Retail Predictions 2020
The world of retail is evolving so quickly, it’s difficult to know where the next disruption will come from. With the world economy stagnant, retailers will look to exploit new tactics to boost their bottom-line and position them for success.
So, what would Perspectives Volume 4 be without some predictions about the future of retail over the next few years?
Here are some big changes we predict will affect retailers more and more over the coming year.
The perception of “convenience” will change
The pinnacle of shopper convenience is still considered to be the in-store experience. A customer visits a store, where they can see, touch and try a product, pay for it and take it away with them when they leave.
This “convenience” is, of course, a myth. Shoppers need to significantly interrupt their lives to plan a trip to a store, it’s just so entrenched in our behaviour, it hardly feels like an imposition. In fact, there are plenty of customers who would choose not to visit a store, if only the alternatives were good enough.
Equipped with new technology, new knowledge, and new power, emerging retail concepts are re-defining convenience with disruptive innovations like showrooming, same-day-delivery and product customisation that will change how customers expect to receive their products after they purchase.
The rising cost of retail space, and new fulfilment and logistics channels will further challenge the supremacy of the store network and their ability to deliver an optimal buying experience to customers.
Delivery to customer will be disrupted
The growth of other fulfilment channels like same-day delivery, click and collect, drive-by storage lockers and freight forwarding services that batch and deliver orders from multiple retailers, will further challenge the status-quo of retail stores.
In 2015, both Amazon and Google developed an autonomous drone prototype to deliver products to customers. As innovative as this method is, it’s unlikely to seriously challenge delivery networks, as packages can be bulky, heavy and/or valuable, making autonomous delivery difficult.
But consider other disruptive delivery options, like Uber. Individual drivers, able to complete the last-mile delivery of products from stores or local warehouses to consumers on-demand and at very low cost to retailers.
As these new delivery channels become more available to retailers, expect to see faster delivery times, lower costs, and more just-in-time delivery options.
Pure-play eCommerce is losing its advantage
Pure play ecommerce as pioneered by Amazon is fast losing its advantage over traditional retailers, as established retailers are quickly maturing their omni-channel offering.
Some of the fastest growing ecommerce retailers in the US in 2014 were not pure-plays, but established retailers, like Macy’s, Walmart, Costco and Dick’s Sporting Goods, who all saw double-digit ecommerce revenue growth, outstripping even Amazon’s.
When an established retailer’s eCommerce offering challenges a pure-play retailer like Amazon, there are no longer any advantages to your business model. In fact, your lack of diversity suddenly becomes a liability.
The store network of retailers is a huge competitive advantage for online sales, as they provide real-world support, and additional opportunities for returns and exchanges.
Showrooming is growing
Retail rental continues to rise, outstripping inflation, and pushing higher than the low average growth rates for most retailers.
With a change in focus from in-store inventory, to just-in-time delivery, the role of the store can evolve from a mini-warehouse carrying a full selection of stock, to an experiential showroom.
Customers who chose to shop in-store will find that their changing notion of convenience means they’ll be happy to leave the store without their purchases and have them delivered later.
‘Webgrooming’ is also growing
The opposite of Showrooming is ‘Webgrooming’ or ROBO (Research online, buy offline). Webgrooming customers spend time researching what and where to buy online, but complete the purchase offline.
Retailers who facilitate this behaviour stand to benefit by attracting tech-savvy customers who can find and compare products online, but wish to touch and feel the product before committing to the purchase.
By being open and transparent about pricing, delivering high quality service both online and in-store and encouraging customer reviews and commentary, the best retailers make little distinction between online and offline channels, and happily facilitate sales in whichever channel is most convenient for shoppers.
Vertical integration is winning
All over the world, brands are discovering that they can own their own supply chain and customer relationships. Vertically integrated brands are establishing flagship retail stores, building outstanding online stores and developing customer loyalty propositions that mean they can attract and market to their own customers, on their own terms.
Brands like Apple, Uniqlo, H&M and Zara are proving that customers prefer dealing with a single-minded brand.
In doing so, these vertically integrated brands are able to retain greater margins and invest in service and customer experiences, further differentiating themselves from cash-starved wholesale retailers.
Wholesale is slowly dying
This also results in the plight of wholesale. Not for every brand, obviously, but definitely for those that can be easily compared, and cross-sold online. On the internet, your nearest competitor is just a search and a click away.
As a manufacturer, relying on other retailers to tell your brand story is a sure way for your brand to disappear into mediocrity. It’s rarely in a retailer’s best interest to explain the point of difference that allows your brand to command a premium. The role of a premium brand and a retailer is now more often competitive, than co-operative.
Why? Because multi-brand retailers are so quickly adding private-label ranges to their own selections. That means, premium brands may be exploited to attract customers, who will then be cross-sold to more affordable, highly comparable private-label products in-store.
Given premium brands increasingly opt-out of their own exploitation and choose vertical integration, this leaves multi-brand stores, particularly department stores with a problem, which is why…
Department stores (as we know them) may already be dead
The role of department stores has shifted from being a “one stop shop” to being a legacy retail model.
Department stores must change from simply warehousing a wide range of other people’s brands, to carefully curating a selection that attracts a particular shopper, and then delivering an experience that captures a significant share-of-wallet from that customer, across a number of categories.
The days of piling product high, and hoping customers will treat them as a convenient destination for an “all-in-one” shopping experience are coming to an end.
While the pace of change in retail has accelerated, the best online and omni-channel retailers are growing much faster than the rest of retail as they invest in high quality online and in-store customer experiences.
The winners in retail will be those who drive, or are able to best keep pace with, changing consumer behaviour to make shopping simpler, easier, better.
