Three Big Trends, Amplified By The Election, That Will Shape The Future Of Retail

Macroeconomic trends matter, and in the aftermath of the 2020 U.S. election, there are some major trends staring the nation and, more specifically, retailers right in the face.  

The divide between the rich and the poor continues to grow, the ethnic composition within the country continues to shift, and technology, like it or not, has irrevocably altered how people spend their time with one another. All of which will have important and lasting implications, not just on national policy, but on how the country, as a nation of consumers, continues to consume and, most importantly, on how its money continues to flow. 

If the election has shown anything, it is that the retail landscape will change even more than one can imagine over the next 10 years. Sure, Amazon
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and e-commerce had already wrought digital transformation across retail, the likes of which have never been seen before, but the changing behaviors and social norms from the trends just described above will likely leave an even greater mark on retail consumerism, one akin to the ripping off of a Band-Aid from the skin of a world everyone once thought they knew. 

Retail stands to evolve in three major ways, all shaped by the very same things that will forge America’s own national identity. Retailers can either fight to push against these changes or elect to move with them.

Lesson 1: Low price and off-price will gain even more market share

According to a recent article in Forbes, the wealth gap in America, often one of the arguments at the center of the blue/red divide, has increased significantly over the past 30 years. From 1989 to 2020, as highlighted in this chart from the Federal Reserve, “the top 10% of U.S. households have seen their wealth rise by almost ten percentage points (from less than 61% of all wealth to 69%), while the total wealth controlled by the bottom 50% has been cut nearly in half (from 3.6% to 1.9%).”

Correspondingly, it should also come as no great shock then that retail concepts like dollar stores, off-price retailers, and warehouse clubs have also grown significantly over this same period of time. Dollar General
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, for example, has doubled its store count to 16,000 stores over the past decade, Costco has seen its revenue increase 3x over the last 15 years, and off-price discounter TJX in 2019 delivered its 24th consecutive year of positive comp store sales growth.

Numbers like these don’t happen by accident. They happen because something else is going on.

As great as all three of the retailers just mentioned are (and they are), it should not be forgotten that underlying macroeconomic conditions have played an incredible role in their successes. Each of the retailers named smartly played their hands against a dealer’s deck, ready to bust because it was stacked with the face cards of an income-constrained American public. 

What it all means, and what the divided election has now elucidated even more, is that this trend is not going away, either. In fact, it will only get exacerbated because the discount segments themselves still have room to evolve and because digital has yet to touch these businesses to the degree that it could and should. 

Dollar General, for instance, has put retail greats like Walmart
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and Target
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on notice with plans to move into suburbia with its new Popshelf concept, Sam’s Club gets more digitally oriented by the minute, and, don’t look now, but food stamps, by way of Amazon and Walmart, are starting to go the way of e-commerce, state-by-state, as well.

As a result, retailers like Dollar General, Amazon, Walmart, and whichever of the warehouse clubs gets the most digital first — Costco, Sam’s, BJ’s, etc. — all have long runways still ahead of them.

Lesson 2: Retail will become more social in a way that has nothing to do with digital

As much as price still matters, so too does cause and identity. The 2020 election, in many ways, was as much about identity as it was about policy. And, the reason for that is simple, America’s demographics are shifting.

According to a recent article by PBS, the U.S. population is expected to grow to 350 million people by 2030. The elderly (those 65 and older) will make up 21% of the population by then (vs. 17% today), and, most strikingly, whites will make up almost 4% less of the total population (55.8% projected vs. 59.7% today) and drop below 50% for the first time in 2045.

The takeaway here is that causes will start to matter . . . a lot. 

America is not going to look the same, literally and figuratively. Some will embrace the change, some will continue to fight it, while others, as discussed above, may be stuck with no other choice but to grin and bear whatever they can or cannot stomach because they will not have the financial means to make the choices they want to make, especially when it comes to choosing where to shop.

Retailers will then be forced to take stock and to make some hard decisions. Do they stay vanilla and play to the masses? Or, do they start to skate to where the puck is going? The former may have been the safe play in the past, with a country +50% white, but 10 years from now it becomes almost impossible to predict what mass even means anymore.

Hints of this phenomenon are already on the horizon. Myriad direct-to-consumer brands have begun to steal share from the big CPG’s, like the Procter & Gambles of the world, because it  isn’t so much about how well a floor mop works as it is about how “woke” one feels when mopping one’s floors that matters most. 

Retailers will have no choice but to choose on which side of the dividing lines they will want to fall.

Lesson 3: The shopping revolution will be televised . . . on Instagram

The past four years have brought with them a cavalcade of tweets, protests, reactions — some real, some fake — and, no matter the take or the degree of its “hotness,” the country still finds itself split right down the middle, moving in the unaltered direction of inertia.

Why?

Because social media is tailored to the echochamber of the individual. People talk to themselves rather than to others. Every person’s social media consumption is tailored to himself or herself as an individual and to no one else. The shared experiences people used to enjoy — going shopping, watching a movie together, etc. — have all been replaced with isolated media consumption by way of individuals’ own mobile phones. 

The draw to these devices is so hot that they have become almost individualized worlds unto themselves. As a result, it is not just attention, but consumption that will shift to these new worlds as well. 

When asked, “What is the next big retail thing on the horizon?” — the answer is simple. It isn’t Amazon. It isn’t Walmart. 

It’s Facebook.

Facebook knows everything people like, everything on which they click, every event they attend, and even how long it takes them to scroll past certain pictures of old high school classmates relative to others. Facebook knows more about people than they probably know about themselves.

It is this combination of knowing consumers’ implicit and explicit desires that has Facebook/Instagram poised to become the biggest retail winner of the next decade. 

Just last week, Instagram retooled its homepage for the first time in years to this very end — i.e. it brought its e-commerce marketplace front and center so that it can more easily take its captive audience from click-to-buy in nanoseconds, all while capturing a small sliver of the final brokered transaction as the middleman and owner of a +2 billion social network.

The new Instagram interface is so slick, in fact, that one never needs a mobile app again. Want to shop Nike
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or Adidas, for example? Now one can do it straight from Instagram, simply and easily, without ever taking his or her eyes off the latest hot take newsfeed report from CNN or Fox News just seconds before or seconds after the inspired transaction. 

Americans will still have their “mall,” of course. It will just be different. They will no longer have to go somewhere or with someone to get it because Facebook will be it, all in its own unique, individualized, and get the hell off my lawn sort of way.

And, that, just as in politics, could have far reaching consequences in the years to come.