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The Evolution of the Retail Industry

Quick overview of why the internet will change the retail industry in deeper ways than most people think.
by

Lawrence Lenihan

on 8 November 2013

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Transcript of The Evolution of the Retail Industry

So, the economic
opportunity/ size

of the market is a
function of the area under the bell curve
Size of Population
Breadth of Population
Size of Population
Populations
can be represented by bell curves
Breadth of Population
Bigger
The arc on the curve represents the distribution of values, interests, aspirations, or wants
In a small town,
the curve is small
and the opportunity
is small
But as the town grows,
so does the economic
opportunity!
When the town grows
large enough, Merchants begin to focus specific target markets
Each target market is a specific size that is shown as the area under the curve
Bigger towns, bigger markets and new/bigger opportunities to specialize
When the town grows
large enough, Merchants begin to focus specific target markets
Each target market is a specific size that is shown as the area under the curve
These new markets, are narrower than before, but are much bigger because there the population is larger
As Towns become cities,
the opportunity grows.
The opportunity in a city like New York is incredibly large, both in total available market as well as for very narrow niches which on their own, are large addressable markets.
Each of these niches is a much larger opportunity than even small cities because of the size of the total market
Now consider the internet.
2500X larger than New York City.
Now "niches" are bigger than entire cities!
Market "Niche"
Your relationship with your customer is an ongoing conversation
Specific, focused conversations about common values, interests and aspirations are exciting!
Conversations across multiple niches are hard to engage because they devolve to the lowest common denominator of interest (e.g "how about this weather we're having?")
Broad, general conversations are boring and short-lived
Convos with Customers
Geography doesn't matter
Geographic aggregation means adding stores to aggregate customers
But many geographic markets can't support a store unless it is broad enough in focus
Broad focus is a boring conversation
Lots of retailers have boring conversations
In a connected world, people don't have to settle for boring conversations
And they are beginning to look elsewhere
vs
Which conversation would
you rather have?

Focus, focus, FOCUS!
Niche markets are very large on a global basis
With the internet, the world is not aggregated geographically, it is aggregated based on values, aspirations and interests
Specific conversations win over broad, boring conversations
The broad, geographic-based retailers will suffer "death from a thousand paper cuts" by focused brands and niche retailers who can satisfy customer needs more specifically
Market Niches
By definition, they are groupings of people with something in common
On the internet, these are common values, interests and aspirations
In the physical world, you are limited by geogrpaphy. On the internet you are limited only by connectivity
Niches are definable: if you can't describe them, they don't exist!
The Evolution of Retail
Why Geographic Aggregation of Customers
Will Fail and How the Industry Will Be
Changed by the Internet

Lawrence Lenihan
@lawrencelenihan
www.lawrencelenihan.com
The End!
Lawrence Lenihan
@lawrencelenihan
www.lawrencelenihan.com
Full transcript