GDI Trendradar 2.07 - Trends in Society and Retailing 2008

GDI Trendradar 2.07 - Trends in Society and Retailing 2008

Media release
GDI Trendradar 2.07 - Trends in Society and Retailing 2008

What does a "simplicity concierge" do? Why is the craving for status growing? What does "unstoring" mean? Why is everything zero? Researchers from the Gottlieb Duttweiler Institute (GDI) in Rüschlikon/Zurich describe the most important factors and trends. The international think-tank also explains how our homes can take care of our health, why rabbits in New York live on balconies, what the future holds for quality and what microtrends are.

By Alain Egli (Manager PR & Communications GDI) and Tobias Gremaud (Head of Marketing & Communications GDI)

1. Trends: from mega to micro
Technology is encroaching increasingly on all aspects of life. At the same time, global networking of business, cultures and IT is causing exponential growth in the complexity of life. Yesterday's patterns and categories are becoming unusable: the simplicity of the mass is giving way to the diversity of the individual. Niche markets that will shake up the segmentation and structure of the retail sector are emerging. The average customer is disappearing; nowadays even best-selling articles and mega-hits rarely reach more than three percent of consumers. Megatrends too are disappearing along with the homogeneous mass of consumers. More than ever before, broad trends in society are breaking down into niche movements that affect only small segments of the market – and, depending on the segment, may even be bucking the trend. This new approach is the "microtrend", as Mark J. Penn, CEO of Burson-Marsteller, recently called it. Identifying and profiting from microtrends is one of the challenges of our increasingly complex world.

2. The economics of envy: from luxury markets to status markets
The real engine of consumption is the craving for status. Whether it is fast cars, diamond-studded watches or designer clothes, the urge to buy them is always preceded by one thing: a craving for social recognition. The fact is, people without status risk being ignored. This drive functions even with "immaterial luxury" that is far removed from traditional prestige goods: a sabbatical, consideration of the environment, spending time with the kids, philanthropy, an "aware" lifestyle – our behaviour is fundamentally shaped by the pursuit of "statusfaction". Man is an "animal ambitiosum", anxious for a place in the sun and driven by sheer envy. The importance attached to status is now soaring. Years of prosperity in Western countries mean that there are now more and more people whose basic needs have been satisfied. Add to these the steadily swelling middle classes of the emergent countries – not to mention the ever greater number of the world's truly rich. The meritocracy has altogether weakened the bedrock of traditional social class divisions and we are now stuck in the shifting sands of lifelong competition for rank and standing, putting us under permanent stress about status. This trend is triggering a spiralling process that is steadily diminishing the half-life of status symbols. For providers, the new needs are creating new markets and new opportunities – but they have to understand and shrewdly exploit the status shift.

3. Simplicity: from life crisis to life coach
The growing complexity of life is creating a desire for simplicity. According to Dell CEO Michael Dell, simplicity is the dominant trend in IT: the future is "one click/one button". With consumers feeling increasingly out of their depth technically and finding they have ever less time at their disposal, there is a growing demand for services that relieve the pressure on them. Customers want help in their everyday lives, and so service and support are becoming the most important value-adding functions of providers, who are increasingly offering assistance, concierges and help with self-management. But really personal service is provided only for the very rich, for instance customers of the exclusive American Express Centaurus credit card. The less affluent have to make do with virtual assistants and electronic concierges. Philipps, for instance, employing a database from publisher Condé Nast, offers mobile phone users a free-of-charge “simplicity concierge”, including a recommendation service for urban tourists. The Nintendo Life Coach for Girls promises to transform young women's lives in only three months. At thenag.net, users receive help with putting their good resolutions into practice. And iwantsandy.com acts as a virtual assistant, taking over many tasks of the traditional secretary via e-mail. Though services offering virtual diet and health coaches, concierges and style consultants are still in their infancy, they are getting better all the time. Soon companies will be competing to offer the best concierge services – because these are the key to customers' real needs and problems.

