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Trends Shaping the Future of Retail
Trends Shaping the Future of Retail 2
Trends Shaping the Future of RetailSignals of change
Retail everywhere is becoming possible as a result of a convergence of trends,
such as increasing rates of smartphone ownership and the growth of the internet
of things, which makes digital connections among objects, consumer desire for
No longer confined to traditional stores, retail is
convenience, and competition for consumer ‘share of mind.’
increasingly ubiquitous. Transactions are becoming
According to Forrester Research, 60 of U.S. retail sales will involve using the
ever easier using mobile payments and automated
internet by 2017. Consumers will either buy a product online or use the internet
to research it before purchasing it in a store.
subscriptions for regularly consumed goods. Stores
Most Millennials have never known a world without internet, social media, and
are also popping up in new and unexpected places,
mobile technology. They represent 15 of U.S. consumers in 2014 and will
such as train stations and truck and bus “stores.”
account for almost one third of total spending by 2020.
Launched in April 2014, Amazon Dash is a small WiFienabled scanner that
consumers can use to scan items in their homes for automatic addition to their
Amazon shopping list.
Grocery delivery service Peapod is testing a system that allows consumers to
shop ‘virtual shelves’ at train platforms in Philadelphia.
Warby Parker, named Fast Company’s most innovative retailer, is driving a
school bus retrofitted with a showroom across the United States to test different
How can your business build brand favorability through retail everywhere
Could there be a consumer backlash against retail everywhere
How could retail everywhere help consumers adopt more sustainable behavior
2Signals of change
Semico, a marketing and research firm, estimates that revenues generated from
augmented reality applications in the U.S. will exceed 600 billion by 2016.
The provision of augmented reality data can be triggered by a user’s GPS
Augmented reality uses mobile or wearable
location or, increasingly, by electronic ‘beacon’ transmitters placed in an
technology to interpose a layer of rich audiovisual
environment such as a store. In January 2014, beacons were installed in 150
data between users and their environment,
grocery stores on the West Coast to send highly targeted coupons to customers
while they are shopping.
providing them with useful, contextspecific
information. Augmented reality applications will
increasingly be used in retail environments to give
consumers product information and help them
Google Glass, a wearable computer with an optical headmounted display
integrated into a pair of eyeglasses, is now available to consumers for 1,500
interact with brands.
and offers a range of augmented reality applications, from map overlays to facial
Clothing retailer Topshop and cosmetics company Shiseido are using
augmented reality to help customers try on clothes and makeup virtually.
How could the use of augmented reality help you improve operations or enhance
the customer experience
Augmented reality will increasingly enable consumers to access thirdparty
information about products, such as health or environmental ratings, in real time.
How might this impact your business
How could the emergence of augmented reality in the retail environment help
consumers make more sustainable choices
3Signals of change
Making products by printing them in ultrafine layers, 3D printing has long
been used in highvalue manufacturing (e.g., to make jet engine parts). Recent
improvements in the technology, coupled with a significant drop in price, are
transforming it into a disruptive technology. It is now possible to print a wide
variety of materials, such as ceramics, textiles, food, and biological tissue. The
availability of inexpensive, compact 3D printers is also enabling consumers to
Technological advances are making
print, rather than buy, a growing range of products.
localized production easier than ever, and 3D
A Michigan Technological University study estimated that by using a lowcost 3D
printing and information technology could disrupt
printer, such as the RepRap, to produce commonly used household objects, a
family could save 300 to 2000 per year.
and localize conventional manufacturing. Industry
A Boston Consulting Group survey found that more than half of USbased
is using networks of geographically dispersed
manufacturing executives at companies with sales greater than 1 billion are
manufacturing facilities, and 3D printers have
planning (or actively considering) to shift production from China back to the
become affordable for consumers to own for their
U.S. However, other studies suggest that while there is a slight increase in U.S.
manufacturing, there is not a widescale movement towards reshoring.
homes or use in their local community.
Organovo, a Californiabased startup, is developing printable human liver tissue.
New Matter, an easytouse 200 3D printer, is being created to make sharing a
3D object with a friend as easy as sending a text message. It’s expected to be
available in 2015.
In 2013, Walmart committed to sourcing an additional 250 billion from US
produced goods in ten years. It will do that by buying more of the goods it
already buys from U.S. manufacturers, sourcing newtoWalmart US produced
goods, and reshoring some products that it already sells.
How could the growth of distributed manufacturing affect your business
The growth of 3D printing may drive customer expectations for products that are
customizable, modular, and upgradeable. How would this impact the design of
Are your products capable of being produced by consumers at home, without any
need for you How can you ensure that you are adding value
If consumers have more power to create the product they want, how does that affect
the retailer’s responsibility for product stewardship, performance, or recyclability
4Signals of change
The impacts of biotechnology are distributed across the economy, but they are
particularly significant for food production. Many experts believe biotechnology
will play a key role in food security in the future, but consumer acceptance of it
in food is far from certain.
