Imagine the 21st century is a consumer.
She’s approaching her 18th year, she’s got the world at her fingertips and she wants it to fall into her hands. This includes purchasing. Yet she couldn’t tell you where of how she will shop tomorrow, or even in the next hour.
And that will largely shape the world of retail in 2018. Like a person who suddenly reaches adulthood, retail’s basics are the same, but its responsibilities are rapidly transforming. In particular, since shoppers are demanding different – in terms of product, experience and location – this will trigger surprising shifts, and risks, in 2018.
They shouldn’t be that unexpected, though, considering what we can see from shopper data and behavior of the past few years. Still, shoppers might be surprised by the revisions they have put into motion.
I asked some industry experts what they see coming, and added a few of my own ideas. Following are 10 predictions for 2018.
Pop-in-path retail: Rather than wait for shoppers to find time to visit their stores, more merchant will step into the shopper’s path to purchase, said Wendy Liebmann, CEO of WSL Strategic Retail, a global retail consultancy. “It’s evidences at the McDonald’s McCafé in Manhattan, where visitors can place and pay for orders by touchscreen, and Walmart’s endless aisle of toys, accessible through a kiosk in its Orlando, Florida, store.” Other retailers are reformatting stores with quick-hit items right inside the door. Target’s next-generation store in Richmond, Texas, includes two entrances, one expressly for online pickups or grab-and-go food items.
Mail will scale: The delivery industry will become increasingly competitive within retail, predicts Stefan Weitz, executive vice president of technology services at Radial, an ecommerce fulfillment company. “In order to keep up with the growing expectations set by Amazon, some retailers (will begin) to contract out their own fulfillment networks, meaning they’ll choose a partner company to maximize delivery speeds and save costs on distributing orders,” he said. “Overall, the broader industry will be required to digitize and take on another level of sophistication to achieve the agility required to remain a competitive partner of retailers.”
Price will gain weight: Brands will explore new ways to use price, outside of discounting, to attract customers, predicts Katie Smith, retail analysis and insights director at Edited, an international retail analytics company. “While some discounting is healthy and necessary, retailers have found that a long-term dependence on markdowns dilutes a brand’s value and erodes confidence,” Smith said. Strategies would include giving online discounts when customers remove the “free returns” option or when shoppers buy multiple items (like with Jet.com). Some brands will align with consumer value for transparency in supply chain costs, as does Everlane.
Bricks-and-data: Retailers will invest more in capturing localized data. Target plans to complete building 32 locationsbefore the end of 2017, many of which will be small formats that could collect hyper-local data to be used for better-tailored assortments. Similarly, Amazon’s purchase of Whole Foods provides insight into how customers shop in store, complementing its leadership understanding of online behavior, said Brian Ross, president of retail analytics firm Precima. “As a passionately customer-centric retailer, Amazon understands that customers shop differently online than they do in store, and that retailers of tomorrow will define omnichannel as providing the most relevant, convenient and value-based offering in all channels.”
Shop, dine, live: More consumers will literally live “above the shop” as malls add housing in a bid to maintain relevance, said Pam Danziger, researcher at Unity Marketing and author of the book “Shops That Pop!” “There are two huge demographic groups — baby boomers on one side and millennials on the other — with equally strong demand for affordable, accessible housing. This is where struggling mall properties can find a new lease on life,” she said. Effectively, it creates a vertical neighborhood or (in my words) “communicity” that serves the retail community. Danziger sees this strategy suitable for vibrant malls as well.
Department, deconstructed: As department stores struggle to retain (or regain) relevancy, they will take surprising risks. Saks Fifth Avenue’s noteworthy approach is to pull several key merchandise segments — shoes, jewelry and contemporary fashion — into separate specialty stores. The three shops, in Greenwich, Connecticut, follow Saks’ redesign of its flagship store in Manhattan, to include an entire floor dedicated to wellness. Dubbed Saks Wellery, it includes a salt therapy room, salons, stretch classes and body sculpting, as well as apparel.
Living labs: Retailers will make greater investments in designated innovation labs to evaluate the latest in artificial intelligence, augmented reality, blockchain and other technologies that will transform retail, said Toby Olshanetsky, cofounder and CEO of prooV, a firm that helps companies test new technologies before implementation. Walmart, for example, launched an incubator arm, called Store No. 8, in San Bruno, as well as two next-gen test stores to evaluate new technologies. Smaller retailers, meanwhile, will collaborate with tech startups to gain a competitive edge.
Limited limitless offers: Several brands, including Smashburger, Olive Garden and MoviePass, closed 2017 with limited-time offerings of limitless purchases, selling hundreds of burgers, pasta bowls and screenings for a flat price. In exchange for super-low prices, they get repeat customers and all the insights from those shoppers’ membership data. Other brands, large and small, are likely paying close attention, and what may have been viewed as crazy giveaways could become the norm.
Pain-point resolutions: From razors to sofas, more products are being designed and merchandised to resolve overlooked pain points rather than presumed shopper needs. Casper notably achieved this with pop-up mattresses that arrived in easy-to-transport boxes. Sofa manufacturer Burrow fairly duplicated the model with its ready-to-assemble couches (no tools needed) that arrive in easy-to-transport boxes. Spotting a resolution to the thorny issue of assembly, Ikea acquired TaskRabbit.
Accountable labels: Based on Whole Foods grocery predictions, food suppliers and manufacturers will offer greater transparency regarding their ingredients, with labels claiming to be GMO-free, responsibly grown and Fair Trade, to name a few. Making these claims requires the brands to live up to them, meaning more food suppliers will change their ingredients to meet consumer demands. Upcoming required changes to food labels, to include listing the amounts of added sugars in nutritional facts by mid-2018, is also pressuring big brands to adjust their ingredients and seek healthier alternatives.
What do you think? Send your predictions for 2018 and we’ll save them for a future post.