2011-01-17-Bain-Bain_retail_holiday_newsletter_6_-_2011_17页_454kb

2010 Holiday Sales Summary

Core Content

The 2010 holiday season for the US retail sector exceeded expectations, with GAFO (Goods at Food Stores) sales growing by 4.9% compared to 2009. This growth was driven by a strong November (up 5.3%) and a slightly slower December (up 4.6%), but still outperformed analysts' forecasts. Full-year 2010 GAFO sales were up 3.4% over 2009, ending just 0.3% below the 2007 peak. Despite not reaching peak levels from 2007, the sector showed signs of recovery.

Key Growth Segments

• Clothing and accessories led the way with 8.4% growth.
• Sporting goods, hobby, books, and music also saw strong growth at 8.2%.
• General merchandise (which includes mass merchandisers, department stores, etc.) grew by 3.4%.
• Furniture and home furnishings and electronics and appliances saw the slowest growth at 2.2% and 1.4%, respectively.

E-commerce Performance

E-commerce continued to be a major growth driver, with sales surging 12% over the previous year to reach a record $32.6 billion. Full-year e-commerce sales increased by 9.8% compared to 2009. Mobile commerce is expected to grow at a 64% CAGR over the next five years, reaching $24 billion by 2015.

Retail Challenges for 2011

Retailers face two major challenges in 2011:

1. Setting realistic expectations in an uncertain economic environment.
2. Developing and executing long-term growth strategies, especially in a rapidly evolving retail landscape.

Building a Strong Core Business

A strong core business is essential for sustainable growth. Bain research indicates that only 1 in 10 companies achieve top- and bottom-line growth with returns above the cost of capital, and those that do are core business leaders who excel in delivering a unique value proposition and have high customer advocacy. Retailers must strengthen their core capabilities to better engage existing customers and expand into complementary areas.

Enhancing Customer Experience

Retailers must focus on customer perceptions and behaviors to drive innovation and improve loyalty. The Net Promoter Score (NPS) is a key metric for measuring customer satisfaction and loyalty. Companies like Apple have excelled by integrating technology and creating seamless customer experiences.

Omnichannel Retailing

Omnichannel retailing is critical for traditional retailers to compete with pure-play digital retailers. It involves integrating the customer experience across all channels—stores, websites, mobile devices, social networks, etc.—to provide a unified and personalized shopping journey. Key elements include:

• Bringing the best of each channel to each customer at each touchpoint
• Integrating infrastructure and support functions across all channels
• Organizing for an omnichannel world by creating enterprise-wide teams and aligning incentives with cross-channel metrics

International Expansion

International expansion is a significant growth opportunity, especially for US retailers looking to tap into emerging markets like India, China, and Brazil. However, it comes with risks, and only 20% of US retailers' international expansions resulted in both positive net present value and a strong market presence. Key considerations include:

• Ensuring the domestic core business is strong and sustainable.
• Identifying favorable market conditions and understanding local consumer behavior.
• Developing a customized entry model for each market.
• Building in-market capabilities quickly, including cultural understanding, store location selection, and supply chain strength.

Strategic Recommendations

• Retailers should prioritize omnichannel innovation to stay competitive.
• International expansion should be carefully planned and executed, with a focus on local presence and market-specific strategies.
• Loyalty and customer advocacy are crucial for long-term success.
• Customization through localization, crowdsourcing, and personalization can drive growth and margin improvement.

Conclusion

The 2010 holiday season marked a positive turning point for the retail sector, with growth exceeding expectations. However, the path to sustained success in 2011 remains challenging. Retailers must focus on strengthening their core business, embracing technology, fostering innovation, and building omnichannel capabilities. International expansion offers growth potential but requires careful planning and local execution to avoid failure. With the right strategies and execution, the retail industry can continue its recovery and thrive in the coming year.