I predict 2018 will be an exciting and innovative year for retailers. The brick-and-mortar side of the business will continue to reshape, redefine and recreate the retail experience. Two trends from 2017 will continue in 2018, driving change in the industry.
- Excellence as a purveyor of product will need to be top of mind for retailers but they also need to create differentiated product to escape the need for discounting or constant competing on price.
- Portfolio strengthening will continue as retailers try to balance the right mix of store locations, digital platform investments and real estate optimization. Real estate companies and malls are working diligently to stay relevant with the use of technology, innovative partnerships and looking at space in a different way.
Six 2018 Trends for Retail (with an emphasis on brick-and-mortar)
The key brick-and-mortar retail trends for 2018 include personal commerce, mobile as a conduit, synchronized technology deployment, data analytics and fulfillment and last mile delivery.
- Personal commerce is delivered directly to wherever the customer wants. The need for all things simple and convenient supersede other shopping factors. Pop-up shops, store-within- stores and partnerships between retailers are slated to make the shopping experience more convenient. Amazon + Kohl’s, Space NK + Bloomingdales, Topshop + Nordstrom, Lenscrafters + Macy’s, Apple partners + Accenture, CVS + Aetna and Amazon’s purchase of Ring are examples of partnerships that make the shopping experience more relevant and simple. Enabling technologies like the Neiman’s iSell app puts the customer in the center of the experience and takes the path to purchase from the desktop to the mobile device. Seamless transactions stemming from the use of AI or AR are taking shape. “Perfect fit apps,” virtual stylists and subscription commerce that use algorithms and machine learning to pinpoint customer preferences are proliferating. For example, Stitch Fix and Bark Box tailor the assortment to the customer or pet preference. IKEA’s augmented reality showcases furniture in the customer’s house. Amazon’s lead in conversational commerce takes the level of convenience to a whole new level and elevates customer expectation. In the not too distant future, wide-scale use of autonomous trade will be characterized by driverless vehicles bringing product to the consumer.”
- Mobile as the conduit across channels has never been more important than today. Mobile
technologies have the agility, power and speed to act as a catalyst for the two most coveted factors for today’s shoppers: simplicity and convenience. As mobile moved into the first screen position a few years ago, this “one device” literally connects all channels throughout the path to purchase and has never been more ubiquitous. Mobile is the “front door” to both brick-and-mortar and e-commerce sites. Mobile has become a powerful purchasing device, browsing machine, social media communication tool and “everyone’s best friend.” According to Verve, a dynamic location mobile marketing platform, 60 percent of Mobile Prodigies (millennials and Gen Z), would rather lose their wallet than their phone. Of course, their phone is their wallet. Retailers have had to work hard to create mobile-friendly platforms allowing for continuous connection across channels and touch points.
- Synchronized technology deployment uses a team to make strategic technologies decisions across various functions of the business to support a better branded customer experience, reduce duplication of efforts in the business and prudently use capital to fund the technologies which align with the overarching strategic plan. There are three technology considerations to ensure synchronized deployment:
- – Creating innovation labs or innovation groups to make strategic decisions about enabling technologies across various functions. This allows for a comprehensive plan across the business to have a measured and systemic approach to technology deployment. In other words, these groups will decide which, how much and when various technologies will be deployed in the business.
- – Determining the cycle time of each of the approved technologies into three time frames (1) in the next year, (2) one-to-three years, or (3) three-to-five years. It is critically important to have technologies in each of these timelines to ensure that continued innovation occurs in the business.
- – After deciding which enabling technologies will be used as part of the strategic plan, the internal business decision becomes whether to build the technology in-house or to use a technology partner. Technology partners have the ability to scale the business faster and come with the experience (intellect and infrastructure) to deploy at a faster rate. However, building technology in-house provides customization and proprietary technology which can lead to a sustainable competitive advantage. The decision comes down to bandwidth, internal capabilities and appetite for risk.
- Data analytics for most brands will emerge as one of the largest investments for retailers in 2018. By deeply understanding the customer across the multitude of touch points including social, mobile, ecommerce and stores, brands will provide a comprehensive view of each customer segment. Sophisticated analytics go beyond the scope of transactions to include external sources such as demographics, weather, or location data. The combined efforts of comprehensive internal data (structured and unstructured) with comprehensive external data, deliver powerful insights and action including personalized content, predictive analytics and robust recommendation engines. Ultimately, data analytics create the roadmap for personal and conversational commerce and can aid in decisions about synchronized technologies.
- Sophisticated fulfillment can minimize the service gap and meet customers’ expectations. Retailers have worked tirelessly to figure out the best business model to maximize labor hours for fulfillment. The added workload for stores coupled with the higher expectations from customers has forced many retailers to rethink the process. The execution of the buy-online, pick-up in-store process is quite complex and requires significant IT infrastructure behind the scenes to provide a seamless experience to the customer. Fulfillment of ecom orders can be done most efficiently with an outsourced provider that can execute at a high level without the distractions of other store tasks. A highly trained and focused in-store team that specializes in fulfillment can also be used, but the mistake some retailers make is asking existing staff to add fulfillment onto their already full workloads which will negatively impact execution at a high and consistent level.
- Last mile delivery has become table stakes. Typically, most customers appreciate the personal service with UPS and many know the driver that makes package deliveries to their home. This is one of UPS’s greatest sustainable competitive advantages and, in an age of personal commerce, this could make a huge difference. In pursuit of keeping costs low with last mile delivery, companies may be shortchanging the customer experience by switching to other providers like USPS or FedEx Ground. Both alternatives have inherent problems.
- USPS employees originally delivered first-class mail and some small packages, and now they are delivering mostly packages and a few pieces of mail. According to the USPS Annual Report, since 2014, first-class mail revenue is down 7.2 percent and shipping and packages up 44 percent. The shift of mail delivery from first-class mail to packages will have an alarming impact on last mile delivery including timeliness and service delivery. The productivity measurement used by USPS, deliveries per total work hour, is down which may be a sign that the shift in workload is taking its toll. According to the report, unexpected changes in volume make it difficult to adjust work hours. Online purchasing will either save or demolish the USPS.
- FedEx Ground uses third-party contract drivers which creates a myriad of issues including driver turnover, inconsistency in standards and inability to control that last mile and point of customer contact. FedEx Ground has to figure out how to maintain a more consistent experience across the network.
- The real competitor in last mile delivery has not even hit the market yet but they are making plans to take over third-party delivery. With a recent acquisition, Amazon is well underway to steal the business away from both FedEx and USPS. Amazon+Ring sums up the retail trends this year; personal commerce delivered right “through” your door into your home.
In summary, 2018 is about synchronization of channels, analytics and technologies culminating in the quest to be all things simple and convenient. Personal commerce is here to stay and flourish, so you’d better be well on your way to deliver exactly what your customers want … when and wherever they want it.