The U.S. biotech industry generates 98 billion in annual revenue and employs
Biotechnology is rapidly advancing as
roughly 1.6 million people.
new technologies, such as synthetic The garage biotech movement is an extension of the hacker principle applied to
genetic engineering and synthetic biology. Although not generally pushing the
biology and rapid genomic sequencing,
boundaries of the science, doityourself (DIY) groups conduct projects such as
work faster and become more affordable. These
analyzing their own genomes, making fluorescent yogurt, and finding ways of
making the technology cheaper to use.
advancements are driving the development of
There is concern that the tools of bioterrorism may become widely available.
powerful new applications in sectors ranging from
The U.S. Federal Bureau of Investigation has set up a neighborhood watch
agriculture to energy to medicine.
type scheme with groups like DIYbio as an early warning system for identifying
Ecover is developing an algaebased liquid laundry soap in an effort to reduce
the use of palm oil in its products. Other benefits include fewer greenhouse gas
emissions, less water use, and reduced land competition.
Unilever has also developed algal oils and adopted them for its Dove and
Brylcreem products through a joint partnership with biotechnology company
Biotechnology is impacting a wide range of materials (such as food and fibers)
and industrial processes. How might this affect your business
Manufacturers face mounting pressure to use biotechnology in consumer
products. What role can retail play in helping consumers to make informed
choices about the ingredients in their products
5Signals of change
Unlike many developed countries, the population of the U.S. is still growing
rapidly, as a result of a relatively high birth rate, increased life expectancy, and
continuing immigration, thus increasing the size and diversity of local markets.
More than half the growth in U.S. population between 2000 and 2010 was
attributed to the increase in the Hispanic population. Based on current census
The U.S. population is growing and changing,
data, the white majority will become the minority by 2043.
becoming older and more multicultural society. By 2030, current projections estimate that there will be about 72 million
Americans older than 65, more than twice the number there were in 2000.
The global population is also increasing and the
Projections also say there will be 78 million Millennials in 2030.
Millennial generation will soon be filling out the
Millennials already account for 1.3 trillion in direct annual spending in the U.S.
This sum is projected to increase as they reach peak earning and buying power.
Populaton by Age and Sex: 2012, 2035, and 2060
New businesses targeting the needs of ethnic groups are emerging. Retail real
estate firm The Legaspi Company has successfully rehabilitated 10 struggling
shopping malls by transforming them to cater to Hispanic families.
Technological solutions are being developed to alleviate the caregiver shortage
for the growing elderly population. Devices like Lively provide lowcost, in
home kits that monitor the whereabouts of the user so that family members can
remotely keep track of elderly relatives and be alerted if there are any breaks in
their daily routines.
How will changing demographics impact your customers and employees How
will you meet the needs of different groups, such as the aging population, the
multicultural population, and the emergent Millennial generation
How will a growing global population impact your overseas business operations
and customer base
6Signals of change
According to the U.S. Census Bureau, “the nation’s urban population increased
by 12.1 percent from 2000 to 2010, outpacing the nation’s overall growth rate of
9.7 percent for the same period.”
the united s tates
In his 2013 book Reshaping American Metropolitan, Arthur Nelson explores a
shift toward urban lifestyles in the United States, citing recent surveys that show
Despite a pause or even reverse in city growth
that “about half of Americans want to live in walkable communities with mixed
housing and other mixed uses.”
in the late twentieth century, cities are now
By 2025, large U.S. cities are expected to generate more than 10 percent of
experiencing a resurgence. Shifting patterns of
global GDP growth, a bigger contribution than all of the large cities of other
settlement have implications for infrastructure,
developed countries combined.
people’s lifestyles, and for consumer priorities and
Urban planners are increasingly concerned with smart and sustainable cities.
Cities such as New York and London are experimenting with apps for parking
and other services, designing for ample green space, and building bike lanes.
There is criticism that cities are becoming places where only the rich can afford
to live. The most expensive cities in U.S. include New York, Washington D.C.,
San Francisco, and Los Angeles. City planners and citizens are concerned about
gentrification and affordability of city services.
Retailers like Target, The Office Depot, and Walmart are expanding into cities by
opening smaller format stores in urban areas. In some cities, like Chicago, large
retailers have met with resistance from local residents.
Retailers like Petco and Best Buy are developing new store brands that adapt to
Ikea is developing alternative methods of transportation, like buses and water
ferries, to its stores to attract urban consumers.
