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Division of Agricultural Sciences and Natural Resources Oklahoma State University

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3. Know Your Customers. The largest data le o its kind,Sears has inormation on 101 million o its customers.

4. The American Mall in Decline. The number o trips to themall has declined by 50 percent since the early1990s.

5. Challenging the Category Killer. Category killers willsoon only have competition rom themselves, and thatcompetition will be erce.

6. Precision Shopping. The quick shopping trip is the basisor the new small store ormat being embraced by manyo the nations largest retailers.

7. Entertaining the Customer. The 21st Century will see thecontinuation o the entertainmentization o retailing.

8. Globalization of Retail Trade. Ninety o the top 100 globalretailers will have international operations by the end o1999. The 1997 total was only 30.

9. Smart Cards. Worldwide 805 million cards had beenissued by 1996. By 2000, that number is expected toreach 2.8 billion.

10. Decline in Retail Sales Growth. Consumer spending isexpected to increase rom 1998 to 2002, but at a pacethat is 14 percent lower than that o the preceding ve

years.

Description of Trends

1. E-Commerce

American Demographics claim that the decade o the2010s will be the linked decade. Whereas Americans spent$2.1 billion on computers in 1986, that gure is expected tobe $666 billion by the year 2006. Already, America is onlinein large numbers, and retailers are understandably takingadvantage o this market. Every 53 days, the number o WorldWide Web pages doubles. According to Computer SciencesCorp. (Commerce By Numbers,1999), the percent o U.S.

retailers oering online shopping in 1996 was 11 percent. Justone year later, in 1997, that percentage was nearly doubled at20 percent. E-marketers 1998 E-Commerce Report states thatretail commerce totaled $1.8 billion in 1997, but is expectedto total $26 billion by 2002. Some estimates claim that thisgure could reach $115 billion by 2005 or 2006. By 2005, theInternet may account or 25 percent o all durable goods andmerchandise sales. Currently, those U.S. retail categorieswith the most Web retail shopping include book and music

Trends in Retail Trade

Suzette BartaExtension Assistant

Jason MartinStudent Assistant

Jack FryeArea Extension Community Development Specialist

Mike D. WoodsExtension Economist

This act sheet identies and describes 10 major

trends in the retail trade sector. Details and statistics orthe ollowing trends are discussed; the growth oe-commerce, kids in the retail market, building customerknowledge les, the American mall in decline, challengingthe category killer, precision shopping, entertaining thecustomer, globalization o retail trade, smart cards, andthe general decline in retail sales growth.

Social and economic trends can dene the environment

local main street merchants operate. Oten, major trendsrequire adjustment in operating philosophy and strategy.Currently, many communities are in a planning process toproduce ideas or downtown development and revitalization.Recent studies provided or these communities have analyzed

sales tax trends and consumer shopping patterns. One suchcity had an additional requestan overview o retail trendsacing downtown merchants and business people.

This act sheet provides a discussion o major trendsimpacting small businesses in the retail trade sector. Currentpublications, national reports and journals, and recent Internetarticles were collected to provide ideas or the report. Tensignicant trends were identied and are discussed on theollowing pages. It is hoped that this inormation will be useulto local groups, such as coalitions o retailers and economicdevelopment groups, and to other individuals concerned withthe growth potential or retail business.

Overview of TrendsThere are many trends and circumstances that can impact

the potential or retail trade development. The ollowing are10 trends that stand out in recent literature.

1. E-Commerce. By 2005, the Internet will account or 25percent o durable goods and merchandise sales.

2. Kids in Retail Trade. Twenty-six percent o teens in theU.S. have or have access to a credit card.

Oklahoma Cooperative Extension Fact Sheetsare also available on our website at:

http://osufacts.okstate.edu

Oklahoma Cooperative Extension Service

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retailers, grocery and department store chains, and nonap-parel specialty stores. According to J.G. Sandom, director-interactive, Ogilvy Interactive, New York, says, I youre noton the Web ready to do electronic commerce, youre history(Freeman, 1999).

