Shop, the socially conscious beauty company known for its ethical products and friendly environmental practices. The deal was made through <a href="https://www.forbes.com/sites/greatspeculations/2017/02/23/why-is-loreal-trying-to-sell-off-natural-beauty-brand-the-body-shop/#1a74ae911523">an agreed buyout</a> with Anita Roddick, the founder of Body Shop. Agreements were made that Body Shop would continue to run independently, and Roddick was quoted as saying Body Shop could act as “<a href="https://www.theguardian.com/business/2006/nov/03/ethicalliving.environment">a Trojan horse</a>” and positively influence the way L'Oréal did business. </p>
<p>However, over time, the lack of a cultural fit between the two companies, and growing competition from other ethical beauty brands, led to a decline in Body Shop’s appeal. Sales fell, as did operating profits and <a href="http://www.business-standard.com/article/international/l-oreal-looks-to-sell-the-body-shop-as-profits-fall-117021000062_1.html">market share</a>. Now L’Oréal is <a href="https://www.theguardian.com/business/2017/feb/09/loreal-considers-selling-the-body-shop-as-profits-fall">looking to sell</a> Body Shop a decade after a deal that shocked many. Clearly, there is more to an acquisition than just potential financial rewards, and that mismatch of ideology and purpose can lead to reduced value for investors themselves. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/174903/original/file-20170621-30227-2rat7d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/174903/original/file-20170621-30227-2rat7d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/174903/original/file-20170621-30227-2rat7d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/174903/original/file-20170621-30227-2rat7d.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/174903/original/file-20170621-30227-2rat7d.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/174903/original/file-20170621-30227-2rat7d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=501&fit=crop&dpr=1 754w, https://images.theconversation.com/files/174903/original/file-20170621-30227-2rat7d.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=501&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/174903/original/file-20170621-30227-2rat7d.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=501&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Is the same in store for Whole Foods?</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/sepang-malaysia-january-14-2017-body-557879005?src=rCxPN_vDsIWkMPjvIfV5kA-1-0">mrfiza/Shutterstock</a></span>
</figcaption>
</figure>
<p>The Whole Foods deal has echoes of that Body Shop-L’Oréal story, but there are some important differences. Amazon has responded to criticisms over its sustainability credentials and signalled a positive shift by significantly expanding its <a href="https://www.theguardian.com/sustainable-business/2016/feb/02/amazon-sustainability-edf-epa-best-buy-walmart-apple-microsoft-csr-child-labor">sustainability team</a>. It has also announced a <a href="https://www.amazon.com/p/feature/gkkwdp34z5ou7ug">series of goals</a> in this direction, ranging from solar-energy-powered fulfilment centres to construction of its largest wind farm. </p>
<h2>Pressure off?</h2>
<p>But let’s not get carried away. Amazon is more than 20 years old, and remains a laggard in the sustainability movement. Its venture into renewables was not a matter of business philosophy, but was driven by market and competitor pressures and the push to align with the previous US administration’s stand on <a href="https://www.ecowatch.com/apple-google-amazon-and-microsoft-file-amicus-brief-in-support-of-the--1882200369.html">climate change</a>. In contrast, Whole Foods has followed a mindful approach to sustainability, winning its first Green Power award from the US Environment Protection Agency (EPA) more than 13 years ago. With the Trump administration’s renewed focus on coal, the US withdrawal from the Paris Climate Agreement, and overhaul of the EPA, the pressure on Amazon to progressively adopt green tech may ease. </p>
<p>It is also hard to see how Amazon will handle the strong views of John Mackey, CEO of Whole Foods and a proponent of conscious capitalism. He <a href="http://features.texasmonthly.com/editorial/shelf-life-john-mackey/">has been quoted</a> as saying:</p>
<blockquote>
<p>Business (in America) is about a bunch of greedy bastards running around exploiting people, screwing their customers, taking advantage of their employees, dumping their toxic waste in the environment, acting like sociopaths.</p>
