Preeti Pincha: Retail bifurcation & the new digital divide

The retail apocalypse is a myth. Retail industry bifurcation is not. Preeti Pincha digs into the impact of income-driven changes on consumer behavior.

Tue May 15 11:19:00 EDT 2018


Day 1 of Retail (R)Evolution 2018 continued as Preeti Pincha, Senior Engagement Manager for Deloitte Consulting, took the stage and built on a familiar theme we had heard from Lila and Gregg earlier in the day: the criticality of the customer experience. But, hand-in-hand with that for retailers, though, is the equally critical need to understand their industry in order to achieve success.

The myth of the ‘Retail Apocalypse’

Right off the bat Preeti called out the oft-reported “retail apocalypse” that is typically based on two core premises:

  • That digital online shopping is destroying traditional storefront retail environments, and
  • Millennials and their unique interests and behaviors are disrupting the retail industry.

Both of which, Preeti said, are frequently mispresented, blown out of proportion and not even entirely real. Calling it a “retail apocalypse” is a misnomer; think of it as more of a “retail renaissance.” Understanding the distinction between those two labels is essential for retailers to survive and thrive today.

The great retail bifurcation

To help make that distinction, Preeti shared some of the key findings from a comprehensive study conducted by Deloitte, “The great retail bifurcation,” which explains the dichotomy between failing storefronts in a strong, growing economy and a strong, growing overall retail industry. More specifically, this “bifurcation” speaks to consumers represented in three different income groups (low income, middle income, high income) and how they intersect with consumer buying trends and patterns as they apply to retailers, also organized into three groups: Price-Based Retailers, Balanced Retailers and Premier Retailers.

Based on various economic trends that relate to the discretionary spending within each income group, we’re seeing a bifurcation in the retail space where the Balanced Retailers are being the most heavily impacted by a reduction in sales, while sales are also increasing on the two ends of the spectrum (Priced-Based and Premier Retailers).

This is due to both the low-income and middle-income consumer groups shifting their purchases away from Balanced Retailers and more toward low-income retailers, in response to reduced income trends and a reduced availability of that income for discretionary spending. This is also due to an increase in high-income consumers choosing to go digital and shop online more and more – a phenomenon that often overstates the exclusive impact of online millennial shoppers.

The takeaway for retailers: More nimble, flexible, agile

The bifurcation we see in the consumer market is almost identical to the bifurcation we see in the retail market, with growth happening at both ends of the spectrum but not in the middle. Retailers must understand this bifurcation in order to be conscious about how they choose to interact with consumers. It’s important to have a critical eye toward the conventional wisdom being reported on regularly – store closings are not universal, they’re not across the board and they are specifically felt predominantly in the middle (i.e. balanced retailers).

Dismiss the myth that the retail industry is experiencing an apocalypse, and instead embrace the reality that the retail industry is experiencing a renaissance. Become more granular in how you position your value propositions to groups of customers at different income levels. That requires understanding your customers very intimately and possibly partitioning your value prop across different customer groups.

Successfully navigating through this sea change in the retail industry requires a more human-centric approach to understanding your customers. Or, as Preeti put it herself:

“[Retailers] need to be more nimble, flexible and agile to actually capture some of the newer smaller pockets of opportunities that the market is giving… Only those retailers who are able to do this – understand the customer more intimately – and also remain flexible and nimble to take advantage of the smaller, newer pockets of opportunities that the market has to offer – will be the winners in tomorrow’s world.”

In the competitive world of global ecommerce, it’s important to know where the industry is heading and how others retailers are reacting. Take the Pitney Bowes Global Ecommerce Assessment to see how you stack up with your competitors – the survey offers a side-by-side comparison between your answers and those of your peers.

Then, dive into the results from one of the biggest global ecommerce research reports of its kind. The Pitney Bowes 2017 Global Ecommerce Report surveyed more than 1,200 retailers and 12,000 consumers around the world, outlining both retailer and consumer perspectives on the global ecommerce landscape. Download the report to learn how these trends provide key growth opportunities.