By: Susan Yashinsky, VP Innovation Trends at Sphere Trending, LLC.

How we all long for a simpler retail time when value was an easy equation of price and quality, with clear distinctions between good, better and best. In today’s world, the value equation has become more complicated while quality has become much less of a differentiator between channels.  And younger consumers have shaken up all of our preconceived notions about the value segment:  convenience stores are considered cool among Millennials while big box has become boring.  Department stores used to be the place for a great journey of discovery and now we thrive on dollar stores.  Resale shops are hotter than hot, going into mainstream locations and even segmenting into niches such as luxe resale and category specific stores.

There has been a consumer shift from ‘having’ to shop value outlets due to economics to ‘wanting’ to shop value outlets due to economics; from feeling shame in having less money, to having pride in paying less. Not only does today’s shopper wear value like a badge of honor but they also share their retail intelligence with others, spreading the word of online and brick-and-mortar discoveries faster than traditional marketing dollars ever could.  This is a new era where ‘things we own’ compete with ‘things we want to do’.  We are in the Experience Economy and as part of this new economic iteration, discretionary dollars for experiences are just as important as spending on things.

Here are the facts:

• If you are not watching what convenience stores are doing, you better start – the segment accounts for more than one-third (34.4%) of the brick-and-mortar retail universe tracked by Nielsen in the US and continues to grow in store count as well as broaden its offerings. Fresh food and seasonal categories are the latest additions.
• Dollar Stores had a 5.2% growth in store count last year and also are broadening into many non-typical categories. NIELSEN
• Sales at mid-priced retailers declined 2% last year. At premium and low-priced retailers, they grew 8% and 7%, respectively. DELOITTE
• The resale industry has consistently demonstrated strong growth. According to Dun & Bradstreet, resale generates revenues of $17 billion+ as an industry, which includes a number of commodities, such as clothing, sporting goods, furniture and musical equipment, which are sold through resale and consignment shops, thrift stores and franchised retailers. Interestingly, an average of 15 percent of Americans shop at resale stores in a given year, compared with 11 percent of shoppers at outlet malls, less than 20 percent in apparel stores and just over 21 percent at major department stores.
• Walmart had a 33% growth in ecommerce in first quarter 2018; online value ramps up.

Don’t expect the trend to change any time soon. Discretionary income continues to be strapped for the vast majority of Americans – some 63% say they don’t have an additional $500 for an emergency per Bankrate research.  In truth, all of the retailers going after the Better/Best segments of retail are appealing to a minority of Americans that are not just struggling to make ends meet.  For more on this topic, see The Atlantic’s June 2018 eye-opening article on the New American Aristocracy:  https://www.theatlantic.com/magazine/archive/2018/06/the-birth-of-a-new-american-aristocracy/559130/.

It is therefore no surprise that we continue to see retail innovation in the value segment, either born and bred in the US or coming over from abroad. Like all retail brands, value retailers cannot just compete on price alone but rather must offer the right assortment, convenience and excitement.  They are disrupting traditional retail – think Home Goods for brick and mortar and Brandless online.  And, we are adding more elements to this segment, such as rent versus own.  Some of the value disrupters we are watching are:

• Online clothing thrift store Thredup opened its first store in an outlet center in Texas last year with plans for 100+ locations.
• Feather, the furniture renting service that launched last year, has announced a new subscription program that gives customers more “furniture freedom.”
• The Goods Mart is a healthy convenience store committed to smarter eating: Every single item is free of artificial colors, sweeteners, and flavors, and without growth hormones or disruptors. The store is located in L.A.’s trendy Silver Lake neighborhood with plans to go national next year.
• Letgo is an online marketplace for used goods, with a current company valuation of $1 billion (founded in 2015).

And the list could go on… Once Amazon and online retailing flipped the paradigm on what constitutes convenience, the value segment – smaller stores, curated assortments, surprise and delight in discovery – became reborn.  In this age of quick change at the hand of technological innovations, consumers’ expectations continue to rise on paying less for more.  Remember, we are appealing for limited dollars to the most design-savvy consumer ever; one that has unlimited tools at their disposal in their value journey of discovery.

 

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Susan has over 30 years’ experience in corporate retail, with management expertise in market research, marketing and merchandising. As head of Innovation Trends at Sphere Trending, Susan works with the Sphere Trending team to elevate future thinking by connecting the dots between intelligence and relevance, working with a wide variety of service and product firms.