Millennials will reshape the face of retail in the coming years. Retailers are already coming to terms with what this means for the industry. As consumers age, some brands are aging with them, and losing sales in the process.

This generation is more tech-savvy, more value-driven, and more mobile than any prior cohort. Retailers need to come up with new ideas to get them to buy, and are testing some of the following ideas to appeal to this generation: (more…)

Retailers are worried about what recent changes to Payroll Taxes will mean for consumer spending. In the aftermath of the fiscal cliff negotiations, politicians let the temporary cut in social security withholdings expire. That means that in 2013, Social Security taxes will increase from 4.2% to 6.2%. This tax hike is likely have significant impacts for consumer-facing companies.

As a result of the increase, many consumer groups are expecting Americans to eat out less and shift to lower-priced brands. In an article from the Wall Street Journal, economist Roberton Williams, said that the “payroll-tax cut will leave the average American household with $18 to $20 less to spend each week, or $900 to $1,000 each year. That is a decline of $120 billion from last year,” or 0.8% of U.S. GDP.

Given this reduction in discretionary income, retailers who have been considering increasing prices may need to rethink their strategies. As tax increases impact consumers differently, and as the economic recovery varies by region, now is a great time to experiment with location-based price tiers. In fact, it is likely that some retail locations can support a small price increase to some items, while others will gain incremental profits by strategically lowering prices on some items. In-market scientific testing is the best way to isolate the cause-and-effect relationship between changing prices and profits, as well as to determine location-based factors which drive the success of price changes.

U.S. consumer spending during the 2012 holiday season was lower than expected. Consumers continued to be wary of expanding their holiday shopping lists this year. According to a SpendingPulse report, sales of electronics, clothing, jewelry, and home goods increased only 0.7%, as opposed to the 3-4% analysts were expecting during the two months leading up to Christmas.

The holiday shopping season is the most important time of the year for retailers. November and December make up 40% of retail sales. While steep discounts may not have been enough to bring consumers back into stores this holiday season, we may need to wait to get a clearer picture on holiday spending until next week when major retailers release their revenue reports.

Some analysts are blaming bad weather for softer sales this holiday season. Sales were lowest in those areas affected by the Superstorm Sandy, which blasted the Northeast and Mid-Atlantic in late October. Others are blaming concern over the fiscal cliff in the run up to the New Year. Nonetheless, many retailers are optimistic moving into the New Year. Despite softer overall sales, many retailers point to record-breaking Black Friday sales as a bellwether for 2013.

A recent article in The Portland Press Herald highlights several companies that are experimenting with new store formats. Some, like Microsoft and Pottery Barn, are testing temporary pop-up stores. Others, like Nine West, are creating new store formats with different merchandising to appeal to new customers.

With the growth of mobile and online shopping, many retailers are questioning the need for larger format stores. Recently, retailers have been experimenting with smaller specialty stores. For example, GameStop Kids, GameStop’s new store concept, is geared toward a kid-friendly crowd. One of Nine West’s new stores revolves around their Vintage America Collection.

Retail strategist Alden Lury expects retailers to experiment with store formats more. He says, “Retailers are focused on more closely connecting with their customers, and that has a lot to do with testing new store formats.” These retailers are trying to create a, “more compelling store experience for their customers,” according to Lury. However, rolling out new store formats is risky, and often involves significant capital investment. Only scientific testing can reveal which store formats work well. More specifically, scientific testing helps retailers understand which elements of new store formats work best so that retailers can allocate resources efficiently and maximize ROI.
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A recent article explains that Amazon is testing a new pricing strategy for its Amazon Prime subscription. CNN reports that Amazon is trialing Amazon Prime for $7.99/ month instead of $79/ year (that’s a $17 premium to the annual subscription), offering streaming content and free two-day shipping at a price point that competes head-on with Netflix and Hulu Plus.

Like many other leading retailers, Amazon has found that testing pricing strategies before rolling them out is the best way to predict profitability. In Amazon’s case, testing offers an opportunity to gauge demand for a different pricing structure, while analyzing its profitability.