</blockquote>
<p>The Whole Foods approach is to create long-term value for its owners, shoppers, workers, suppliers and local residents. What marks out a so-called “purposeful” business is its ability to stay true to that mission, rather than drifting inexorably towards life as an engine of growth for investors through continuous expansion. </p>
<p>Now, Amazon has focused on long-term growth and is a customer-centric company, but <a href="https://www.nytimes.com/2015/08/16/technology/inside-amazon-wrestling-big-ideas-in-a-bruising-workplace.html">its attitude</a> towards workers, communities and the environment has often been drastically different from that of Whole Foods, leading to the obvious question of how Whole Foods will be run within Amazon. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/174904/original/file-20170621-30211-1y616y2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/174904/original/file-20170621-30211-1y616y2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/174904/original/file-20170621-30211-1y616y2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/174904/original/file-20170621-30211-1y616y2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/174904/original/file-20170621-30211-1y616y2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/174904/original/file-20170621-30211-1y616y2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/174904/original/file-20170621-30211-1y616y2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/174904/original/file-20170621-30211-1y616y2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Will Mackey make way?</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/gageskidmore/8485118402/in/photolist-dVNs5S-dVUiVa-rtKip-UtaGiz-UrqdnN-UrqnDy-UtaEiH-UrqtxN-UtaFGV-UgB712-TQNHGu-Tkg4p7-UgBWZK-UiwYjB-Upurnu-Un9r2w-UtaDi6-TdDhAf-TSMWEy-Uiyqkn-UrquoW-Ted39c-UqPeCH-UrqknE-TbJHqh-UfXorA-KxcdF-Uptx9G-TdE43m-UtacqK-TV3Njd-UfYfQG-UtaGV6-TV4a7f-UtaEPT-UgB47g-Up7TVo-TbJwPN-UfXRWW-Uix3Zt-Fr2cEw-UdGs6m-TdDgpC-UiypX8-PwbUAR-NwvbCd-UixvuH-UbLEGN-TbJxAY-UfY98U">Gage Skidmore/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<h2>Misfits</h2>
<p>The fear must be that the rationale for the Whole Foods acquisition is to make cost cuts and secure a good outcome for investors. There is <a href="http://nypost.com/2017/06/19/amazon-may-replace-a-whole-lot-of-whole-foods-cashiers-with-robots/">much chat in the media</a> about Amazon’s warehouse robots being let loose on Whole Foods, at the expense of jobs. And the door is already ajar. Pressure from investors has already led to an overhaul of the Whole Foods’ <a href="http://fortune.com/2017/05/11/whole-foods-board-shakeup/">board of directors</a>, where long-standing conscious capitalism supporters have been replaced by corporate leaders interested in market growth and investor wealth maximisation. </p>
<p>There is clear business potential here for Amazon, but an equally clear lesson from past acquisitions where a poor cultural fit has proved detrimental for everyone involved and for the brand itself. Whole Foods has become synonymous with ethical consumption through its careful selection of vendors and products. Despite competition, it has an ardent following of ethical consumers. </p>
<p>There is a genuine risk that this acquisition will muddy the waters for Whole Foods shoppers. Will they now be faced with shelves full of “anything” that can sell, rather than the benign niche products they are used to? How leadership works post-acquisition will be key: how and why decisions are made, and by whom, will dictate whether the upscale grocer loses its <a href="https://theconversation.com/conscious-capitalism-how-to-make-the-most-of-the-kindness-in-business-34848?sr=1">claim to conscious capitalism</a>. The deal could be a success, but if lessons aren’t learnt, Whole Foods could even go the same way as the Body Shop, and end up on the auction block in a decade’s time.</p><img src="https://counter.theconversation.com/content/79776/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span> </span></em></p>A pioneer of ethical consumerism, wedded to a corporate giant with a questionable record? The lessons of a decade ago should be ringing alarm bells.Tanusree Jain, Assistant Professor of Ethical Business, Trinity College DublinLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/778212017-05-17T15:09:53Z2017-05-17T15:09:53ZWho needs experts? UK retail giants take a calculated risk with new bosses<figure><img src="https://images.theconversation.com/files/169597/original/file-20170516-11956-hw7kxz.jpg?ixlib=rb-1.1.0&rect=245%2C303%2C4955%2C3227&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/manchester-uk-may-11facade-marks-spencer-638496250?src=BDlY_untuPuhm47idK3dPQ-1-19">george green/Shutterstock</a></span></figcaption></figure><p>Two established British high street stores have announced senior appointments, both of which have sparked some surprise across the industry. A new CEO at department store House of Fraser and a new director of home, clothing and beauty at Marks & Spencer share an intriguing characteristic: both will arrive in these posts with little relevant experience of their new fields.</p>
