The Future is Diverse, so Retailers Must Shift from a ‘Mass’ to a ‘Micro’ Model to Keep Up

Society is changing rapidly, and retail needs to evolve just as rapidly to keep up, according to the Buying Into Better: The Future of the Consumer Industry report by Deloitte. The headline is that retailers can’t just invest in outside programs or initiatives that focus on diversity and sustainability — changing demographics and customer demands must be addressed at the very foundation of the business. The old way of doing retail was designed for a post-World War 2 world, and it’s time for companies to chart a new path into the future.

“We built an industry based on a set of requirements, and those requirements largely were around a growing middle class and a largely homogeneous consumer in the U.S.,” said Kasey Lobaugh, Principal and Chief Futurist of the U.S. Consumer Industry at Deloitte in an interview with Retail TouchPoints. “So we built an industry for mass — mass production, mass distribution, mass marketing. As you look at where we’re at today and ask, ‘Well, what are the requirements that we see starting to form over the next decade?’ They actually start to be fairly dramatically different than what we built the industry for.”

Growing diversity is a major part of this change: Lobaugh noted that 75% of Baby Boomers were white, and this generation’s level of homogeneity increases when the concentration of wealth is taken into account. In contrast, Gen Z is only about 50% white, and with much greater diversity in other areas as well:

  • 25% of Gen Z believe their gender identity will shift at least once during their lives; and
  • During the 1989-2019 period, net worth rose 54% for the 65-to-75 demographic but dropped 11% for the 25-to-35 demographic — creating greater income bifurcation.

All these massive changes support the idea that the industry must shift from its mass approach to a more personal, micro one, according to Lobaugh. The effects are already being felt in the ways loyalty is waning as shoppers find themselves with an enormous number of options. Retailers need to rethink how they approach the entire customer journey if they want to keep up with modern demands.


“Micro shows up because the consumer is changing, but also because barriers to entry in the industry have crumbled,” said Lobaugh. “So you’ve got this fragmentation from the consumer side, but you’ve also got this fragmentation coming from the supply side. What’s happening is we’re getting more and more precise about offerings that directly target micro-segments of the market. This shows up in a lot of different ways you might expect, in terms of marketing messages or products, but it also shows up in the number of brands, channels, formats and service models.”

Changing Life Paths Require a New Approach

One important driver of change is the way that today’s shoppers are “breaking free of traditional anchors” to follow much more varied life paths compared to what the retail industry was designed to serve. For instance, in 1970 only 9% of people aged 18 to 35 had never been married. In 2020, that demographic rose to 35%. This and other factors, such as declining home ownership, have created knock-on effects in terms of what shoppers need and how they want to go about buying it.

A major result of this shift to a “micro” mindset is that shoppers expect greater personalization than ever, and not just in marketing materials. Customers can and will find retailers that closely match their needs and values, which is creating opportunities for retailers to target specific demographics.

However, this process is easier described than followed. Lobaugh, for example, subscribes to a personalized vitamin company that provides him with vitamins made specifically for his specific gut biome and nutritional needs — something a traditional vitamin company might not be prepared to offer.

“Go to the head of the production line and tell that person that we’re now going to be producing individualized personalized medicine,” said Lobaugh. “I suspect that person would say, ‘Are you crazy? We’re not built to do that.’ It really does imply that there’s a whole different operating construct, and so you have to get your head around that idea — that the market is changing, and therefore we want to build toward that change. To address that change, we have to ask ourselves, ‘How do we need to operate differently?’”

Traditional mass retail stores still have the potential to reposition themselves for a micro future, but companies need to put in real effort to achieve this goal. Investments in technology that can help retailers predict demand, rather than just react to changes, will be essential moving forward.

“A hyper-localized assortment is a very different operating model,” said Lobaugh. “First of all, how do you get a hyper-localized assortment? Let’s say you have 1,500 stores in your chain. That’s a really complex business to operate, especially if you’re operating with a human who’s going to try and decide what the perfect assortment is at 1,500 different places. Even if you divide it into clusters, it’s difficult. The operation really shifts to predictive analytics.”

A Healthy Industry Requires Healthy Consumers

Pivoting to an approach that better reflects current consumer trends is ultimately just one part of the equation for success. The technologies that will power the next evolution of retail also will have a significant impact on society as a whole, and using them to benefit the world — in addition to the business — will be key to ensuring the industry remains strong.

“You actually have choices, and some of those choices pertain to how you win,” said Lobaugh. “In our industry, winning is defined by shareholder value. It’s defined by sales and profitability. But what we actually have to recognize is a broader set of choices that we have to participate in as executives of these companies. Those have to do with broader societal and ecological problems that a lot of what I’m describing accelerates. For us to have a strong retail environment, we actually need a healthy consumer. For us to have a healthy consumer, we actually have to care about quality and we have to think deeply about the implications of automation on the health of the consumer, not just the health of our own business.”

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