Unlike the banking sector, the main actors of retail are rapidly restructuring their networks of sales points because of the rising price of rent - a major brake on profit. Town centers are losing their stores and it’s not unusual for a large distributor to prefer one point of sales rather than a sprawling network. Restaurants also suffer from the business failures; only fast food restaurants resist the desertification of these districts.
What is future of drugstores?
The recent acquisitions of Target by CVS or Duane Reade by Walgreens has upset the pharmaceutical sector. In addition, the failed buyout of Rite Aid by Walgreens has put the chain in danger. The result, and in the absence of competition, CVS and Walgreens have raised their drug prices and made many changes in terms of development strategies. Food has taken over ⅓ of the brands, reducing the space reserved for cosmetics. In fact, many brands have been discontinued. As for magazines, they have been removed in favor of batteries, USB keys, cables...the type of paraphernalia that does nothing to develop a clientele.
CVS and Walgreen clients lost the advantages of their fidelity cards from one day to the next, to the benefit of other programs.
Another revolution is the buyout of Whole Foods by Amazon ($13.7 billion dollars). The group has just created a new concept of Amazon Go located in Seattle, the first food store (like a city market) that’s completely automatic “no cashiers, no lines, no checkout”. In this Supermarket of the future, the client uses his smartphone to shop, and sensor vision tells when the product leaves the shelf. The customer is charged to his account after leaving the store. Amazon’s goal is to be one of the five biggest food distributors in the USA.
For now, Amazon still has to fix several technical problems, for example, the system is rapidly saturated during busy times (more than 20 shoppers) or children or short clients (below 1m20 the vision scanner doesn’t register).
And finally, there is the arrival of Primark, Aldi and Lidl to the American market. These stores want to compete with Wal-Mart and offer different products.
Experts are not worried because the US has the biggest ratio of sale space per inhabitant: 23.5 square feet/person, compared to Canada: 16.4 sq. feet/person, and Australia: 11.1 sq. feet/person.
The numbers from the NRF (National Retail Foundation) for 2017 project a rise of +3.7% to 4.2% in retail sales. Note that for now, only retailers are suffering, clients are surfing the Internet to find the best deals!
Sephora is clearly the leader in its category and the arrival of big name luxury brands in its store is a positive sign, guaranteeing dynamism and creativity.
The VIB (Very Important Buyer) - the active members of Sephora or Ulta Beauty (24.5 million clients) guarantee sales revenue in net progression.