<p>You might think this taps into a wider, global trend, where in the US and France, Donald Trump and Emmanuel Macron have both won the presidency after seeing off rivals with more impressive and relevant CVs. </p>
<p>But business, and in particular the retail business, tends to reward detailed industry knowledge gleaned from time spent at the coal face. That’s why there was much surprise at <a href="http://www.telegraph.co.uk/business/2017/05/03/ms-poaches-halfords-bossjill-mcdonald-run-struggling-clothing/">Jill McDonald’s move to M&S</a> from automotive retailer Halfords, and <a href="https://www.theretailbulletin.com/news/house_of_fraser_names_new_chief_executive_12-05-17/">Alex Williamson’s switch to HoF</a> from running the Goodwood sporting estate in Sussex. Both are tried and tested managers, but both would appear to be fish out of water in their new roles.</p>
<p>Although the leadership turnover in the retail world is relatively high – across the UK’s largest 300 retailers there were 41 changes at CEO level <a href="http://www.kornferry.com/institute/uk-retail-tracker-2017">in the past year alone</a> – these kinds of unconventional appointments are rare. </p>
<h2>Sporting chance</h2>
<p>But perhaps the electoral success of Trump and Macron could help explain it. Do those at leadership level in UK retail really need to have had specialist functional skills or prior sector experience?</p>
<p>Both M&S and HoF already have product design, buying, marketing, data analytics, supply chain and store management teams, full of very talented individuals, and so it may be that exemplary transferable skills, in particular leadership, are the real requirement, whether gained in the retail sector or not.</p>
<p>There are some parallels that can be drawn with recruitment and development programmes in high performance sport. They include <a href="http://www.eis2win.co.uk/expertise/pathways/">Performance Pathways</a>, the collaboration between UK Sport and the English Institute of Sport (EIS), which sought to identify talented athletes who had no previous experience of a specific sport and develop them for success at Olympic and Paralympic Games. That project has resulted in over 100 newly identified athletes across 17 sports, and secured more than 150 international medals. </p>
<p>Their <a href="http://www.independent.co.uk/sport/olympics/from-pitch-to-podium-footy-rejects-get-lifeline-1693418.html">Pitch to Podium scheme</a> tried to do a similar thing with young footballers who hadn’t made it to the highest level in their chosen sport, but who might have the right physiology and attitude to succeed in other sporting disciplines. In both these examples, it is transferable strengths that were sought after and valued, rather than specific previous experience.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/169599/original/file-20170516-11952-amvh9x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/169599/original/file-20170516-11952-amvh9x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/169599/original/file-20170516-11952-amvh9x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/169599/original/file-20170516-11952-amvh9x.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/169599/original/file-20170516-11952-amvh9x.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/169599/original/file-20170516-11952-amvh9x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/169599/original/file-20170516-11952-amvh9x.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/169599/original/file-20170516-11952-amvh9x.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Second chance?</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/football-soccer-387311377?src=NNDrG6TCmz40YloVLbTaSg-1-23">makieni/Shutterstock</a></span>
</figcaption>
</figure>
<h2>Team talk</h2>
<p>At M&S, McDonald will have the support of an experienced clothing and beauty director, and will also work with Neal and Mark Lindsey, the former sourcing gurus at high street rival Next, who have been retained to sharpen M&S’ <a href="http://www.telegraph.co.uk/business/2017/05/03/ms-poaches-halfords-bossjill-mcdonald-run-struggling-clothing/">clothing supply chain</a>.</p>
