Is Traditional Retail Dead?

In Manhattan, there are always a bunch of stores -- aimed at tourists -- that hang huge banners proclaiming "Going Out of Business Sale -- huge discounts."

Some of those stores have been in business, it seems, for decades.

The overall retail sector may have a lot in common with those stores.

According to "The Death of Retail is Greatly Exaggerated,"

As of early May, S&P Global Market Intelligence tallied a record 18 retail bankruptcies, al­ready matching the total for all of 2016. The carnage is on full display in the new Fortune 500 list: Household names like Macy’s, Sears, and Kohl’s all took tumbles down the list, as did other struggling chains like GameStop (GME, -0.37%) (falling 19 spots, to 321) and Dillard’s (DDS, -0.94%) (which fell 37, to 417).

We began seeing/predicting the fact that retail would go through a rough 2017 back in Q1, and feel that it is a big issue because:

• The U.S. retail sector is a huge employer, including part-time and seasonal work: 15,836,200 as of May 2017 -- down from Feb. 2017 of 15,887,600, which represents a loss of 51,400 jobs, a significant drop in a short time. (By the way, back in 2012, the sector employed 29 million people, according to the National Retail Federation.) According to the NRF, which does a tremendous job of tracking the state of the retail industry, the retail sector "is the largest private employer in the United States. Retail directly and indirectly supports 42 million jobs." Basically 1/4 of all private jobs. We'll get to directly and indirectly in our third bullet. 

• The U.S. retail sector holds leases and owns a tremendous amount of real estate. According to one estimate, there are more than 1,000 malls in America and that doesn't include downtown real estate holdings. In fact, Macy's real estate holdings by themselves may be worth more than the actual retail side of the business, according to Fortune's senior retail reporter, Phil Wahba, who also wrote the "Greatly Exaggerated" story. That said, those value and viability of those real estate holdings may be in jeopardy if suddenly they all came onto the market. We've already seen the impact of retail-store closings on Greenwich Village's Bleecker St. in a New York Times article.

• The U.S. retail sector contributes $2.6 trillion annually to U.S. GDP, according to the NRF, approximately 15% of the total economy. That includes retailing companies along with other companies that support the retail industry, such as logistics, including trucking and shipping; warehousing; construction and maintenance; agriculture; manufacturing; technology; and health care. Basically, if the retail sector takes a hit, the rest of the economy will suffer.

Does this mean the retail sector is dying? Not really. The parts of the retail sector is somewhat cyclical and other parts are very sensitive to external factors -- like the weather or other trends. So a downward trend, by itself, is not necessarily troubling. And some retailers continue to do well, including Walmart, Home Depot, Costco, TJ Maxx and Best Buy, according to Fortune. 

What is troubling is that there's a fundamental shift going on, towards online and mobile. Bricks-and-mortar stores may no longer be about buying but sampling and community, according to another Fortune article. http://for.tn/2r8qLET. Instead, retail may seek to leverage: "newly available real estate to experiment with boutiques, showrooms, and pop-up shops." If that trend continues, it will mean a further decline in the number of full-time retail jobs and a further decline for companies that support retailers.

While reshaping retail to better meet the needs of consumer is good news, and more efficient, that's not good news for the long-term health of the sector. A lot of retailers that sell fashion commodities such as basic Ts and jeans will likely not survive in an e-commerce playing field. 

And one more thing, which has been overlooked by retail reporters: According to the NRF, 98.6% of businesses employ fewer than 50 people.  In a world in which most retail transactions take place online or via an app, these local mom-and-pop stores don't stand a chance. They may not have the skills and resources to move their business online, and may not be able to compete on price. They won't be able to survive the Amazonification of retail. This could decimate small retailers and small towns around the country.

That's going to be a big story the rest of 2017 and going forward.

 

Boycotts Will Be Big Trend in 2017 -- but by big brands and there could be implications for their marketing functions

It's still early in the year so we're going to issue some additional trends for 2017.


We now think that boycotts will be a big media trend in terms of coverage.

And actually, we're not even talking directly consumer boycotts.
We're actually talking about corporate boycotts.

We think there will be more emphasis over the next few years on how to help brands better manage their online programs. It remains to be seen what impact that will have on public relations.


But we're not talking about consumer boycotts, from the left and the right because we're not interested in taking a political perspective on this.

Instead, the boycotts we're talking about here are by big brands not against big brands.

The big brands seek to avoid controversy so they are trying to avoid placing ads on or working with sites that don't resonate with their consumers.

For example, we see concerns about controversial content on YouTube, porn content on Snapchat that are testing advertisers' tolerance for risk as well as concerns about advertising on potential fake news sites or politically biased sites.

One challenge for big brands is that the automated nature of online advertising known as programmatic advertising has made it easier and more efficient to get their ads out there. At the same time, the programmatic aspect makes it more difficult to control where ads appear. So a brand may have decided to not place ads on what it deems to be a questionable site but the way online advertising works, an ad may be placed ad on that site anyway. 

This is the aspect that interests us.

These big brands won't stop advertising but until there is a new tech solution combined with a business model that provides more control over where online ads appear, companies may want to consider changing the mix of their marketing activities since other marketing disciplines may be able to get the messages out without associating with the media brands that companies seek to avoid.

Further, PR and social media may be better positioned to help brands respond to concerns from their customers about ads placed on questionable sites.

While the tools don't exist quite yet to manage ads to the degree that big brands want, we expect that big brands will continue to avoid advertising on questionable sites, and will continue to need to communicate the core values that matter most to them (while avoiding online sites that do not mesh with those values). We expect the trend of big brands to boycott to continue.