What goods and services would appeal to urban dwellers
How might retail stores adapt to a growing urban population
How might changing densities of settlement affect store formats and siting
7Signals of change
“Severe income disparity” ranked fourth in the top 10 global risks in the World
Economic Forum’s “Global Risks 2014” report. It also ranked as the risk most
likely to occur for the third year in a row.
According to a recent report by Oxfam, almost half of the world’s wealth is now
owned by only one percent of the population, and seven out of ten people live in
The global economy is changing, with sustained
countries where economic inequality has increased over the past three decades.
Wealth disparity in the United States has been rising steadily since the 1970s.
economic growth in emerging economies, such as
The Brookings Institution estimates that there are 1.8 billion in the global middle
China, India, and Brazil. The economic center of
class (as of 2013), which will grow to 3.2 billion by the end of the decade.
the world is moving South and East—with middle
According to PwC, the demographics and wealth gaps between shopper
class growth in those economies. Meanwhile,
segments are expected to widen by 2020. This may create shopper segments
with different expectations for product offerings and shopping experiences.
global economic inequality is rising—the United
States has the greatest wealth disparity out of all
the developed economies in the world.
In February 2014, clothing retailer Gap, Inc., announced that it would unilaterally
raise its hourly minimum wage to 10, impacting 65,000 employees.
As of 2012, 55 percent of Unilever’s total global business comes from
New business models are being developed to sell a variety of products in African
and Asian countries through microfranchisees. Companies like Solar Sister
(which sells solar lamps) and Living Goods (which sells a variety of products)
are using those models to distribute goods to otherwise difficulttoreach
What are the implications of wealth fragmentation for your customers and
employees How will this affect your marketing and human resources strategies
There may be hidden risks and opportunities to your business from the growth of
the global middle class. How can you uncover these and address them
8Signals of change
n ew approaches to
The cost of healthcare and a greater understanding of the determinants of poor
health are placing a greater emphasis on prevention in addition to treatment.
As a result, there has been an explosion in digital healthcare innovation and
health and wellbeing
changes in lifestyle approaches.
Medical spending on obesity in the U.S. now accounts for 20.6 of U.S.
Medical spending on obesity in the United States
healthcare expenditures; at 190 billion per year this figure exceeds costs
related to smoking.
now accounts for 20.6 percent of U.S. health care
According to the Pew Internet Research Project, seven out of ten Americans
expenditures; at 190 billion per year, this figure
track a health indicator for themselves or a loved one.
exceeds costs related to smoking.
Governments are more and more interested in introducing taxes and other
measures to nudge behavior to improve health. The Prevention and Public
Health Fund under the Affordable Care Act provides funds for local governments
that want to experiment with obesity prevention.
Although the fate of New York City’s soda ban sits with the State Court of
Appeals, Mexico launched a similar scheme in January 2014 in an effort to curb
sugar consumption and address its obesity crisis.
Nike’s FuelBand tracks wholebody movement and intensity and provides
feedback and reminders via a smartphone app.
Retailers like Walgreens and CVS are investing in instore clinics to provide cost
effective and convenient health services.
Safeway provides its employees with a variety of healthcare options including its
CareConnect program, discounts at national fitness centers, online healthcare
decision tools, and more. Its healthcare programs were so successful that it
spun off a new venture, Safeway Health, to help other organizations apply the
Health delivery is moving out of the doctor’s office and into everyday life. How
can your business help promote the health and nutrition of your employees and
9Signals of change
The ubiquity of data
In 2012 alone, humans generated more data than over the course of our entire
history up to 2011. The rate of production of data from internet and mobile
phone use, digital sensors, and the digitization of public and commercial data
The accumulation of vast amounts of data,
more than doubles every two years.
combined with an exponential increase in computing
The International Data Corporation and International Institute for Analytics
power, has enabled the use of new and powerful
estimate the global market value of Big Data at 16.1 billion (as of 2014), and
see it growing six times faster than the overall information technology market.
insights in every aspect of society. Companies
Regulations around what data is truly private are shifting; Google search
that successfully leverage Big Data can provide
histories and tweets, for instance, are both admissible as evidence in court. In
highly targeted products and services. At the same
2009, Google searches were used to convict a hitandrun driver when it was
found he was searching for the phrase “hit and run” after the crime.
time, the proliferation of individuals’ data and the
In May 2014, the European Court of Justice ruled against Google in a landmark
increasing sophistication of analytic algorithms
“right to be forgotten” ruling that would strip Google of a large amount of private
threatens to undermine individual privacy.
data on individuals.
Amazon filed a patent for anticipatory shipping in January 2014, a system that
can predict purchases and prepare products for shipping before a consumer has
In 2013, personal genomic analysis company 23 and Me came under fire from
the U.S. Food and Drug Administration for offering users a profile of their health
risks based on an analysis of their genomic data.
