Nielsen Dispels Four Biggest Retail Myths

11/10/2016

NEW YORK — Emerging markets have run their course, bigger equals better, promotions are the best way to drive sales, and e-commerce isn’t important for grocery are the four biggest myths facing both retailers and manufacturers today, according to Louise Keely, EVP, global retail practice leader for Nielsen.


In a webcast presented Nov. 10 entitled “Modern Myths and Retail Realities,” Keely explained that although in many ways the retail landscape looks the same, there are several new norms developing regarding shopping behavior.


 “It’s an exciting dynamic right now,” she said. “A lot of change is taking place.”


The biggest change currently being seen is in digital commerce, with technology changing the retail landscape dramatically. 


“It’s complex but also an exciting time for change,” said Keely. 


Focusing on each of the four myths, Keely acknowledged emerging markets have slowed down a bit in Brazil, China and Russia, with India still growing strong. However, catering to the emerging markets for retailers and manufacturers is definitely worth the effort, due to large populations in emerging markets and even more importantly, populations that are getting wealthier. 


“Purchasing power is growing by 9 percent in China and 7 percent in India per year,” she said. “And consumers are becoming more engaged. Two-thirds of the emerging market population will live in urban areas by 2030 and the middle class will reach 3.2 billion people by 2020. Also, consumers [in emerging markets] are saying they have spare cash.”


As for the “Bigger Equals Better” myth, Keely revealed Nielsen data showing the average store size in the United States has shrunk from approximately 13,500 square feet to less than 13,000 square feet in the past 10 years. This change is in response to consumer desires to visit smaller stores that are easier to get in and out of, she noted. A blurring of the lines is also taking place, whereby modern retail is blending together with traditional brick-and-mortar stores, by utilizing social media and other tools to engage with consumers. This blurring of the lines will continue to happen more and more in the future, Keely added. 


Despite these changes, one thing retailers continue to do is spend money on promotions, thinking they are the best way to drive sales. Promotions do not drive sales at the cash register, she said, as Nielsen research determined that nearly 60 percent of promotion dollars spent by retailers wasn’t made up for with subsequent sales. 


“Anyone can spend money on promotions, but you need something to make consumers come back again and again [to the store],” said Keely. “One way to get return customer visits is innovation. Forty-four percent of consumers are willing to pay more for innovative new products.”


A final myth Keely sought to dispel is a notion that “e-commerce isn’t important for grocery.” In fact, online sales are growing 20 percent per year and in the U.S., and direct-to-consumer brands already have a 10-percent share in certain categories.


“Understanding your e-commerce performance is no longer nice to have,” Keely said. “It’s essential. Forty-nine percent of people globally shop online to get grocery products they cannot find in physical stores. Onmichannel is the new reality.”


Despite this statement, Keely stressed that brick-and-mortar retail locations will not go away anytime soon. 


“Stores will not disappear, but shopper expectations will change,” she concluded. “Expect competition to come from new and unexpected directions.”


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