Omni Talk Retail Podcast Summary

Episode: The Retail Trends (And Retailers) To Watch In 2025 | Ask An Expert
Release Date: January 26, 2025
Hosts: Chris Walton and Anne Mezzenga
Guest: Ethan Chernofsky, SVP of Marketing at Placer AI

Introduction

The episode kicks off with hosts Chris Walton and Anne Mezzenga welcoming returning guest Ethan Chernofsky from Placer AI. Ethan brings his extensive knowledge of retail trends to discuss pivotal shifts and emerging retailers to watch as we approach 2025.

1. The Resurgence of the "Third Place" Concept

Overview:
Ethan highlights the revival of the "third place"—a space outside home and work where people gather, socialize, and engage in leisure activities. This concept is gaining traction across various retail sectors beyond its traditional association with coffee shops like Starbucks.

Key Points:

• Starbucks' Influence:
  Ethan points out that Starbucks, under Brian Niccol, has effectively leveraged the third place concept, enhancing customer engagement and increasing visit durations.
  “Starbucks sees 7% more visits between 3 and 7 pm compared to Duncan's.” [04:25]

• Broad Application:
  Retailers like Barnes & Noble and Macy's are incorporating events and experiences (e.g., book readings, interactive departments) to make their spaces more inviting.
  “Creating areas where customers want to spend more time inherently increases transaction likelihood.” [05:10]

• Strategic Implementation:
  It’s crucial for retailers to tailor the third place experience to their specific environment, ensuring it aligns with their brand and customer expectations.
  “How does the third place fit within your specific retail environment?” [06:21]

2. Starbucks' Strategic Positioning and Future Prospects

Overview:
Ethan delves into Starbucks' future, emphasizing its robust positioning and expansion strategies that align with emerging retail trends.

Key Points:

• Third Place Success:
  The return to the third place concept is pivotal for Starbucks, especially in suburban areas where return-to-office trends sustain foot traffic.
  “The return of the third place will be very valuable, particularly in suburban environments.” [07:08]

• Expansion Potential:
  Starbucks continues to identify and penetrate markets with less saturation, providing ample growth opportunities.
  “There are still places where Starbucks is not as saturated, and their expansion potential aligns well with these regions.” [07:50]

• Operational Efficiency:
  Enhancing convenience through optimized store operations allows for quick customer turnover, catering to both leisurely visitors and those seeking efficiency.
  “Optimizing the convenience element ensures that customers who want to get in and out quickly can do so effectively.” [07:15]

3. Calendar Matters: Leveraging Key Shopping Dates

Overview:
Ethan discusses the significance of understanding and leveraging key shopping dates, such as Super Saturday, to maximize retail performance.

Key Points:

• Super Saturday Insights:
  Super Saturday’s performance varies based on its placement in the weekly calendar. For example, December 21st saw different traffic patterns compared to December 23rd.
  “This year's Super Saturday fell on the 21st, but the post-Saturday traffic on the 22nd and 23rd surged due to last-minute holiday shopping.” [10:30]

• Strategic Planning:
  Retailers should analyze the motivations behind peak shopping days to tailor marketing and in-store experiences accordingly.
  “Understanding the drivers of visit motivations allows retailers to message effectively and enhance the in-store experience.” [11:54]

• Operational Adjustments:
  Implementing models like buy online, pickup in-store (BOPIS) can help manage traffic spikes and improve customer satisfaction during peak periods.
  “Creating seamless online-to-offline experiences helps customers transition smoothly from shopping to purchasing.” [11:54]

4. The Evolution of Malls: From Mall 2.0 to Mall 3.0

Overview:
The conversation shifts to the transformation of traditional malls into experiential hubs, referred to as Mall 3.0, focusing on enhanced customer experiences and diversified tenant mixes.

Key Points:

• Experience-Driven Retail:
  Malls are shifting focus from purely shopping to providing unique experiences, such as interactive promotions and entertainment zones.
  “A mall with a Nintendo promotion, where families engage with classic games, exemplifies the shift towards experience-driven retail.” [15:38]

• Tenant Performance:
  Open-air shopping centers and innovative indoor malls are outperforming traditional anchor stores, indicating a shift in consumer preferences.
  “During Black Friday weekend, many open-air centers outperformed traditional mall anchors in visit trends.” [15:10]

• Strategic Real Estate Management:
  Retailers like Macy's are experimenting with new store formats and locations to adapt to evolving consumer behaviors, though execution remains challenging.
  “Macy's aggressive testing of new concepts underscores their strategic foresight, despite mixed execution outcomes.” [17:53]

5. Migration Patterns and Retail Opportunities

Overview:
Ethan presents data on net positive migration across U.S. states, highlighting regions where retail expansion may thrive due to population growth and increased disposable incomes.