<p>Similarly, HoF have built up one of the strongest retail management teams to ensure they <a href="http://www.telegraph.co.uk/business/2017/05/11/house-fraser-hires-new-boss-no-retail-experience/">have a balance of skills</a> and so Williamson will be leading a team recently strengthened by the recruitment of several experienced retail operators from, among others, online fashion retailer Asos, M&S and rival department store John Lewis.</p>
<p>While McDonald’s appointment prompted predictable <a href="http://www.vogue.co.uk/article/marks-spencer-new-boss-jill-mcdonald">“from jump leads to jumpsuits”</a>, press coverage, M&S CEO Steve Rowe sought to highlight her customer knowledge and experience in running dynamic, high achieving teams <a href="http://www.telegraph.co.uk/business/2017/05/03/ms-poaches-halfords-bossjill-mcdonald-run-struggling-clothing/">which he felt</a> “made her exactly the right person to lead this all-important part of the M&S business from recovery into growth”.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/169600/original/file-20170516-11920-1rpg1c1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/169600/original/file-20170516-11920-1rpg1c1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/169600/original/file-20170516-11920-1rpg1c1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=456&fit=crop&dpr=1 600w, https://images.theconversation.com/files/169600/original/file-20170516-11920-1rpg1c1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=456&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/169600/original/file-20170516-11920-1rpg1c1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=456&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/169600/original/file-20170516-11920-1rpg1c1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=573&fit=crop&dpr=1 754w, https://images.theconversation.com/files/169600/original/file-20170516-11920-1rpg1c1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=573&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/169600/original/file-20170516-11920-1rpg1c1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=573&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Trouble in store? M&S clothing lines have struggled.</span>
<span class="attribution"><a class="license" href="http://creativecommons.org/licenses/by-nc/4.0/">CC BY-NC</a></span>
</figcaption>
</figure>
<p>As Nick Bubb, a leading UK retailing analyst <a href="https://www.retail-week.com/analysis/opinion/nick-bubbs-verdict-on-jill-mcdonalds-move-to-ms/7020628.article">pointed out</a>, the role that McDonald takes on at M&S is crying out for somebody who is good with customers and people and that “leftfield” choices for key leadership positions can sometimes be inspiring. He also thought that the task of managing the inexorable decline of M&S clothing may well need new talents from outside the fashion industry.</p>
<p>The House of Fraser appointment is perhaps slightly more difficult to understand, but again you need to look behind the headlines. Last month, HoF revealed plans to turn its shops into a <a href="http://www.telegraph.co.uk/business/2017/01/11/house-fraser-defends-department-stores-online-shoppers-drive/">“lifestyle-led experience”</a> by adding restaurants, cafes and more beauty services.</p>
<p>With that in mind, Williamson’s experience at Goodwood starts to make a little more sense. And HoF chairman, Frank Slevin, focused on his new CEO’s ability to deliver “compelling and engaging experiences for the customer” <a href="https://www.theretailbulletin.com/news/house_of_fraser_names_new_chief_executive_12-05-17/">when announcing the appointment</a>. He also said: “Transformation isn’t delivered by classic retail appointments.” </p>
