2019 comes at a time when the retail industry has just enjoyed a record-breaking holiday buying season at the end of 2018. Past the holidays and changes in consumer behavior, however, may either be a boon or an obstacle, depending on how quickly the retailer can adapt. Whatever the case, technological and social shifts are unearthing several retail trends.
These can shape the way global consumers buy things—or even what they buy. These shifts in retail are less of a seismic shift and more of a gradual change. We’ve compiled a list of the changes that we believe are the keys to a successful retail enterprise in the next decade and now more urgent than ever.
The change of direction of retail in the coming years is, surprisingly, not just because of technology but due to changes in consumer behavior. While analysts used to be so sure that e-commerce is the future, the rapid adoption of broadband technology and the shift in “experience over material” commodities has just made e-commerce another channel to shop in.
It’s a big channel, though. Our previous retail statistics post reported that e-commerce is expected to have sold US$3.45 trillion in 2019. This doesn’t mean that brick-and-mortar is dead, however.
In a survey published in late 2018 by the University of Arizona, a majority of respondents thought that traditional retailers are part of the social fabric and will be bad for the economy in the long run.
Having said that, without further ado let’s start with the hottest trends in the retail industry.
E-commerce in 2019 isn’t “online shopping” anymore—it’s simply shopping.
Industry experts predict that retailers will have both online and physical presence to cater to consumers. Online stores are looking to expand into the physical realm by opening brick-and-mortar stores, even those that are online platforms first and foremost. Amazon’s 4-Star Stores, including Amazon Go and Amazon Books, are a testament to this trend.
It’s not just Amazon, though. In the last few years, pop-up stores have literally popped everywhere, with most of these stores previously online-only. You will see more pop-up stores appear during the holidays, too.
Conversely, brick-and-mortar stores are learning from the success of their online cousins.
For example, Walmart’s recent move equips its store employees with a device connected to Walmart’s online store. This allows shoppers to select a product—even not in that physical location—to receive it in their home or delivered to their chosen Walmart location.
Retailers now understand that consumers love the act of product discovery just as much as they love convenience. Some say that this is a sign that e-commerce is maturing. Others point out that e-commerce will soon become indistinguishable from regular retail.
If you’re one of the 15% of consumers in 2016 who signed up for receiving recurring products, this news will excite you. The subscription e-commerce industry, which also includes media (like Netflix and video game stores like Humble Bundle), has grown 100% in the last five years.
This is an impressive figure, given a subscription-based model’s high churn rates. While a steady stream of venture capital investments is partly responsible, it’s mostly because subscription e-commerce is one of the easiest, affordable, and personalized ways to buy something that consumers need.
That said, subscription e-commerce, specifically subscription boxes, remain a niche in the greater e-commerce market. They’re not going anytime soon, however. Retail sales trends figures suggest that they may be key to overcoming e-commerce challenges in the long run.
A 2018 study from CB Insights revealed that private label sales are soaring. Private labels sell three times as much as branded products, which forces CPG manufacturers to rethink their strategy in the coming years.
And this is nowhere more apparent than in Europe, where 40% of grocery items sold are private label. The United States has some catching up to do, but it’s on track—who hasn’t heard of Trader Joe’s, anyway?
The biggest reason retailers are going in-house in the last few years is because they earn an average of 25% more. Compare this to a typical 1.3% gross profit they get from a typical grocery item and it’s easy to see why private labels have become more mainstream.
As a consequence, the retailer will also have leeway when it comes to pricing their products competitively. And millennials are driving this growth. Private labels comprise 25% of a typical shopping cart, but a millennial’s would have 32%.
Marketers have mined data from users’ smartphone and browser habits for years, but it will come to a head as the third decade of the millennium approaches. And this will happen because of AI. AI revenue will reach over US$36 billion in 2025, according to market research firm Tractica.
This is not surprising, as studies show that AI adoption can save retailers US$340 billion annually due to a more efficient supply chain.
Retailers use AI for various applications. These include 2D/3D computer vision, natural language processing, AR and VR, sensor technology, and robotics. It’s also a contributor to the development of a C2M (customer to manufacturing) business model, where companies use big data and AI insight to personalize the products for the individual consumer.
In C2M, AI will have a more intimate view of the user and what they need more than the users themselves know. It will be in charge of a secure network that uses analytic tools, behavioral databases, algorithms, and image recognition. It will combine it with technology from an IoT ecosystem to target the user’s consumption habits. Too dystopian? No worries—it will have a ton of regulations to limit the type and amount of data it can harvest. It will likely also need consent from the user.
The discussion of AI naturally dovetails with voice search and personal assistants. In Britain alone, smart speaker adoption has increased from 14% in 2017 to 27% in 2018, a trend that is reflected everywhere in the developed world. And while Amazon’s 75% market share is still dominant with its Alexa interface, the coming ubiquity of voice search-enabled personal assistants like it will be a mainstay in the future. That is a future where 55% of U.S. households will have a smart speaker at home.