Technology companies like Google and Facebook are using knowledge of their
users to customize the users’ experiences and advertise to those users.
How can your business leverage the insights that are now becoming possible
through Big Data to improve operations or enhance customer experience
What sorts of data privacy issues do you anticipate for your business How will
you deal with them
10Signals of change
According to Deloitte, future consumers will “expect and demand transparency
in product and service quality, pricing, and company policies, and procedures.”
Customer demand for supply chain transparency has led to the proliferation of
certification standards for commodities. The number of certified goods increases
every year according to Fair Trade USA. Threequarters of consumers surveyed
The rapid increase in access to data and
said Fair Trade made them feel “positive” or “very positive.”
information – mainly through the internet – Regulations, such as the U.S. Securities and Exchange Commission’s conflict
minerals rules, are increasingly requiring companies to be transparent about the
combined with shifts in consumer expectations
sourcing and composition of their products. Similar regulatory mechanisms are
is creating significant change in organizational
already being proposed to tackle other supply chain issues.
and individual transparency. Technological
developments mean that in the nottoodistant
future, every detailed aspect of a business could be
Whole Foods Market has committed to full GMO transparency by 2018 for its
fully in the public eye.
grocery stores. By that date, all products that contain GMOs will be clearly
Fashion company Everlane seeks to introduce radical transparency to high
fashion and challenge the high premiums associated with it. Everlane’s website
features an interactive map where consumers can view the factories where
products are made and read stories about the production process.
Consumer products companies like Clorox, S.C. Johnson, and Seventh
Generation are listing their product ingredients on their public websites.
How would greater public scrutiny of your operations and supply chain impact
What measures can you take to make your business operations more transparent
and build trust with all of your stakeholders, from consumers to communities to
Would greater transparency about the challenges you face around operating
more sustainably have a positive or negative impact on relationships with your
11Signals of change
s elf and
The number of Maker Faires around the country has grown more than twentyfold
in the past seven years, from 22,000 in 2006 to 530,000 in 2013. President
Obama hosted the first White House Maker Faire on June 17, 2014.
Some have called ‘the IKEA Effect’ one in which people cherish the things they
build more than the things they buy.
New models of self and communityreliance may
The number of farmer’s markets in the United States increased 9.6 percent
flourish as a result of greater access to digital from 2012 to 2013, maintaining the trend of steady increases since the U.S.
Department of Agriculture began monitoring them in 1994.
platforms, growth in distributed manufacturing, and
the rise of the sharing economy, with the potential
to distance people from brands. How this trend will
unfold is uncertain, but its impact will be fundamental
Etsy, an online marketplace for buying and selling unique goods, sold more
than 1.35 billion worth of creative goods in 2013 – the biggest year for the Etsy
to retail’s health over the next two decades.
community since it was founded in 2005.
Threadless is an online community of artists who create designs, which are then
evaluated via their ecommerce website. The community votes on submitted
designs each week, which are then printed on clothing and sold worldwide
through Threadless’s online store. Winning designers receive an award upfront
and a commission when one of their designs is sold.
How would a move toward self or community reliance impact your business
Are there are any new opportunities for your business model that support self or
12Signals of change
The rise of the
According to Fast Company, the U.S. sharing economy was worth 26 billion in
2013 and is predicted to increase.
Havas Worldwide, one of the largest integrated marketing communications
agencies, reported in its 2014 “New Consumer and the Sharing Economy” study
that more than a third of Millennials already belong to a sharing service or expect
Rather than buying new products to consume,
to join one within the next year.
people are increasingly sharing or renting things Regulatory uncertainty is an important factor shaping the future of the sharing
economy and may impact its ability to grow, and the rate at which it can, in
like cars, bikes, power tools, clothes, housing,
different industries. For example, peertopeer taxi services have been banned in
and even leftover food. This trend could grow
some cities after strong lobbying against them by traditional taxi organizations.
and continue to create a new form of consumer
The gig economy, a segment of the sharing economy in which people compete
to offer services at low prices, has been criticized recently. In a recent Fast
economy in which experiences and access to items
Company article, “Pixel and Dimed: On (Not) Getting by in the Gig Economy”,
are more desirable than ownership. However, it
editor Sarah Kessler highlighted the lack of benefits and struggle to earn
is uncertain whether the barriers to the sharing
minimum wage that many of these workers face.
economy will grow as well.
Companies like Zipcar, Rent the Runway, and Airbnb are using technology to
enable people to share on a large scale. Recognizing the size of the opportunity,
car rental company Avis acquired Zipcar for 500 million in March 2013.
