Viewing offline content

Limited functionality available

Dismiss
Deloitte Middle East
  • Services

    What's New

    • Deloitte175

      Join us for a celebration of 175 years of making an impact that matters.

    • Building the Resilient Organization

      2021 Deloitte Global resilience report

    • 2020 Global Gender Impact Report

      A collection of Butterfly Effect stories highlighting how our Deloitte professionals are positively impacting the lives of women and girls around the world

    • Audit & Assurance

      • Assurance
    • Consulting

      • Strategy, Analytics and M&A
      • Customer and Marketing
      • Business Operations
      • Human Capital
      • Enterprise Technology & Performance
    • Financial Advisory

      • Mergers & Acquisitions
      • Forensic
      • Real Estate
      • Restructuring Services
    • Risk Advisory

      • Strategic & Reputation Risk
      • Regulatory Risk
      • Financial Risk
      • Operational Risk
      • Cyber Risk
    • Tax

      • Global Business Tax Services
      • Indirect Tax
      • Global Employer Services
    • Deloitte Private

      • Global Family Solutions
      • Family Office
    • Legal

  • Industries

    What's New

    • Deloitte perspectives

      Leadership perspectives from across the globe.

    • Deloitte Insights App

      Our thought leadership and Dow Jones news, now at your fingertips

    • Future of Mobility

      Learn how this new reality is coming together and what it will mean for you and your industry.

    • Consumer

      • Automotive
      • Consumer Products
      • Retail, Wholesale & Distribution
      • Transportation, Hospitality & Services
    • Energy, Resources & Industrials

      • Industrial Products & Construction
      • Mining & Metals
      • Oil, Gas & Chemicals
      • Power, Utilities & Renewables
    • Financial Services

      • Banking & Capital Markets
      • Insurance
      • Investment Management
      • Real Estate
    • Government & Public Services

      • Civil Government
      • Defense, Security & Justice
      • Health & Social Care
      • International Donor Organizations
      • Transport
    • Life Sciences & Health Care

      • Health Care
      • Life Sciences
    • Technology, Media & Telecommunications

      • Technology
      • Telecommunications, Media & Entertainment
  • Insights

    Deloitte Insights

    What's New

    • Combating COVID-19 with resilience

    • Daily executive briefing

      Timely insights to inform your agenda.

    • Deloitte Insights app

      Get daily updates on your mobile device

    • By topic

      • AI & cognitive technologies
      • Analytics
      • Blockchain
      • Digital transformation
      • Diversity & inclusion
      • Economics
      • Human capital
      • Innovation
      • Leadership
      • Private companies
      • Risk management
      • Strategy
    • By sector

      • Automotive
      • Consumer products & retail
      • Financial services
      • Government & public services
      • Health care
      • Industrial products
      • Life sciences
      • Mining & metals
      • Oil, gas & chemicals
      • Power, utilities & renewables
      • Technology
      • Telecom, media & entertainment
      • Transportation & hospitality
    • Spotlight

      • Deloitte Insights Magazine
      • Climate and sustainability
      • Economic weekly update
      • Future of work
      • 2021 Human Capital Trends
      • 2021 Tech Trends
  • Careers

    What's New

    • Millennial Survey 2020

      Millennials and Gen Zs hold the key to creating a “better normal”

    • Candidate Profile

      After applying for a job in this country, you can access/update your candidate profile at any time.

    • Job Search

    • Students

    • Experienced Hires

    • Executives

    • Life at Deloitte

    • Alumni

  • XE-EN Location: XE-English  
  • Contact us
  • XE-EN Location: XE-English  
  • Contact us
    • Dashboard
    • Saved items
    • Content feed
    • Profile/Interests
    • Account settings

Welcome back

Still not a member? Join My Deloitte

The great retail bifurcation

by Kasey Lobaugh, Christina Bieniek, Bobby Stephens, Preeti Pincha
  • Save for later
  • Download
  • Share
    • Share on Facebook
    • Share on Twitter
    • Share on Linkedin
    • Share by email
Deloitte Insights
  • By topic
    By topic
    By topic
    • AI & cognitive technologies
    • Analytics
    • Blockchain
    • Digital transformation
    • Diversity & inclusion
    • Economics
    • Human capital
    • Innovation
    • Leadership
    • Private companies
    • Risk management
    • Strategy
  • By sector
    By sector
    By sector
    • Automotive
    • Consumer products & retail
    • Financial services
    • Government & public services
    • Health care
    • Industrial products
    • Life sciences
    • Mining & metals
    • Oil, gas & chemicals
    • Power, utilities & renewables
    • Technology
    • Telecom, media & entertainment
    • Transportation & hospitality
  • Spotlight
    Spotlight
    Spotlight
    • Deloitte Insights Magazine
    • Climate and sustainability
    • Economic weekly update
    • Future of work
    • 2021 Human Capital Trends
    • 2021 Tech Trends
    • XE-EN Location: XE-English  
    • Contact us
      • Dashboard
      • Saved items
      • Content feed
      • Profile/Interests
      • Account settings
    14 March 2018