4. Homestyle: from well-appointed to well-being
The health and eco booms are now encroaching on the home as well. Our own four walls are gradually being transformed into a wellness zone ¬- feng shui was just the start. Well-appointed homes are no longer enough: people want products that will not just satisfy or seduce but actually change them. Private spas are therefore more than just elegant bathroom environments or oases of well-being in which to relax. They are just as much about healing and mental transformation, about harmony of body, mind and spirit. The new home should also change us, make "new" people of us – home is becoming a therapeutic agent. There is a demand for fundamentally new, healthy designs for bathrooms, kitchens and bedrooms that are being developed by physicians and architects working in tandem.

5. Nature: from concrete walls to urban farming
Nature is a good thing: it brings us tranquillity and regeneration, it enriches our lives and guarantees the value and healthiness of products. This positive perception of nature grows with every new warning about climate change and the threat to the environment. To get closer to nature in an estranged world, we are bringing it back into the cities. The broad spectrum of "urban farming" projects, which range from rabbit-rearing on New York balconies to inner-city vertical greenhouses, expresses our longing for natural surroundings. After "art in architecture" we are now seeing the spread of "nature in architecture" in our cities, with green roofs, climber-clad walls and mini-biotopes reflecting our new love of nature. This exaltation of nature is boosting demand for "natural" materials and colours. Representations of nature are also in growing demand: electroluminescent floral wallpaper, humidifying plant walls and intelligent building elements are only the start – the new Arcadia is only two streets away.

6. Tolerance: from everything to nothing
When a name was being sought for the first decade following 1999, the "zeroes" was suggested. The name never caught on, but the idea did, and everything become "zero": zero energy, zero additives, zero calories, zero fat, zero alcohol, zero pollution, zero waiting time, zero cars, zero side effects, zero risks, zero advertising. There are also the zero-impact chocolate bar, zero-impact car, zero-impact house, zero-impact holidays and, last but not least, Coke Zero. Zero is becoming the ideal value across all categories and an increasingly popular sales argument: less is more. Gone are the wild, open-to-all days of "anything goes". The increasing popularity of zero reflects a growing zero tolerance. The trend is fed by consumers' sense of being out of their depth and by their desire for unlimited self-fulfilment. This calls for products that are as natural, local and fresh as they can possibly be. They must also be environmentally and socially responsible and have as few unwanted secondary effects as possible. By this token, environmental, climate and health sinners are living increasingly dangerously. At the same time, however, the growing prevalence of the ban-it mentality is generating a defiant glee in breaking taboos – so operators of oases of pleasure and excess could well have prosperous times ahead of them.

7. Globalisation: from one-way street to two-way process
Wealth is going East. The victims of economic colonialisation are hitting back and the Western masterminds are losing their grip on the reins of power and control. In India's "birthing" culture", the labour force comprises four-fifths of the population. The universities turn out 3.5 million graduates each year, half a million of whom are engineers, compared with just under 20,000 in the USA. A fifth of General Electric's research scientists now work in India - in five years it will be a quarter. Wages are rising fast – by 2025 forty percent of Indians will belong to the middle class. And the focus there is increasingly shifting from exports to consumption. In China there are now more brokerage accounts than members of the Communist Party, the country is hiring Indians and India itself is outsourcing production to Vietnam and Rumania. What we are seeing is the "outsourcing of outsourcing". Countries such as the USA and Germany are already bringing up the big protectionist guns. Stephen Roach, CEO at Morgan Stanley, recently described Washington as the headquarters of the anti-globalisation movement.

8. Markets: from supply and command to reply and demand
Customers have enough. They certainly have enough to eat and to wear. But they have also had enough of being fobbed off with mass-produced articles and marketing lies. They are defending themselves by seeking information – not from retailers or manufacturers but from other customers. Online forums, rating organisations and comparison sites provide them with exactly the overview they do not find in the opaque markets of yesterday. Providers are losing control of their own product communication. Moreover, consumers are increasingly looking for products that will set them apart from others, thereby heralding the end of mass markets. To survive in such markets, providers should lose no time in adapting rapidly to their customers' new needs. They could, for instance, try "open innovation". The toy manufacturer Lego involved its biggest fans in the further development of its Mindstorms line – other companies are now following suit. Efficient, cost-effective innovation in niche markets will probably be achieved only if producers have the courage to experiment. The winners will be those who can devise intelligent propositions and put them to the test.