Instacart, a peertopeer grocery delivery service, connects people who have
money, but no time to go shopping with people who have time, but would like
to make extra money. It’s notable in that it does not intrude on a regulated
industry, provides competitive wages, and is leveraging human labor rather than
technology to drive value. TaskRabbit is another such example.
Where do opportunities for your business exist in the sharing economy Could
you develop a new business model around products or services you already offer,
develop new partnerships, or acquire new businesses
Is there a risk that consumers will be less inclined to purchase your products
because they can simply share items owned by other consumers
How can your business help address the potential downsides of the sharing
economy such as the gig economy
13Signals of change
Havas Media’s 2014 “Meaningful Brands” report found that 71 percent of U.S.
consumers think companies and brands should play a role in improving their
quality of life and wellbeing, while only “36” think that brands work hard at
improving their quality of life and wellbeing.
One of the three major findings of IBM’s 2013 global chief marketing officer
Empowered by social media and easier access
(CMO) survey found that CMOs believe an organization’s character (i.e., how it
behaves) is as important as the products and services that it sells.
to more data, consumers are more and more
According to the World Economic Forum’s “Engaging Tomorrow’s Consumer”
informed about the ecological and social impacts
report, trust (78 percent), environmental friendliness and ethical practices (71
of their buying habits and have greater means to
percent), and alignment with a cause or social issue (61 percent) are among the
top buying concerns for Millennials. 86 percent of Millennials are willing to share
create pressure for change. This evolution of power
their brand preferences online.
is transforming the nature of the relationships
between retailers and consumers.
Chipotle’s annual Cultivate Festival inspires consumers to discover family
farmers, local products, fresh ingredients, and more around its Food with
My Starbucks Idea seeks to crowdsource ideas from consumers. More than
150,000 ideas have been submitted and two million votes have been cast over
five years (more than the last mayoral election in Chicago).
GoodGuide, a smartphone app, enables consumers to review various health,
sustainability and other criteria by scanning the product’s barcode. It currently
catalogues information about over 210,000 products.
How will you build trust with consumers of the future
What will you do to ensure that your brands continue to engage with consumers
on the issues they care about
14Signals of change
Highly beneficial from a materials and costs point of view, a circular economy is
likely to continue to emerge over the next two decades. Its development is at an
early stage, and barriers to scale include the need for regulatory change, new
The circular economy is an integrated industrial
technology, crossindustry collaboration, and changes in consumer behavior.
system inspired by the natural world, in which
According to the Ellen MacArthur Foundation, the circular economy has
waste from one process provides the input for
the potential to generate more than 1 trillion in GDP globally. Currently,
only 20 percent of material goods are recovered, primarily to be reused or
another process. In that way, nothing is discarded.
decomposed. In addition, the report expects this economy’s expansion to lead
For retail, applying this system typically means
to such benefits as innovation, land productivity, soil health, and job creation.
finding new uses for products and materials that
Thirtyone U.S. states have extended producer responsibility (also known as
product stewardship) laws for specific products. Connecticut, Massachusetts,
would otherwise be discarded. As resources
and Vermont have become the first states to ban the disposal of organic matter
become scarcer and more expensive, interest in
in landfills, forcing significant improvements in food waste reduction.
developing a circular economy is growing.
Launched in May 2014, the businessled Closed Loop Fund aims to provide low
interest loans to U.S. municipalities to advance projects that improve recycling
infrastructure from a 100 million fund. Initial investors include Walmart, The
CocaCola Company, PepsiCo, Procter Gamble, Unilever, Johnson Johnson
and Goldman Sachs.
Foss Manufacturing produces a highquality polyester fiber from 100 recycled
plastic bottles that are used as fiber in clothing, carpeting, furniture, and other
Patagonia provides product repairs, helps host a marketplace for reselling used
clothing, and recycles all of its products.
How could your business help build a circular economy Do you or your
consumers produce waste products that could be valuable inputs for another part
of your supply chain or another sector
Which businesses, within or outside of your sector, are potential collaborators in
building circular material systems
What is the role of your business in addressing the barriers to creating a circular
economy, including regulatory, technological, infrastructural, or behavioral
15Signals of change
d ecline in
A study by the The Economics of Ecosystems and Biodiversity (TEEB) found
that environmental externalities—including loss of natural resources and nature
based services—are costing the global economy 4.7 trillion per year. The study
estimates that conserving forests would eliminate 3.7 trillion in damage related
to climate change by 2030 and that mismanagement of the world’ s fisheries
costs 50 billion each year.