    The great retail bifurcation Why the retail “apocalypse” is really a renaissance

    14 March 2018
    • Kasey Lobaugh United States
    • Christina Bieniek United States
    • Bobby Stephens United States
    • Preeti Pincha United States
    • Preeti Pincha United States
    • Save for later
    • Download
    • Share
      • Share on Facebook
      • Share on Twitter
      • Share on Linkedin
      • Share by email
    • An industry on the verge of collapse?
    • The great retail bifurcation
    • A backdrop of prosperity
    • Following the consumer
    • A retail renaissance

    ​Is the retail industry—especially the traditional store—on the verge of apocalypse? In this excerpt of our report on the state of the retail industry, our in-depth survey tells a more nuanced story, one based on a stark income bifurcation.

    An industry on the verge of collapse?

    Learn more

    In a hurry? Read a brief version from Deloitte Review, issue 23

    Listen to the podcast

    Download the full report

    Explore the interactive and infographic

    Subscribe to receive more Consumer Business content

    Create a custom PDF or download Deloitte Review, issue 23

     

    The retail industry appears to be going through an existential crisis. Every day, media and business journals declare a retail apocalypse is upon us: It would seem as if many traditional retailers have stopped growing, as shoppers, especially millennials, make more and more of their purchases online.

    However, in this excerpt of our report detailing an in-depth study conducted over more than a year, we discovered that the situation is much more nuanced than a retail apocalypse. Current economic conditions and technological advances have influenced consumer behaviors so that the debate is no longer simple online vs. in-store, or millennials vs. older generations. Instead, income—specifically, a stark income bifurcation—may be the key.

    The great retail bifurcation

    [ View interactive graphic fullscreen ]

    Deloitte undertook an extensive research process, devoting the better part of a year to examining the retail environment: studying official data; conducting a survey of over 2,000 participants; and drawing on the knowledge of our clients, industry contacts, and our own industry specialists. Our key finding: “Balanced” retailers (which deliver value through a combination of price and promotion) are generally doing worse than either price-based retailers (which deliver value by selling at the lowest possible prices) or premier retailers (which deliver value via premier or highly differentiated product and/or experience offerings). Specifically, premium retailers have seen their revenues soar 81 percent over the last five years, while price-based retailers have seen their revenues steadily increase 37 percent over the same period. This contrasts with balanced retailers, whose revenue has increased only 2 percent.1 What’s more, consumers are more likely to recommend premier or price-based retailers than balanced, suggesting that retailers at either end of the spectrum are more in tune with the changing needs and are better at meeting the expectations of consumers than those in the middle.

    Why the perception of a retail apocalypse if the stores at the extremes are doing so well, including traditional brick-and-mortar retailers? One possibility is that store closures among balanced retailers—which account for the majority of closures and bankruptcies—are driving this perception. Price-based and premium retailers, on the other hand, have been opening more stores over 2015–2017 than closing them.2

    A backdrop of prosperity

    That balanced retailers are typically doing worse than off-price and luxury stores may come as a surprise, especially considering that macro US economic conditions, consumer spending, and industry trends tell a positive story of a consumer operating in a healthy financial landscape. Median income is now higher than it was in 2007, even before the Great Recession;3 US GDP growth has rebounded;4 and growth in retail spending has outpaced even GDP growth.5

    Various retail sectors also showed many bright spots: Home furnishings, beauty/cosmetics, and home improvement all grew over the past five years. While conventional wisdom might argue that such growth excludes brick-and-mortar channels, the opposite is actually true: Retail across all channels continues to grow. The vast majority of retail sales—91 percent—still take place in brick-and-mortar stores, which means that online shopping represents just 9 percent of total retail sales. Even though the online channel is projected to grow 11.7 percent, in-store sales are also projected to grow 1.7 percent—hardly the stuff of apocalypse.6

    Following the consumer

    But if macroeconomic and industry data indicates a healthy picture, looking more closely at the consumer—and specifically, consumers’ spending behavior as a reflection of their economic well-being—provides a different view. Despite positive macroeconomic trends, it’s actually been an abysmal period for most Americans. For the past 10 years, the lower 40 percent income group has found itself struggling to keep up with expenses, while the middle 40 percent has seen its income shrink.7 Thus, for 80 percent of consumers, the last decade has generally represented a dramatic worsening of their financial situation. Income and net worth gains are disproportionately going to the highest-income group.

