Upheaval, battles and technology are the future of retailing

Rochester retail expert predicts the new future will follow the demise of the existing structure of U.S. retail.

Retail battles that result in consolidation and significant investments in new technologies will bring the American consumer to a new point in the “Wheel of Retailing,” according to Eugene Fram, a professor of marketing at the prestigious Rochester (New York) Institute of Technology.

Fram refers to the future of retail as the “21st Century Store,” and said the trends of retail bankruptcies, retail layoffs and retail consolidation are the early steps to the new store.

“Its development will come from the demise of the current structure, the development of new electronic retail technologies and the need for infusions of huge amounts of risk related venture capital,” Fram said in a statement.

From said the run-up to the new 21st Century Store has seen a major competitive retail struggle, beginning about 1990, between well-financed and well-managed retail organizations fighting for market share. That fight resulted in the merger or acquisition of some, closure of others and many chapter 11 bankruptcies.

At the national level, Federated Department Stores, now Macy’s, acquired May Company stores. Best Buy is reported to be seeking to acquire some of the closed Circuit City locations.

“We are on track to reducing the retail head count to a few large retail chains like Wal-Mart, Target, Barnes & Noble and Costco,” Fram predicted. “These trends will only accelerate as environmentally oriented high school graduates become adult purchasers.”

RETAILING WHEEL
The wheel of retailing, according to Fram, dates back to the 1800s and suggests that every new form of retailing began with discount strategies of low prices and limited services. As the discounters matured, they began to add services and boost prices, which provided room for new discounters to emerge. And thus, the cycle continues.

Technology, Fram says, is leading the way to the “next innovative form of retail store.” Fram says.

“Operating costs will be substantially reduced by RFID chips, self check-outs, completely automated supply chains, automated grocery purchasing, virtual apparel purchasing and electronic dressing rooms. Some of these technologies are already available in their infant stages,” Fram noted.
He said huge cost savings could develop if large retail chains could reduce inventory-carrying costs by delivering merchandise from a small group of central warehouses instead of from a myriad of individual retail store locations.

The technology won’t be cheap, and the new players who want to push a new technologically-driven method of being the new discounter in the retailing wheel will need access to venture capital, Fram said.