Key Points:

• Southward Shift:
  Significant population growth in states like Florida, Texas, Arizona, and North Carolina presents new retail opportunities in these burgeoning markets.
  “Florida has seen a 3.6% increase in net positive migration, with Texas and Arizona also experiencing substantial growth.” [21:05]

• Targeted Retail Expansion:
  Retailers should consider expanding into these high-growth areas, aligning their store locations with regions experiencing both population and income growth.
  “Brands should explore opportunities in Dallas, Austin, Miami, and other growing cities to capitalize on their expanding markets.” [21:46]

• Audience Alignment:
  Understanding the demographic and economic profiles of migrating populations ensures that retailers can tailor their offerings to meet local demand.
  “It's not just about the number of movers, but also aligning with where higher disposable incomes are shifting.” [23:40]

6. Brands to Watch in 2025

Overview:
Ethan identifies several brands poised for significant growth in 2025, each capitalizing on emerging retail trends and consumer behaviors.

a. Sam’s Club

Key Points:

• Value and Loyalty:
  Sam’s Club excels in delivering value and fostering customer loyalty through its membership model.
  “Sam’s Club nails value and loyalty with their business model, positioning them well for future success.” [24:21]

• Strategic Audience Shifts:
  As younger demographics with higher disposable incomes move to suburban areas, Sam’s Club is well-positioned to attract these consumers.
  “New suburban audiences align perfectly with Sam’s Club’s offerings, making them a strong contender for growth.” [24:21]

• Innovation Focus:
  Investment in retail media and in-store innovations enhances Sam’s Club’s market relevance.
  “Their focus on innovation, both in-store and digitally, speaks to their preparedness for future challenges.” [24:21]

b. Home Furnishings: Ashley Furniture and HomeGoods

Key Points:

• Comprehensive Comeback:
  Ashley Furniture and HomeGoods are leading the home furnishings sector’s resurgence, driven by strong visit growth and strategic positioning.
  “Visits for Ashley Furniture and HomeGoods have shown impressive year-over-year growth, signaling a strong comeback.” [27:41]

• Competitive Positioning:
  These brands offer value-oriented products that resonate with consumers, differentiating them from mass-market competitors.
  “Their focus on value and price makes them well-suited to attract a broad customer base seeking quality furnishings.” [27:41]

• Market Adaptation:
  While IKEA and Wayfair are prominent players, Ashley and HomeGoods effectively fill niches that mass merchants may overlook.
  “IKEA’s unique limitations create gaps that HomeGoods and Ashley can strategically fill to dominate specific market segments.” [29:16]

c. Focused Grocery Stores: Trader Joe’s and Sprouts

Key Points:

• Specialty Offerings:
  Stores like Trader Joe’s and Sprouts excel by providing unique product assortments and exceptional shopping experiences that differentiate them from traditional grocers.
  “Specialty groceries offer products and experiences that keep customers coming back, beyond what all-in-one grocers provide.” [30:16]

• Expanding Demographics:
  The growing appeal of ethnic and specialized groceries broadens their customer base and aligns with diverse consumer preferences.
  “Ethnic grocery chains like H Mart are experiencing audience growth, reflecting expanding palates nationwide.” [30:16]

• Strategic Placement:
  Integrating digital capabilities with physical stores allows these retailers to enhance convenience while maintaining their unique value propositions.
  “The digital-physical loop enables focused grocery stores to complement, rather than compete directly with, mass merchants like Walmart.” [34:11]

7. The Future of Grocery Shopping

Overview:
Ethan explores the evolving landscape of grocery shopping, emphasizing the shift towards specialized stores and the integration of digital and physical retail experiences.

Key Points:

• Digital-Physical Integration:
  Consumers are increasingly utilizing services like buy online, pickup in-store (BOPIS) for essentials, while choosing specialty stores for unique items.
  “Consumers prefer to get essentials from all-in-one grocers while visiting specialty stores for products they specifically desire.” [34:11]

• Behavioral Shifts:
  Post-pandemic behaviors have entrenched certain shopping patterns, favoring convenience for staples and experiential shopping for specialty items.
  “The pandemic accelerated visit durations and the desire for experiential shopping, benefiting specialty grocers like Trader Joe’s.” [32:23]

• Strategic Opportunities:
  Retailers must leverage their unique strengths to dominate their niches, fostering loyalty through specialized offerings and exceptional experiences.
  “Focused grocery stores must leverage their strengths to create unparalleled value, ensuring they become essential stops in the shopping journey.” [34:11]

Conclusion

The episode offers a comprehensive look into the retail landscape of 2025, highlighting the importance of experiential spaces, strategic expansion, and the rise of specialized retailers. Hosts Chris Walton and Anne Mezzenga, alongside Ethan Chernofsky, provide valuable insights and actionable strategies for retailers aiming to thrive in the evolving market.

Notable Quotes:

• “Creating areas where customers want to spend more time inherently increases transaction likelihood.” – Ethan Chernofsky [05:10]
• “Understanding the drivers of visit motivations allows retailers to message effectively and enhance the in-store experience.” – Ethan Chernofsky [11:54]
• “Macy's aggressive testing of new concepts underscores their strategic foresight, despite mixed execution outcomes.” – Ethan Chernofsky [17:53]
• “Their focus on innovation, both in-store and digitally, speaks to their preparedness for future challenges.” – Ethan Chernofsky [24:21]

For more detailed insights and data shared during the episode, interested listeners are encouraged to reach out to Ethan Chernofsky via LinkedIn or email at ethan@placer.ai.