<p>Perhaps that says it all. It may well be a risk to bring in new retail leaders – or even presidents of G7 countries – without them ticking off all the traditional staging posts on their career path, but they certainly have the capacity to shake things up.</p><img src="https://counter.theconversation.com/content/77821/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Nelson Blackley does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>When presidents are elected with no experience, perhaps M&S and House of Fraser are right to try the same formula.Nelson Blackley, Senior Research Associate, Nottingham Business School, Nottingham Trent UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/728442017-03-06T19:24:42Z2017-03-06T19:24:42ZCompany results: how competition is transforming Australia’s retail sector<figure><img src="https://images.theconversation.com/files/158405/original/image-20170225-22981-ucf0nc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Aldi's decidedly Germanic expansion strategy continues to eat into Woolworths’ earnings.</span> <span class="attribution"><span class="source">AAP/Lukas Coch</span></span></figcaption></figure><p>Several pressures are emerging in the Australian economy that are making business competition more unpredictable and challenging. Three examples in the retail sector, as evidenced by recent half-year financial results, are the emergence of new competitors, Australia’s changing tastes, and disruptive technologies.</p>
<h2>More investment extending overcapacity?</h2>
<p>Incumbent firms, when confronted by agile new entrants, face some tough choices. In some respects the best way to counter new entrants with better business models is to change and expand the way you operate. For myriad reasons, this is usually impossible.</p>
<p>What firms generally do is try to replicate the new entrants’ approaches within their own business. Qantas pulled this off fairly well with Jetstar: it built a low-cost airline to counter Virgin’s emergence in Australia. But large grocery retailers Coles and Woolworths, facing a similar threat in their sector, are struggling to counter the threat posed by new entrants.</p>
<p>One of these new entrants is Aldi. Its decidedly Germanic expansion strategy continues to eat into Woolworths’ earnings. <a href="http://www.woolworthsgroup.com.au/icms_docs/186045_half-year-results-announcement.pdf">In Woolworths’</a> near-A$19 billion food business, sales were up by more than A$500 million while earnings declined by around A$130 million in the half-year to December 31, 2016.</p>
<p>One interesting statistic in Woolworths’ results was the decline in sales per square metre for the Australian food division from A$16,251 to A$15,927. This is a decline of just over 2%.</p>
<p>In the context of higher real sales numbers, this shows Woolworths is growing its retail space quickly. There’s evidence of this by the growing number of smaller inner-city stores, and new stores in the capital cities’ urban fringes.</p>
<p>This can be contrasted with Aldi’s smaller stores and relatedly simpler and more agile logistics arrangements. This particular measure shows how Woolworths’ legacy store structures and leases continue to hold back any fundamental turnaround in profitability – and why perhaps Woolworths’ landlords should be worried.</p>
<p>The conundrum for the likes of Woolworths, Metcash (supplier to IGAs) and Coles is that they are driven to lease new, generally smaller-format, stores to retain customer patronage, but moving out of their older sites is rarely feasible. As such, by trying to refresh their retail locations they are also adding more and more floorspace to a business where floorspace is driving less in sales.</p>
<p>The problem is that Woolworths is adding more retail capacity to a sector that is approaching saturation, with a rapidly growing competitor in Aldi. As such costs are increasing and margins are declining. </p>
<p>This is a classic economic imbroglio: firms see such innovative expansions as a means to solve their problems, but in many ways it makes those problems worse.</p>
<h2>Changing tastes upend value chain arrangements</h2>
<p>There is more to the story of a tougher retail environment than Aldi. Changes in what Australians are buying at the checkout is impacting supply chain arrangements significantly, and tilting profits to producers of higher quality and more healthy foods – and away from retailers. </p>
<p>As our national average girth expands, there is evidence that Australians are starting to change their ways in relation to heavily sugared grocery mainstays like soft drinks, sweet biscuits and the like.</p>
<p>This is evidenced by <a href="http://www.asx.com.au/asxpdf/20170222/pdf/43g5vs32tdr8sy.pdf">Coca-Cola Amatil’s tough result</a>. Its sales volumes were down by 2.1%, while revenues were down by 3.4%. This shows Australians are drinking less and paying less for their products. The squeeze was more acute for “sparkling beverages”: its volumes were down 4.7%.</p>
<p>While better-quality and healthier food is great news for Australia’s health, it is not so great for our grocery retailers. The decline of high volume consumer staples like chips and soft drinks is bad news for retailers, which use such products to draw in customers. This means retailers have to be more cost competitive and margin-sensitive across the complete business, not just in the drawcard products.</p>