Ecosystems provide essential goods and
The 2005 Millennium Ecosystem Assessment found that approximately 60
services that sustain life – from the purification
percent of global ecosystem services are degraded or used unsustainably,
of air and water to the provision of food, fuel, and
resulting in nonlinear changes (i.e., accelerating, abrupt, and potentially
irreversible) that have important implications on human wellbeing and are
fiber. Although generally not valued or factored
affecting the poor disproportionately.
into investment decisions, industries such as
Emerging complementary approaches to traditional conservation include
agriculture, pharmaceuticals, or cosmetics could
restoration and rewilding, where targeted interventions aim to increase
not exist without them.
biodiversity in degraded ecosystems. Examples include reintroducing native
plant and animal species back into the White River National Forest in Colorado
to address disturbed areas and reintroducing trout into the River Wandle in
London, England to restore river health in a polluted area.
A few companies are exploring monetary valuation of ecosystem services and,
in some cases, are even integrating these financial values into their corporate
accounting. PUMA’s Environmental Profit and Loss Account (EPL), for instance,
evaluates “environmental impact for greenhouse gas emissions, water use, land
use, air pollution and waste generated through the operations and supply chain”
and has received considerable media attention and a few prominent supporters.
In what ways does your business depend, directly or indirectly, on ecosystem
How would your investment decisions change if you or your stakeholders
incorporated the costs of ecosystem services
16Signals of change
w ater insecurity
According to the Organisation for Economic Cooperation and Development
(OECD), almost half the world’s population will be living under severe water
stress by 2030 under a businessasusual scenario.
More water is being used for agriculture, industry,
Although the United States is classified as medium risk for water stress overall,
energy generation, and inhome uses as population
large areas are already suffering: Arizona, California, Kansas, Nebraska, New
grows and globalization increases. Freshwater
Mexico, and Texas are all classified as being at high or extreme risk.
is becoming scarcer and increasingly expensive,
Concern over embedded water in food and other products is also expected to
increase in the next five years. Trade in embedded water has steadily increased
which will necessitate changes in usage and
over the last four decades. Approximately 15 percent of domestic water is
conservation in both industrial and household
exported via trade.
According to the Water Research Foundation, water rates increased in over
1,961 utilities in six U.S. states over the last decade – at a rate faster than
Consumer Price Index (CPI) inflation.
The CocaCola Company has committed to becoming “water neutral” by 2020.
It needs 333 ounces of water to generate one dollar of revenue and is highly
dependent on efficient water use.
According to the U.S. Department of Agriculture, the ongoing drought in
California could potentially have large and lasting effects on fruit, vegetable,
dairy, and egg prices beyond forecasted CPI increases; drought conditions in
Texas and Oklahoma could drive beef prices up further.
What is the water footprint of your current products, services, and operations
What are the implications for your business if relatively inexpensive and/or
adequate water supplies are no longer guaranteed
What steps can you take to minimize your reliance on fresh water
How can your business help people use water more efficiently
17Signals of change
Humanity currently uses resources at a rate 50 percent faster than they can be
regenerated by nature. By the early 2030s, we are projected to need more than
two planets to meet resource demand, compared to half a planet’s worth in the
Many key natural resources are becoming more
scarce and expensive. An increase in global
Resource demand from emerging markets, particularly in Asia, in the past
interconnectedness means that shocks can
decade has reversed the price declines of the 20th century. For example, metal
prices have jumped 176 percent since 2000 after declining throughout the 20th
quickly ripple throughout supply chains, causing
century, according to McKinsey.
price spikes and volatility. Governments and
In 2014, 80 percent of countries consume more biocapacity (e.g., cropland,
businesses will likely continue to struggle to
fisheries, forests, etc.) than is available within their borders. Copper, zinc, tin,
and nickel have seen a near exponential rise in production. There is not enough
secure continuous supplies of key resources and
copper to meet the demands of the future global population at the same levels
are developing alternatives where possible.
used in Western lifestyles today.
Pronutria, a biotech company, has developed a process that converts algae to
protein necessary for human nutrition. The company claims it can feed a billion
people on an area of land the size of Rhode Island.
In June 2014, BlueOak, a leader in sustainable sourcing, received 35 million
from the Arkansas Teachers’ Retirement Fund (a consortium of European and
domestic investors) and the Arkansas Development Finance Authority to build
the first urban mining refinery in the United States capable of retrieving valuable
metals, including gold, silver, copper and palladium, from ewaste. Production at
the Arkansas facility is scheduled to begin by the end of 2015.
What natural resources does your business depend on for its products, and what
are the medium and longterm prognoses for these resources
How could resource scarcity affect your business indirectly (e.g., through
regulation, consumer demand, resource conflict, or protectionism)
What actions can you take to secure resources or find alternatives
18Signals of change
The average American worked 1,800 hours in 2013, significantly more than
workers in countries like France (1,490 hours) and Germany (1,430 hours).