Wall St. Journal Validates Our Gig Economy Prediction With Articles That Explore The Changing Nature of Employment

For the last couple of years, we've been seeing the gig economy as a trend of increasing significance, as the population of workers who either work side jobs or businesses (known as "side hustle") or hold a series of part-time jobs continues to grow.

This year, with a new Administration that promises to bring back jobs to America, it may become more politicized. Our perspective is not political but merely recognizing a seismic shift in how American work, since many seem to prefer being in the gig economy (made possible by technology) rather than work traditional jobs.

In Dec. 2016, when we issued our list of top trends for 2017, TrendReport 2017, we went a step beyond just saying that the gig economy would be important. We also said, 

"We need to more accurately define the gig and the sharing economies (i.e., Uber, which touches on both; as well as Airbnb) and to identify and track meaningful metrics, both to gain an accurate portrait of overall U.S. economy as well as develop appropriate policies regarding taxes, healthcare and social services."

Today, in a article, the Wall St. Journal noted: "Counting Up Contractors Is a Tricky Business Government agencies and employers have difficulty tracking the numbers because many contractors are hired by one company to work for another."

A follow-up article, that the Journal felt important enough to place on its front page, was entitled, "The End of Employees," and noted that "Never before have big employers tried so hard to hand over chunks of their business to contractors. From Google to Wal-Mart, the strategy prunes costs for firms and job security for millions of workers." Interestingly, the article did not refer to the "gig economy" at all but did refer to "TVCs—an abbreviation for temps, vendors and contractors (who) test drive Google’s self-driving cars, review legal documents, make products easier and better to use, manage marketing and data projects, and do many other jobs. They wear red badges at work, while regular Alphabet employees wear white ones."

These are two of the first articles we've seen that discussed the point we think is crucial in terms of understanding how the gig economy works, what it's impact is -- whether you're in a traditional job or a gigs -- and how to structure our tax policy and health and other benefits.

Check out the WSJ articles because we do think understanding the nature of the gig economy is important for our country's future, regardless of one's politics. 

TrendReport 2017: Our Annual Look at Media and PR Predictions

As we have done for the past 15 years, here are this year's annual list of predictions of media trends. We use this annual process to identify issues to help our clients brainstorm how they fit into what the media will cover in the upcoming year. We have a lot of fun developing these, and will be rolling out additional trends next week.

1. Fake news won’t fade in 2017. When you cut out all the costs involved in actually reporting news, as fake news does, financial sustainability isn’t an issue. Fake news will continue as long as it remains profitable or ideologically effective. It will take more than big brands pull their advertising on fake news sites (or try to get their ads off those sites) to stop fake news. Facebook, along with Twitter and Reddit (not really among the “Big Social”), are taking steps to reduce the spread of fake news. Some critics call “enforcing user guidelines” a form of censorship, and we expect that the Big Social will be accused of doing too much by some and not doing enough by others. Both Facebook, whose advertising tools have made it easy for fake news sites to promote their content, and Google, whose AdSense has enabled fake news sites to monetize their content, indirectly profit from fake news. While both have said they will work to rid it from their platforms, fake news is like spam: the only way to truly kill it, is to have people to stop clicking on those links – but there always seems to be enough people who fall for it to make it worthwhile for the content providers. 
2. Big Social will evolve in 2017, but not necessarily in a good way. We expect more trolling and twitstorms on social media. The future of Donald J. Trump’s go-to social media platform, Twitter, is very much in doubt. It lost $500 million in 2015, and $1.6 billion since going public. If Twitter is not financially viable as a standalone platform, its survival becomes a real question. Although profitable, Facebook is facing the problems of ad counting and fake news. All of this turmoil will benefit Snapchat, which is already is favored by the millennials, and Gab, described by the New York Times as the social media platform for the alt-right, a “throwback to the freewheeling norms of the old internet, before Twitter started cracking down on harassment and Reddit cleaned out its darkest corners.” From a demographic perspective, we think Snapchat will be the dominant social media platform by 2018, along with Instagram. We also think LinkedIn will thrive as long as it remains (as we think it will) apolitical.
3. The media cycle will speed up. There used to be a lag between the time an event took place and the time it could be reported. In the era of social media dominance, it seems to take a nanosecond between an event and the social response to it to hit Twitter, followed by an ensuing twitstorm.  This is further fueled by the participation of anyone with the app, as evidenced by the many who felt compelled to stay on top of the developments during the campaign and afterwards, regardless of whether they cheered or jeered. We expect twitstorm, and coverage of those twitstorms followed by outcry to the initial response to be a mainstay of broadcast coverage in 2017.
4. The gig economy and the sharing economy will continue to go mainstream. There are people who work in the gig economy who don’t necessarily realize it – including, for example, teachers who tutor after school. We need to more accurately define the gig and the sharing economies (i.e., Uber, which touches on both; as well as Airbnb) and to identify and track meaningful metrics, both to gain an accurate portrait of overall U.S. economy as well as develop appropriate policies regarding taxes, healthcare and social services.
5. IoT will continue to open the door to cyberattacks. We saw one major cyberattack via the Internet of Things (IoT) in 2016, and we expect more to occur in 2017. The challenge for IoT companies is to be able to deploy security protocols that are flexible enough so IoT devices in your house (or office or car) can talk to each other, yet also prevent hackers from getting access. We expect there will be much media coverage in 2017 on cyberattacks, in general, whether perpetrated by foreign countries or other parties.

Please let us know if you agree or disagree with these trends. If we missed something, let us know.