<p>The flipside of this can be seen in the listed fruit-and-vegetable producer Costa Group, Australia’s largest grower and packer of fresh fruit and vegetables. <a href="http://investors.costagroup.com.au/Investor-Centre/?page=asx-announcements">Its results</a> showed sales up by 9% and earnings up by 26.6% year on year.</p>
<p>Since its listing in 2015, Costa’s share price has increased from A$2.25 to more than A$3.50. Its stronger margins since listing is a sure sign that, as a supplier to grocers, it is getting a stronger share of the food value chain – at the supermarkets’ expense.</p>
<h2>Innovation is disrupting business models</h2>
<p>Technological innovation <a href="https://en.wikipedia.org/wiki/Joseph_Schumpeter">drives waves</a> of creative destruction in economies allowing firms to continually revolutionise and competitively recreate themselves. Economist Joseph Schumpeter noted that economies progress through such innovation, albeit at the expense of firms left behind by the new innovators.</p>
<p>This is nowhere better illustrated than among Australia’s pizza retailers, where <a href="http://www.asx.com.au/asxpdf/20170215/pdf/43g0bb360j4z9z.pdf">Domino’s</a> ascendancy is close to complete. In its recent <a href="http://www.asx.com.au/asxpdf/20170215/pdf/43g0bb360j4z9z.pdf">results</a>, profits were up by more than 30% year-on-year. </p>
<p>As a retailer, Domino’s has taken command of its market segment through innovation, IT development and marketing in an unprecedented manner.</p>
<p>Illustrative of this is <a href="http://www.smh.com.au/business/retail/dominos-pizza-enterprise-is-set-on-a-3minute-pizza-and-2000-new-stores-20160404-gnye7k.html">its 3/10 project</a>, which aims to have pizzas for pickup available in three minutes or home-delivered in ten. Innovations such as this have left Domino’s competitors in its wake.</p>
<p>Even this market hero, however, has clay feet. Domino’s share price has declined sharply recently, in part due to a series of <a href="http://www.smh.com.au/business/retail/dominos-scandal-franchisees-selling-visas-20170211-guau8x.html">scandals</a> ranging from alleged immigration fraud to widespread <a href="http://www.smh.com.au/business/workplace-relations/dominos-pizza-workers-kept-in-the-dark-about-underpayment-for-almost-two-years-20170214-gucq1f.html">underpayment of workers</a>.</p>
<p>In terms of technology-based disruption, more is on the way. Innovators like Amazon have signalled an interest in moving heavily into the Australian economy, expanding its e-commerce model into groceries. </p>
<p>Its <a href="https://www.amazon.com/b?node=16008589011">Amazon Go</a> technology and business model, where customers walk in, take what they want, and walk out (with goods billed automatically to the customer’s account) is intriguing. </p>
<p>Innovations such as this promise to disrupt retail as much as platform-based innovators like Uber have <a href="https://theconversation.com/when-uber-is-legal-the-taxi-industry-will-have-nowhere-to-hide-48820">disrupted taxis</a>.</p>
<p>Amazon’s mainstay is general e-commerce. In the <a href="http://www2.census.gov/retail/releases/historical/ecomm/16q4.pdf">US,</a> e-commerce accounts for 8.3% of retail sales, while in <a href="http://business.nab.com.au/nab-online-retail-sales-index-june-2016-17897/">Australia</a> the figure is around 6.8%. In both markets e-commerce is experiencing double-digit percentage growth. It is chipping away at the fundamental economics of traditional retailers like Myer, which continues to struggle.</p>
<h2>Batten down</h2>
<p>Taken together, the retail sector will continue to be a tough place for incumbents to thrive. </p>
<p>Innovators entering without the legacies of outmoded business models and with the benefit of new technology will continue to usurp incumbent firms. </p>
<p>For consumers, choice and convenience will continue to emerge. For incumbents unable to deliver on these outcomes, the future is bleak.</p><img src="https://counter.theconversation.com/content/72844/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>For consumers of Australia’s retail sector, choice and convenience will continue to emerge. For incumbents unable to deliver on these outcomes, the future is bleak.John Rice, Professor of Management, University of New EnglandNigel Martin, Lecturer, College of Business and Economics, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.