    Moreover, not only has the income level of the lower cohort been stagnant, the share of their income spent on non-discretionary categories has skyrocketed: Health care costs have risen 62 percent, education 41 percent, food 17 percent, and housing 12 percent.8 These increases have hit the lowest-income group the hardest. Basic necessities now, for this first time in a decade, take up more than 100 percent of a low-income family’s budget.9

    What this means for traditional retailers is that there is greater competition for discretionary dollars. For the 80 percent of the shoppers who face strained budgets with limited disposable income, price sensitivity is paramount—these consumers may think twice about buying a new pair of slacks and thus may be drawn more to price-based retailers.

    Economic considerations based on their own perceptions (and realities) of financial well-being profoundly affect consumers’ spending behaviors across channels and categories. For example, we found that the likelihood of making an online purchase versus buying in a store is highly correlated to income. Low-income consumers are 44 percent more likely than their wealthier counterparts to shop at discount retailers, and also more likely to shop at supermarkets, convenience stores, and department stores. High-income consumers, on the other hand, are 52 percent more likely to shop online (based on self-reporting).10

    What about millennials?

    Millennials are often lumped together and portrayed as the source of disruption to everything from golf to dating to retail. Their behaviors are commonly listed as being addicted to their smartphones and shopping only online; spending on experiences, not goods; and driving massive shifts in category spend. However, our analysis showed that consumer behavior is based more on income rather than generational differences. Below-income and middle-income millennial consumers behave very much in line with the other members of their income cohort—so not that different at all. Instead, high-income millennials were the ones skewing the “average” behavior of the millennial group overall.

    A retail renaissance

    A sea change is clearly taking place in the retail market—but it is not the retail apocalypse. In our view, it is instead a renaissance—driven by huge shifts in economics, competition, and consumer access to options, all fueled by exponential advancement in technology. And in this renaissance, the winners appear to be those retailers that can capitalize on consumers’ experiences of their economic well-being—or lack thereof—to offer a value proposition that aligns with consumer needs.

     

    Read the full report, The great retail bifurcation: Why the retail “apocalypse” is really a renaissance.

    Authors

    Kasey Lobaugh is the chief retail innovation officer for Deloitte. He is based in Kansas City, MO.

    Christina Bieniek leads Deloitte Consulting’s US Retail, Wholesale, and Distribution practice. She is based in Philadelphia, PA.

    Bobby Stephens is a leader in Deloitte Digital’s Retail & Consumer Products practice. He is based in Chicago, IL.

    Preeti Pincha is a senior manager in Deloitte Consulting, based in New York.

    Acknowledgements

    Cover image by: John Jay Caubay

    Endnotes
      1. Based on analysis of the largest US retailers (by sales) of the 2017 IBIS World Report, filtered for those that are primarily retail, serve the business-to-consumer market, and are publicly traded. View in article

      2. Analysis of annual reports and news reports of representative price-based, premier, and balanced retailers. View in article

      3. US Census Bureau, Household income: 2016 American Community Survey briefs, 2016. View in article

      4. Bureau of Economic Analysis, “GDP increases in third quarter,” November 29, 2017. View in article

      5. Based on analysis of two sources: National Retail Federation projections and Conference Board, “The Conference Board economic forecast for the US economy,” accessed 2017. View in article

      6. Bureau of Economic Analysis, “GDP increases in third quarter.” View in article

      7. Analysis of 2016 income and expenditure data from Bureau of Labor Statistics. View in article

      8. Ibid. View in article

      9. Ibid. View in article

      10. Deloitte analysis of The Great Retail Bifurcation survey data, 2017. View in article

    Show moreShow lessShow less

    Topics in this article

    Retail & Distribution , Consumer Products , Consumer Spending , Interactive , Americas

