Where Retail Is Headed: What Can We Expect In The Roaring 20’s?
Greg Foran, the former CEO of Walmart U.S. said that “Retail Will Change More in the Next Five Years Than It Has in the Past 50 Years”. If he is even remotely correct, expect to see a rapidly shifting retail landscape as we enter a new decade on top of what has been a tumultuous prior ten years.
As the Holiday season of 2019 winds to an end, I am going to use this time to look back and to look ahead. The 2010’s were a transformative decade for retail. While Retailmageddon didn’t exactly come to pass, we saw a significant slowdown in physical brick and mortar retail growth and an unprecedented number of retail store closures.
In our decade recap blog, we spoke of five key trends that shaped the decade: 1. A full decade of unimpeded retail sales growth. 2. The rise of e-commerce and Amazon.com. 3. The collapse of the middle and the rise of value driven retail. 4. Private equity’s outsized role on retail economics. 5. The power and influence of the consumer through social media and connectedness.
I asked our team to weigh in on what they thought the next ten years will look like. So here goes:
- Extreme retailing will define winners and losers. We have defined extreme retailing as the following:
- Extreme Value. Retailers who deliver outstanding value to the customer will continue to gain share. Value can be defined as low prices (of course), accomplished through private label and augmented by a treasure hunt experience.
- Extreme Convenience. Retailers who remove pain points from the customer looking for and ultimately buying and using products.
- Extreme Experience. Retailers who energize the experience through great displays, provide reasons for customers to show up, change often and amplify product categories.
- Extreme Engagement. Retailers who establish direct relationships with their consumers and encourage the ability to customize and personalize products, promotions and the overall experience.
I can argue that the trends below will simply become more efficient ways to accomplish the above.
- Technology will lead the way. Having just left the NRF Big Show, it is abundantly clear that the implementation of technology will alter the retail landscape, both in the ways that we will do business and the tools available for the consumer:
- AI is transforming the way retailers do business. Everything from assorting, pricing, displaying (in-store and on-line), replenishing is being changed by AI. It will also begin to more aggressively enter the consumer realm through anticipating and responding to consumer needs.
- A gimmick today, applications like Siri and Alexa are gaining usefulness and will be embedded everywhere we live, work and play. This is going to impact shopping in the same way we have seen mobile devices transform the retail experience.
- The end of the front end. It is not difficult to look ahead over the next decade and predict the end of human interactions at the beginning and end of the consumer experience. Automated ordering and automated checkouts will rule the day as technology, consumer preference and very real labor shortage issues will drive adoption of these technologies. The mobile phone and social shopping will likely become the new front end.
- Robots and drones…maybe. Robotics will change distribution centers, fulfillment and automate certain retail tasks like inventory management and maintenance. However, I have not seen practical examples of how they will transform the front end of the consumer experience….yet.
- The battle for the Last Mile. The costs and inefficiencies of package delivery (and returns) to the home is already catching up to retailers who attempt to match Amazon’s deep pocketed and money losing approach. While consumer expectations for increasingly faster and still free won’t change, retailers must change their approach.
- Access to consumer’s home. Along with smart technology, access to consumer’s homes, garages or dedicated “home lockers” will accelerate.
- Consolidated lockers and pick-up points. Stores will reconfigure themselves as efficient and potentially consolidated pick-up points to reduce costs of the last mile.
- BOPIS done well. Buy on-line and pick-up in store (or through a drive-thru) has real potential to both lower retailer costs and make it easier for the consumer. Largely, it is not being done well today. That will change.
- Amazon goes full retail. Why? It is the only way for them to continue to efficiently grow and gain access to large categories like food. Retail might look quite different, with a lot less traditional space for inventory and much more space dedicated to omni activities (see above).
- Greentailing becomes mainstream…really, finally. I wrote Greentailing and Other Revolutions in Retail in 2008. At the time, there was ample evidence that the consumer was ready to embrace new behaviors in the way they live and shop. Then, the recession happened, and behavior shifted back to worrying more (understandably) about managing a budget. We seem to be at an even more pronounced inflection point today, driven by the next generation of consumers who want to shop and live more sustainably. This will have a profound impact on packaging, ingredient integrity, food waste and the rise of the rental and second-hand resale markets. And yes, taken all together, it could signal a shift towards less overall consumption. Companies who embrace these values will be well positioned for the next decade.
- The shift towards an experience. We have been speaking about experiential retail for some time. It is often misinterpreted to be about “entertainment”. But, the real shift will be away from retail stores and toward shopping centers which focus on product and an increasing move towards services, food and beverage, health care, fulfillment and yes, entertainment. As “purchasing” continues to shift on-line, stores must rethink space, rethink assortments and rethink the purpose of a retail trip. The new Nordstrom Flagship in New York is illustrative of this shift, with less space dedicated to products and more space dedicated to services, food and experiences.
- The economy comes into play. Somehow, we managed an entire decade in the U.S. without a significant economic downturn. We won’t be so lucky in the next decade. With an inevitable downturn, expect a greater number of retailer casualties (bankruptcies, closures, downsizing) coupled with new behavioral shifts. Value retail and private label are examples of segments that thrive during recessions. If retail has been tumultuous during good times, imagine what changes a real recession will bring.
So, what does it all mean?
- Expect significant change in retail. Retail will change dramatically in the next decade, particularly in the ways in which we manage the business and the way that customers will transact on-line and in-store.
- If you’re a retailer, supplier to retail, in retail real estate, etc., you need to ask one simple question: Are you ready for the next decade?
How you answer may well determine whether you’re still in business in 2030.