Even the figures today are eye-opening. Voice search now comprises 20% of Google searches, which should incentivize retailers in making their websites searchable through voice. In 2020, Gartner estimates that up to 30% of searches will no longer use a screen and will possibly use other technologies. Andrew Ng, the chief scientist at Baidu, even pegs this number at 50%.
And there’s a reason for that—humans can speak an average of 150 words per minute while typing only 40.
Retailers should leverage social media’s 2.65 billion users for their social media toolkits and strategy. This is why social media giants are now testing ways to load payment information into the platform itself. Instagram is one of the first to do this, though it’s still experimental.
In the coming years, social networks will now not only be places to discuss and keep up to date with your friends but for retailers to keep in touch with their user base. In fact, 60% of Instagram’s users (or 600 million of their total 1 billion users every month) already use the platform to find and purchase products. Adding a native payment system will expedite this process.
It’s 2019 and the term “omnichannel” is still bandied around in retail circles. This is simply because it’s the future of the retail industry. As already mentioned, consumers no longer distinguish between online and offline shopping. They may start shopping in one and checkout in either. A Harvard Business Review report disclosed that 73% of shoppers used multiple channels to discover and buy products.
In the last few years, retailers have capitalized on this phenomenon by offering agile solutions for both online and physical retail. 2019 and beyond will demand more, however, as the rapidly maturing technologies of AR and VR can be used to augment the shopping experience in a given store.
For example, AR can be used to preview items before actually buying them. This makes AR especially useful for furniture and clothing. 60% and 55% of retailers, respectively, incorporate the technology into their purchasing process.
Consumers demand the same experience and information they need whatever channel they use. Retailers shouldn’t differentiate between online and offline—their customers won’t.
The traditional retail model of buying a product is so 20th century. Today, consumers want not only the product but also the act of the purchase itself. And while studies show that remodeling your store can benefit your bottom line, to survive in 2020 and beyond you need to look further into giving your customers a more engrossing experience.
“Brands as a culture” will become more tangible in 2019. Big retailers like Ikea and Nike are all experimenting with small-format or concept stores. These stores offer a limited stock of items but provide pertinent services or curated content. Millennials (again) are the driving force behind these changes, but they’re only the spearhead of evolving consumer behavior across all contemporary generations. All in all, experience-related expenses have grown 6.3% in the period of 2014 to 2016. Material purchases grew only 1.6% in the same period.
Sustainability is not optional anymore, as far as consumers are concerned. A study from Unilever highlights the changing stance of consumers in this aspect. 21% of consumers now report that they would prefer brands with an active environmental responsibility campaign. The retail trends report predicts that this about-face in terms of customer predilection represents US$1.1 billion worth of untapped potential for packaging and sustainable practices.
Consumers also detect facile environmental initiatives that are mere ad hoc campaigns. This is why most companies are now using sustainable and ethical practices more closely aligned with their organization’s values. This allows them to commit to these campaigns more productively and for the long-term. Even government institutions, at least on the state level in the United States, are jumping on the green bandwagon by banning single-use plastics.
Most retailers know that time is the biggest currency they have, so they use tools like fleet management software to automate their back-end and other administrative processes. What they’re just starting to realize is that consumers are also time-sensitive.
For example, an Alix Partners study found that consumers are becoming more impatient with delivery times—from about 6 days in 2012 to just 4 days in 2018. Amazon Prime members are even more demanding—they want their items delivered in less than 4 days!
What this means is that with the plethora of online retailers to choose from, customers abandon their (loaded) carts if the retailer doesn’t offer the shipping options they want. 1 in 4 retailers would rather pay slightly more than pay extra for shipping and 88% will pay more for same-day or one-day delivery, after all. Differentiating your business from the crowd means going the extra mile to make your shipping fast, efficient, and free.
Retail is a volatile industry and the rapid and widespread adoption of technology just makes it more so. Also, as the market becomes populated by a younger demographic, companies are finding it hard to abandon traditional modes of thinking. The “retail apocalypse” that has seen over 8,000 store closures is proof that businesses quickly need to adapt to a change in consumer behavior to survive.
As a retail professional, knowing what’s in store for the industry gives you a leg up on your competition. It will also give you the insight to innovate in unforeseen gaps in the market that any industry shake-ups tend to do.
The line between digitally native retailers and brick-and-mortar stalwarts are becoming blurred. This is why using business intelligence tools in concert with an understanding of where the market is headed is an advantage.
FinancesOnline is available for free for all business professionals interested in an efficient way to find top-notch SaaS solutions. We are able to keep our service free of charge thanks to cooperation with some of the vendors, who are willing to pay us for traffic and sales opportunities provided by our website. Please note, that FinancesOnline lists all vendors, we’re not limited only to the ones that pay us, and all software providers have an equal opportunity to get featured in our rankings and comparisons, win awards, gather user reviews, all in our effort to give you reliable advice that will enable you to make well-informed purchase decisions.