9. Purchasing power: from boom to bang
Consumers are reallocating their spending money. Because the price of basic foodstuffs and energy looks set to soar in the foreseeable future, consumers will have to devote a greater part of their disposable income to items of everyday use – and will, on balance, be able to afford less. Or at least they will think so. Because if they have to pay more for their daily bread and petrol, it will feel to them like scraping the barrel: higher prices for everyday items come as a shock, especially since the younger generation has grown up accustomed to falling prices. It will affect consumers with a low income first and hardest. If consumers decide to limit spending to their basic needs, the result will be a virtual grounding of consumption: expectations will be disappointed, desires put on the back burner, disposable income set aside for a rainy day. The boom in the premium segment will weaken because people on medium incomes will be increasingly unable to afford "masstige" items (prestige articles produced in mass quantities). Discounters will benefit from this trend and increasingly retreat from "trading-up" and refocus on their "cheap" core business. And a shift will also take place in consumers' choices of holiday destination: air travel will again become a luxury that – for reasons of both cost and climate change – people feel they can increasingly rarely afford.

10. Consumption: from gratification to awareness
In the wake of the instant gratification society of the 1990s, the focus has shifted towards values: people with largely satisfied basic needs are searching for fulfilment – also in terms of consumption. They weigh up the pros and cons of mass vs. quality, indulgence vs. abstention, individual needs vs. social responsibility. Their own well-being – but also that of their fellow human beings and their environment- becomes the focus of their purchasing decisions. Because ever larger sections of the population want to shop in an ecologically and ethically aware manner, the already fast-growing market for sustainable products will boom and spread to other sectors. The most prominent segment of this awareness-driven consumption continues to be green products and services. Given the increasingly effective networking of critical consumer communities, providers have to strengthen their image with regard to credibility, transparency and trust. Rewe CEO Alain Caparros has already pledged his company to “transparency and decency”. Traditional price-driven competition for customers is being superseded by competition for their trust. This will open up new opportunities for providers of regional specialities. Their selling points in the new competitive environment: they involve shorter transport routes, offer transparent production and working conditions and are socially rooted in local communities.

11. Inner cities: from shopping centres to social hubs
Almost half of the world's population live in cities, and the tendency is very much upwards. This flight from rural areas will impact on urban shopping patterns because there has always been close interplay between retailing and inner cities. Many high-streets already look like large shopping centres. As social hubs in an increasingly anonymised world, they are taking on the role of the village square and marketplace of earlier times. And it is no longer traditional-style retailing that counts but the experiences that customers gain there. The trend: unstoring as a way of supplementing store concepts. Here, it is no longer enough simply to offer products for sale; they have to be exceptional products and be displayed in an exceptional setting with exceptional service. The importance of shopping facilities for a city's identity will continue to grow because they basically determine its lifestyle feeling and urban design. At the same time, in the tough competition for location the inner cities must market themselves more consciously as products – attractiveness can be created. The engine of this process is the retail sector, which functions as a provider of convenience and all-round services and also offers public-sector functions and services.

12. Products: from bling brands to quality
For years only one thing mattered: the brand. Products became vehicles for experiences; they were designed for emotional impact rather than functionality. But this effect has fizzled out. The focus on experience has allowed the pendulum to swing so far on the side of the offering's "invisible" components that the core functions are often neglected: the marketing frosting on the cake was often sexier than quality assurance. Now customers are demanding quality they can see and feel. China's recalls of sensitive product categories have made critical consumers more aware of something that used to be taken for granted. If harsh headlines now catch up with Western companies that have outsourced production to the Far East, it is not because of bad luck or because "mistakes happen". Nor is it about China, "the world's factory". Rather, after the downside of the "cheap" trend has become obvious for all to see, it is time for managers to show the results of their homework. More and more people are again demanding real value for their money. With this they are also expressing their general sense of unease with the state of the economy. The trend to the "new quality" makes it both harder and simpler for providers: traditional enticements to purchase a brand and also the fashionably green "values costume" under which some market participants hide are being increasingly seen through, yet those providers who know what their identity is and transparently stand by it will be taken at their face value – and not automatically regarded as a fake.

Additional information
Alain Egli
Manager PR & Communications
Gottlieb Duttweiler Institute
Phone: +41 44 724 61 11
Phone: +41 44 724 62 78 (direct)
Fax: +41 44 724 62 62
E-mail: alain.egli(at)gdi.ch