People in East Asian countries, including Korea, Hong Kong, and Singapore,
Time poverty is a growing concern for Americans,
work even more hours than Americans.
who work longer hours than citizens of many other
On average, a U.S. worker spends 60 percent of the day (14.3 hours) on
countries. This influences many other retailrelated
personal care and leisure (including eating and sleeping). This is less than the
average (15 hours) for the 34 Organization for Economic Cooperation and
trends such as pressure for greater convenience,
Development (OECD) member countries.
online shopping, deliveryondemand, and retail
According to the Anxiety and Depression Association of America, anxiety
everywhere. Time poverty also contributes to
disorders are the most common mental illness in the U.S. and affect 40 million
Americans. Lack of time, or stress, can exacerbate an anxiety disorder. Anxiety
increased stress and mental health problems.
disorders cost the U.S. 42 billion per year, almost onethird of the nation’s
yearly mental health bill.
More employers are experimenting with ways to ensure their employees are
healthy and happy—from offering fourday workweeks to nutritious food on
the job. In a 2012 New York Times article, tech CEO Jason Fried described the
productivity gains that came from shifting his company to a fourday workweek.
Meditation training is becoming widespread in innovative business communities
in Silicon Valley. Companies, such as Google, are hiring Zen masters to lead
How will time poverty impact the way customers interact with your products and
How can your products or services enhance customer wellbeing and minimize
What can you do to ensure the productivity and wellbeing of your employees
19Signals of change
Geopolitical instability indirectly contributes to fluctuations in commodity
prices and impacts the supply of raw materials. Experts believe we are likely
to see more systemlevel disruptions (e.g., attacks on oil pipes, power grids,
IT networks, and the food supply) as a highimpact way of expressing dissent.
Approximately 60 to 70 of historical commodity price movements are
associated with noncommodity shocks, such as political insecurity, rather than
Climate change, resource scarcity, poverty, and
direct shocks to commodity markets.
ideological conflicts all threaten to continue or
According to a study conducted by the Millennium Project in 2012, half of the
deepen geopolitical instability. Today’s retail
world is vulnerable to social instability and violence due to growing global and
local inequalities, falling water tables, increasing energy demands, outdated
supply chains are global in nature; meaning that
institutional structures, inadequate legal systems, and increasing costs of food,
even localized natural, humanitarian, and political
water, and energy.
disasters can influence the raw material extraction,
A September 2013 McKinsey survey found that 47 percent of executives
production, and transportation of products around
considered geopolitical instability the biggest threat to domestic growth in
the next year; 69 percent of respondents (up from 51 percent in June) cited
geopolitical instability as a threat to global growth.
In May 2014, the Financial Times reported that China and Vietnam’s political
standoff in the South China Sea is causing significant disruption to global
supply chains. For example, Taiwanese electronics manufacturer Foxconn,
which produces iPhones and iPads for Apple, halted work for three days as a
precaution. Yue Yuen, the world’s biggest manufacturer of sports shoes and
supplier to Nike and Adidas, also shut down its operations.
In what regions would conflict disrupt your supply chains
How resilient are your supply chains to changes in global trade relations
Have you conducted a risk assessment of your critical supply chains taking into
account indirect threats such as resource scarcity, poverty, and climate change
What mitigating actions could you take now
20Signals of change
A resurgence of fossil fuel production is underway in the United States, driven
by the use of hydraulic fracturing (‘fracking’) to extract “tight oil” and natural gas.
Advocates see the shale boom lasting for 100 years; however, skeptics say it
could collapse within five to ten years.
Although natural gas emits fewer GHGs than coal, fracking is associated with
The U.S. energy system is transitioning in response
environmental degradation, especially of water sources, and has attracted much
to multiple factors, including energy security,
The cost of solar panels has dropped 75 percent since 2008.
increasing demand, cost, safety, advances in
In June 2014, the U.S. Environmental Protection Agency (EPA) announced
technology, and the need to lower greenhouse gas
regulations to cut GHG emissions from coalfired power plants by 30 percent by
(GHG) emissions. Volatile energy costs will have
2030 (from 2005 levels). The regulations will face years of legal challenges and it
remains to be seen whether they will be implemented.
profound impacts on business, both directly and
On May 11, 2014, Germany set a new record by producing 74 percent of its
energy from renewables. This record production occurred midday and solar and
wind energy filled in a large portion of the power. The country is aiming for 80
percent of power to come from renewables by 2050.