2. Kids in Retail Trade

According to Ohio State University proessor RogerBlackwell, children play an important role in the retail market

(Raymond, 1999). Children may infuence 17 percent o amilyspending on cars and vacations and as much as 80 percenton ood purchases. However, teenagers have more than justinfuence, they have credit cards. In 1998, o the 31 millionteens in the U.S., 13 percent o them had their own creditcards and another 13 percent o them had credit cards intheir parents names. In a recent poll conducted by TeenageResearch Unlimited (The Class o 1997, 1999), the majorityo 16- and 17-year-olds said that they spent between $51and $100 the previous week. From jobs or other sources,teens average an annual income o more than $3,000. Addthat to the projection that the teen population will reach nearly35 million by 2010 and you get a sector o population with asubstantial impact on retail sales.

3. Know Your Customer

Almost every giant supermarket chain in the U.S. isnow compiling customer inormation. Sears has customerinormation on 101 million households. This is probably thelargest inormation le o its kind in North America. Why isknowing your customer suddenly so important? The realitiesare this:

The U.S. population growth rate is declining. More and more consumers are shopping online or by

mail order. American women are working more and shopping less. Todays consumer is extremely selective.

I the traditional retailer wants a customers business, thatretailer must meet the very specic needs o the consumer.According to American Demographics, A woman is no longersimply a woman or marketing purposes. She is, or example,a single mom, an ethnic minority, a bicycling enthusiast, abuyer o petite-sized clothing, and a wine connoisseur.

4. The American Mall in Decline

According to a recent study by Management Horizons(U.S. Department o Commerce, 1999), the number o tripsto the mall has decreased 50 percent since the early 1990s.In 1980, mall visits were 4.6 per month, but dropped to 1.6per month as early as 1995 (U.S. Department o Commerce,1998). The number o stores visited per trip has dropped rom

seven to three. According to Kurt Salmon Associates, morethan hal o consumers surveyed said that they shop less otenand that shopping is a hassle. One o the main reasons orthis decline is the time pressure aced by Americans. A resulto this is a substantial surplus o retail space. In 1980, theU.S. had 13 square eet o retail space per person. By 2000,it is expected to be 20 square eet per person. According toHenry Faison, chairman o the board o Faison Associates (ashopping center developer) a signicant number o malls aregoing to get bulldozedpossibly as many as 30 percent. Hisresponse. So what? Give the public what it wants (McCloud,1997).

5. Challenging the Category Killer

A category killer is a huge, single-ocus store, such as alarge oce supply store, which could kill all local competi-tors. For instance, Home Depot is a successul example othis kind o ormat in the market or home improvement andbuilding supplies. A power center is a 200,000 (or more)square oot shopping center that is anchored by a categorykiller. Oten, power centers locate near each other orming aregional retail center. These have been very successul, but

this market is beginning to saturate. So many category kill-ers exist that they have begun to reach a point where theirmain competition is among themselves. (They have killedall the other competitors.) Home Depot is let to competewith similar-type stores such as Lowes. Only the strongestwill survive the sti competition. Like malls, the category kill-ers and power centers ace the challenges o surplus space,online shopping, and a return to Main Street.

6. Precision Shopping

Americans are going to the mall less. When they doshop, they are generally looking or a specic item. They dontnecessarily have the time or energy to walk up and down theaisles o a 200,000 square oot super store to nd that one

item. The quick shopping trip is the basis or the new smallstore ormat being embraced by many o the nations largestretailers. OceMax is setting up a prototype store stockedwith only 3,000 SKUs (or stock keeping units), compared to8,000 SKUs at a regular OceMax. Wal-Mart recently openeda 40,000 square oot Neighborhood Market, or Small-Martas it has been nicknamed, near Bentonville, Arkansas. Thechallenge or these smaller stores is to track their SKUseectively so that the stores can be stocked with only theirbestselling merchandise. This precision shopping trend hasalso spurred the growth o brand-name stores, such as Levis,OshKosh Bgosh, and Tommy Hilger. In addition, it has cre-ated room or department stores, such as Dillards, to makea comeback, even though their demise was predicted just aew years ago.

