The retail industry is falling – fast and hard. In November, the 125-year-old Sears filed for bankruptcy; a sad turn for what was once the world’s largest retailer. The public has also come to expect a similar outcome for stores such as Macy’s, Sears, Toys ‘R’ Us, Kmart, Kohl’s, J.C. Penny and Barnes & Noble.
What does this all mean? A recent report by the consultancy BCG documented a general decline in sales among consumer packaged good (CPG) companies in the United States during 2017. Mid-sized and large companies are losing market share – and small companies are increasing theirs.
Shoppers today are making most of their purchases online. Thus, they’re making fewer trips to stores and seeing fewer in-store promotions. Consider the trendy razor club, Harry’s. Harry’s attracts more Instagram followers and product subscriptions through its website than a fully stocked Gillette aisle in a supermarket could ever hope to. Harry’s has been growing 35 percent year-on-year between 2014 and 2016 – that’s three times faster than the industry average.
Johnson & Johnson and P&G are also feeling the effects of changing consumer preferences. For 20 years, P&G has been busy restricting, but “without much to show for it”, in the words of a former finance manager. No matter how hard the company has tried, it has yet to reverse the decline from $83 billion in sales in 2008 to $65 billion in 2017. Both companies face the same dynamics: over-reliance on traditional retailers, market share lost to smaller brands and weakness in creating direct relationships with consumers at a time when e-commerce is taking over.
Activist investor Nelson Peltz, who sits on P&G’s board, has argued that P&G “must acknowledge that others will inevitably come up with new ideas, new opportunities for growth, and new products that are on-trend with customers.”
Peltz went on to say suggest that “P&G must be proficient at acquiring small, mid-size, and local brands and using its R&D and marketing clout to take them to the next level.”
All in all, a shift in mindset, goals, and direction is needed is if any consumer brand wants to avoid falling into the ditch of retail wasteland. Offering consumers more options – like mobile payment processing and customer financing – can help your brand stand out and stay ahead.
Author Bio: As the FAM account executive, Michael Hollis has funded millions by customer financing solutions. His experience and extensive knowledge of the industry has made him a finance expert at First American Merchant.