The solar portfolios of many leading U.S. retailers are growing as the overall
commercial market continues to develop. Apple, Costco, IKEA, Kohl’s, Macy’s,
Staples, and Walmart were among the top 10 on the 2013 Solar Capacity
Rankings for installing more than 445 megawatts (MW) of solar photovoltaic
capacity (up from 300 MW in 2012). This investment in solar has allowed
companies to reduce energy costs and better plan for the future.
Retailers like Ahold, Cabela’s, Macy’s, Safeway, Staples, Walmart, and Whole
Foods are testing fuel cells at their stores to generate energy onsite.
How exposed are your business and supply chains to unexpected increases in the
cost of energy, including electricity and fuels
How exposed is your customer base to increases in energy costs How could
increases change their lifestyle and purchasing behavior
Are there steps your business should take to hedge against possible cost
increases and a change in the energy mix, for example, through onsite power
21Signals of change
In recent years, thousands of students who cannot access elite universities
have been enrolling in online courses. At Stanford University in 2011, 160,000
students in 190 countries registered for an online artificial intelligence course.
Educational models are being questioned as employers identify a gap between
degrees and the skills that jobs require. According to McKinsey, 45 percent of
The educational model that prevailed in the United
U.S. employers say lack of skills is the main reason for entrylevel vacancies,
and only 42 percent of worldwide employers believe new graduates are
States for decades is rapidly changing. There is
adequately prepared for work.
a widespread feeling that education is no longer
The rising cost of U.S. college education has left many questioning its value and
preparing students adequately for the world, but
many others graduating from college with a heavy debt burden. According to the
New York Times, student debt topped 1 trillion in May 2014. A record number
little agreement on how it should change. At the
of college students in America graduate deep in debt. Former U.S. Treasury
same time, technology is enabling new forms of
Secretary Lawrence Summers said that student loan debt was taking the “life
teaching delivery, such as massive open online
out of the housing recovery.”
courses (MOOCs), that are making education more
Net Impact, a leading nonprofit that supports a new generation to work within
and beyond business for a sustainable future, reported in its 2013 “Business
widely accessible and affordable.
as UNusual: The Student Guide to Graduate Programs” that social and
environmental issues are becoming a standard feature in leading MBA programs,
in part driven by overwhelming student demand.
Companies like Apple, Ford, LEGO, and Disney are members of the Partnership
for 21st Century Skills, an organization that builds partnerships among
educators, businesses, communities, and governments to promote the teaching
of 21st century skills.
In partnership with handset makers Nokia, Samsung, and Ericsson, and network
infrastructure manufacturers Qualcomm and MediaTek, Facebook CEO Mark
Zuckerberg launched Internet.org to connect the world’s poor to basic internet
services. It aims to alleviate poverty and provide education by allowing more
people to participate in the knowledge economy.
What skills will be needed for the future jobs in your industry
Is there a role for your business to work with those innovating in the educational
What will it mean for the workforce and consumers if people leave college with a
high debt burden
22Signals of change
The Intergovernmental Panel on Climate Change’s “Fifth Assessment Report”
warns that carbon emissions grew twice as fast during the past decade as they
did over the previous three decades.
The World Bank estimates that adapting to climate change will cost the world
70 to 100 billion per year by 2050—the same order of magnitude as the
In addition to the direct environmental impacts of
foreign aid that developed countries now give each year.
climate change (e.g., increases in floods, droughts, The 2014 U.S. National Climate Assessment declared that climate change is no
longer a future possibility, but a current reality.
extreme temperatures, sea level rise, etc.), societal
Regional capandtrade initiatives have cropped up in the United States and
responses like regulations will shape the future of
Canada and are considered more efficient and effective than actions taken
retail. Governments and organizations are likely
by individual states because they cover a broader geographic area (and more
emissions), eliminate duplication of work among states, and help businesses by
to focus even more on reducing carbon emissions
bringing greater uniformity and predictability to state rules and regulations.
and to place a greater emphasis on adapting and
San Francisco recently hired the world’s first Chief Resilience Officer to plan the
developing climate resilient models.
city’s longterm adaptive response to climate change.
Two dozen major U.S. corporations (including ConAgra Foods, Delta Airlines,
DuPont, Duke Energy, General Electric, Google, Microsoft, Walt Disney, Wells
Fargo, and five major oil companies) are factoring the price of carbon into their
Chipotle recently warned investors that extreme weather “associated with global
climate change” might force it to stop serving menu items such as guacamole.
According to Ceres’s 2014 “Power Forward” report, 60 percent of the Fortune
100 have goals for shifting to more renewable energy or reducing greenhouse
Are your supply chains and operations resilient to climate change impacts, such
as increased flooding, drought, and extreme storms Do you have a climate
change adaptation strategy
How might action by others to address climate change affect your supply chains
How could you improve business performance while lowering carbon emissions
and preparing for climate risks