7. Entertaining the Customer

According to Ira Mayer, president o EPM Communicationsin New York City, the 21st Century will see the continuation othe entertainmentization o retailing (Raymond, 1999). Forexample, in November o 1998, Wal-Mart hosted a live GarthBrooks concert that was telecast in the retailers electronicsdepartments nationwide. Even though ew new malls will bebuilt, the revitalizing o old malls will include an entertainmenttheme. One example is the remodeling o Quail Springs Mallin Edmond, Oklahoma to include a 26 screen theater withstadium seating. On a less elaborate scale, retailers willcontinue to attempt to entertain the customer through the useo creative displays, lighting, and merchandising. In the end,entertaining the customer is just one more way o compet-ing or the business o a consumer who has ceased to viewshopping as recreation, but instead views it as a chore.

8. Globalization ot Retail Trade

Most analysts agree that international retailing will increaseover the next several years. A recent survey showed that only12 percent o 250 U.S. retailers surveyed had internationaloperations. This number is expected to grow. Reasons orthis prediction include certain push actors. Saturation and

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intense competition in domestic markets, declining populationgrowth rates, and limited growth in consumer spending willpush U.S. retailers into oreign markets. Simultaneously, U.S.retailers are being pulled into some o these oreign marketsby rising standards o living and population growths, higherconcentrations o young adults, and weak levels o competition.In addition, globalization o trade is being encouraged by theadoption o certain trade agreements, such as NAFTA, whichlower barriers to international trade. For example, Toys R

Us opened 35 international stores in 1998, compared to only15 domestic new stores. Wal-Mart planned to open 50 to 60new retail stores overseas in 1998. It is predicted that 90 othe top 100 global retailers will have international operationsby the end o 1999. The 1997 total was only 30.

9. SmartCards

A smart card is a card that is embedded with a micro-processor and a memory chip. Such cards can be used tohold money, such as prepaid phone cards, debit cards, andgit certicate cards. Worldwide 805 million cards had beenissued by 1996. By 2000, that number is expected to reach2.8 billion. By way o comparison, there are more than 900million credit cards in circulation today. O interest to retailers

is the popularity o the use o smart cards in loyalty programs.In these programs, customers are issued a smart card alongwith their club membership. Instant discounts are bestowedon purchases made using the smart card. According to CoxDirects 20th Annual Survey o Promotional Practices, morethan three-ourths o the shopping populace are already mem-bers o a store loyalty program. Furthermore, A.C. NeilsensAnnual Frequent Shopper Study shows that more than 90percent o cardholders use their card almost every time theyshop (New Survey, 1998). A trend or the uture will likely bethe consolidation o our smart cards. William Barr, president othe Smart Card Forum, says that in the 21st Century, peoplewill only want to carry one card instead o 16, like we currentlydo (Raymond, 1999).

10. Decline in Retail Sales Growth

Most analysts seem to agree that growth in the retail salessector will slow substantially between 1997 and 2002. Theannual increase is only expected to be about 2 percent. Thatcompares to more than 4 percent annual growth rom 1992 to1996. This declining growth rate can probably be attributed toalling growth rates in durable goods, whose 7 percent growthrate is expected to drop to 2.8 percent rom 1997 to 2002.

Durable goods are those items that are expected to have alie o three years or longer. This includes cars, urniture, andappliances. These are oten big-ticket items and their salesare typically more volatile than the sales o nondurables (suchas ood and clothing). One reason given or the slow down indurable sales is the projected decline in real consumer spend-ing over the same period, 1997 to 2002. According to DRI, adata research company, consumer spending is expected toincrease rom 1998 to 2002, but at a pace that is 14 percent

lower than that o the preceding ve years (US Departmento Commerce, 1999). The allout rom declining growth ratesor retail sales combined with an over-stored retail marketis that there will likely be a large number o bankruptcies andconsolidations that take place in the latter part o the 1990s. Thistrend is currently evident. For example Mens Wearhouse hasbeen expanding through the acquisition o ailing companiessuch as C & R Clothier in 1996, Kuppenheimer Mens Cloth-iers in 1997, and K & G Mens Center, Inc. in June o 1999.JCPenney has moved into the lucrative drugstore businessthrough its acquisitions o Eckerd in 1997 and Genovese Rxin 1998. In July o 1999, Toys R Us announced its acquisitiono Imaginarium Toy Centers Inc., a specialty and educationaltoy retailer.