    Deloitte's Retail, Wholesale, & Distribution practice

    View
    Download Subscribe

    Related

    img Trending

    Interactive 3 days ago

    Christina Bieniek

    Christina Bieniek

    Chief Commercial Officer

    Christina is a principal in Deloitte Consulting LLP and Chief Commercial Officer. In this role, she is responsible for driving profitable growth across all of Deloitte Consulting LLP’s offerings and industries. She oversees Sales, Marketing, Client Excellence, and Ecosystems & Alliances – four essential areas that fuel the organization’s business strategy and empower Deloitte account leaders and engagement teams to win and differentiate in the marketplace. Additionally, Christina serves as a strategic advisor on a number of large retail, consumer, and health care-related clients as well a cloud-based, data analytics Alliance partner. Prior to this role, Christina led the Retail and Consumer Products sector within Deloitte Consulting LLP. There, she drove business transformation based on more than 20 years of deep retail industry knowledge, innovation, and practical implementation. Christina was known in this sector for having a keen understanding of how to bridge the gap between retail business models and consumer products companies to drive the next generation of consumer-focused business models. Christina has deep experience leading teams to deliver operational change initiatives for the world’s largest consumer companies. She helps clients achieve meaningful and sustainable impact through top line growth, improved margins, and overall operational efficiencies. Recognized by Consulting Magazine as one of its 2014 Top 25 Consultants for her excellence in driving value, Christina sets the agenda for business transformation, and reengineers end-to-end value chains.

    • cbieniek@deloitte.com
    • +1 215 446 4445
    Bobby Stephens

    Bobby Stephens

    Principal | Deloitte Consulting LLP

    Bobby is a leader in Deloitte Digital’s Retail & Consumer Products practice. He has nearly 20 years of retail and e-commerce operations, consulting, and start-up experience in the United States and abroad. He focuses on working with clients to drive revenue growth through digital transformation and customer engagement. To stay on top of trends, he also leads research and eminence for Deloitte’s Retail & Consumer Products practice. Prior to joining Deloitte, Stephens co-founded and led Bucketfeet, a VC-backed global omnichannel retail start-up that is still in operation today.

    • rostephens@deloitte.com
    • +1 312 486 2455
    Preeti Pincha

    Preeti Pincha

    Senior Manager | Deloitte Consulting LLP

    Preeti is a senior manager in Deloitte Consulting LLP. She brings cross-functional perspectives from strategy expertise to implementation experience serving both mid-market and Fortune 500 companies across the Americas and Europe. She focuses on helping her clients identify, prioritize, and operationalize new opportunities through effective business transformation. Her projects span digital transformation/innovation and omnichannel strategy, among others.

    • ppincha@deloitte.com
    • +1 212 618 4519
    Kasey Lobaugh

    Kasey Lobaugh

    Chief Innovation Officer | Retail & Distribution

    Kasey serves as the chief retail innovation officer for Deloitte Consulting LLP. For more than 20 years, he has worked with many of the world’s largest retailers to drive strategic perspectives, strategic initiatives, and organizational change. Kasey consults with clients to think about the implications of the changing competitive landscape and the rapidly evolving consumer. He focuses on broad business-based strategy that will enable innovative customer experiences, operational scalability, and provide return-on-investment.

    • klobaugh@deloitte.com
    • +1 816 802 7463

    Share article highlights

    See something interesting? Simply select text and choose how to share it:

    Email a customized link that shows your highlighted text.
    Copy a customized link that shows your highlighted text.
    Copy your highlighted text.

    The great retail bifurcation has been saved

    The great retail bifurcation has been removed

    An Article Titled The great retail bifurcation already exists in Saved items

     
    Forgot password

    OR

    Social login not available on Microsoft Edge browser at this time.

    Connect Accounts

    Connect your social accounts

    This is the first time you have logged in with a social network.

    You have previously logged in with a different account. To link your accounts, please re-authenticate.

    Log in with an existing social network:

    To connect with your existing account, please enter your password:

    OR

    Log in with an existing site account:

    To connect with your existing account, please enter your password:

    Forgot password

    Subscribe

    to receive more business insights, analysis, and perspectives from Deloitte Insights
    ✓ Link copied to clipboard
    • Contact us
    • Search Jobs
    • Submit RFP
    Follow Deloitte Insights:
    Global office directory Office locations
    XE-EN Location: XE-English  
    About Deloitte
    • Home
    • Newsroom
    • Middle East matters blog
    • Press releases
    • ME PoV magazine
    • Corporate Responsibility and Sustainability
    • Diversity and Inclusion
    • Middle East office locator
    • Global Office Directory
    • Press contacts
    • Contact Alumni team
    • Report an ethics complaint
    Services
    • Audit & Assurance
    • Consulting
    • Financial Advisory
    • Risk Advisory
    • Tax
    • Deloitte Private
    • Legal
    Industries
    • Consumer
    • Energy, Resources & Industrials
    • Financial Services
    • Government & Public Services
    • Life Sciences & Health Care
    • Technology, Media & Telecommunications
    Careers
    • Job Search
    • Students
    • Experienced Hires
    • Executives
    • Life at Deloitte
    • Alumni
    • About Deloitte
    • About Deloitte in the Middle East
    • Privacy
    • Terms of use
    • Cookies
    • Avature Privacy

    © 2021. See Terms of Use for more information.

    Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see About Deloitte to learn more about our global network of member firms.