SummaryThis act sheet identies and describes some current

trends in retail trade. It is not intended to be a comprehensiverepresentation o the retail sector, but a look at some o themost prevalent topics being discussed in popular literature. Itis hoped that this inormation will be o value to the retail sec-tors o Oklahoma cities and towns, both as a piece o generalinormation and as a tool or use in economic developmentprograms.

ReferencesAbrams, Robin, The Future o Retail Has Arrived, Chain

Store Age, June 1998, pp. 9B-11 B.Commerce By Numbers: Business Activity on the Web.

[Online] Available http://www.computerworld.com/home/Emmerce.ns/AII/bus, June 9, 1999.

E-Marketer. The E-Marketer E-Commerce Report: ToplineFindings. [Online] Available http://www.emarketer.com/enews/enews_ecreport.html, August 4, 1999.

Freeman, Laurie, Technology Infuences Top Trends or 1999Business Marketing, January 1999, p. 1.

Galenskas, Stephanie Mariel, Five Trends That Will ChangeMarketing Forever, Direct Marketing, August 1997, pp.26-27.

Hanover, Dan, Honey, I Shrunk the Store, Chain Store Age,January 1999, pp. 40-45.

McCloud, John, Retail Market Roundup: ConsolidationContinues to be the Name o the Game, National RealEstate Investor, May 1997, pp. 56-78.

NRF Expo Examines Strategies or Success, Discount StoreNews, February 3, 1997, pp. 18-19.

Negley, Jennier, Operation 101: Becoming a Better Retailer,Discount Store News, July 21, 1997, p. 13.

New Survey Details Promotional Practices, Chain Store Age,November 1998, pp. 67-68.

Newell, Fred, Beyond Location, Discount Merchandiser,September 1998, p. 94.

Table 1. Millions of Smart Cards Issued, By Application

Card Application 1996* 2000*

Pay Phone 605 1,500Health Care 70 120Banking 40 250Identity/Access 20 300Transportation 15 200Pay TV 15 75Gaming 5 200Metering/Vending 10 80Retail Loyalty 5 75*In Millions

Source: Smart Card Industry Association

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OConner, Patrick, Which Retail Properties are GettingMarket Share? The Appraisal Journal, January 1999,pp. 37-40.

Posten, Robert, Strategies or Marketing Toward the Mil-lennium, Advertising Age, Vol. 68, December 8, 1997,p. 28.

Raymond, Joan, The Millennial Mind-Set, American Demo-graphics, January 1999, pp. 60-65.

SmartCard Industry Association About SmartCards.[Online]

Available http://www.scia.org/aboutsc/aqs.htm, June9, 1999.

The Class o 1997 - Money: Getting It and Saving It. [Online]Available http://myuture.com/OUTPUT/mwclsave.htm,June 9, 1999.

The Devotion, Chain Store Age, January 1999, pp. 52-70.

U.S. Department o Commerce, U.S. Industry and TradeOutlook 1998, McGraw-Hill: New York, 1998.

U.S. Department o Commerce, U.S. Industry and TradeOutlook1999, McGraw-Hill: New York, 1999.

Oklahoma State University, in compliance with Title VI and VII o the Civil Rights Act o 1964, Executive Order 11246 as amended, Title IX o the Education Amendments o 1972, Americanswith Disabilities Act o 1990, and other ederal laws and regulations, does not discriminate on the basis o race, color, national origin, gender, age, religion, disability, or status as a veteran inany o its policies, practices, or procedures. This includes but is not limited to admissions, employment, nancial aid, and educational services.

Issued in urtherance o Cooperative Extension work, acts o May 8 and June 30, 1914, in cooperation with the U.S. Department o Agriculture, Robert E. Whitson, Director o Cooperative Exten-sion Service, Oklahoma State University, Stillwater, Oklahoma. This publication is printed and issued by Oklahoma State University as authorized by the Vice President, Dean, and Director othe Division o Agricultural Sciences and Natural Resources and has been prepared and distributed at a cost o 20 cents per copy. 0507