Depending on where you look you are likely to find radically different views on the current state of retail. While most mainstream media has focused on the sensational and negative, the facts seem to point to a much sunnier outlook. The truth is, since January of 2017 the retail industry has increased sales by $565.7 billion and opened 8,575 stores. According to a 2019 report on the state of the industry by IHL Group, the health of retailers is widespread and the outlook for 2020 is strong. They also warn, however, that the industry is changing rapidly and those retailers who do not keep up will pay the price.
Now that we've settled into 2020, stay on top by familiarizing yourself with these 5 major retail trends shaping the future of the industry.
Bigger Gains for Smaller Stores
The economic growth of the last few years has been overshadowed by the closing of thousands of stores by behemoth retailers from Toys R Us to Sears. So many stores have closed in fact, that the media dubbed it the “retail apocalypse.”
The happy truth is that for every retailer that's closing stores, 5.2 are opening new locations and the wave of store closures in recent years has been driven primarily by just a handful of companies with large format stores. What's interesting is that small stores with fewer than five employees have seen the biggest gains, with a net increase of 4,569 as of the first quarter of 2018 compared with the same time in 2017.
Offering a less overwhelming atmosphere for consumers and providing a lower overhead for retailers, downsizing may be the ticket to success in 2020 and beyond.
The Come Back of Brick-and-Mortar
Over the past decade digital-first retailers have changed the retail game and garnered the lion’s share of industry growth. Many people anticipated that the convenience of ordering from home combined with the leaner business model of “cutting out the middle man” would ultimately be the end of traditional brick-and-mortar storefronts. Instead, we’ve found that physical storefronts could be the key to success in this new era. In fact, the biggest area of growth in the industry is in the seamless integration of the e-commerce and brick-and-mortar shopping experience.
We’re currently seeing digital first retailers from Amazon to Casper opening their own brick-and-mortar locations across the U.S. What’s more, findings from a 2017 study by retail omni-channel platform Hero conclude that a staggering 67% of e-commerce brands that have received over $6M in funding have opened physical spaces in the past few years.
Although online shopping can offer some level of convenience to shoppers, both consumers and retailers are quickly wising up to the fact that an exclusively online store can’t do it all. This doesn’t mean traditional retailers should abandon their digital stores, however. Consumers want to be able to browse and buy online with the option to pick up or return their items in store. By 2021, a staggering 90% of retailers are expected to offer this option to their customers.
If you have a physical store location you should work on integrating ecommerce to capture this market, while also capitalizing on what brick-and-mortar does best: offering instant gratification, engaging all the senses, and providing expert advice.
Remember when five to seven business days was a reasonable window of time for something to ship? Perhaps the biggest effect Amazon’s introduction of ever shorter shipping windows has had on consumer online shopping habits is that now waiting a week or more for anything seems interminable.
As shipping speeds increase, expectations increase, as well. Plenty of retailers, including Amazon, offer same-day shipping—the logical end-game for online shopping. But there comes a point where the supply chain simply can’t get a package to you any faster. The constant demands for faster and more efficient delivery put a strain on even the mightiest of supply chains, which is why retailers need start coming up with new fulfillment strategies.
You should definitely be looking into investing in technologies to drive improvements in warehouse automation and inventory accuracy, but it may be that the answer to faster fulfillment doesn’t involve shipping to customers at all. Omni-channel strategies like BOPIS (buy online pick up in store) are extremely popular among consumers and can give even small size retailers an edge against giants like Amazon.
Whatever you end up doing, you need to take an active approach to coming up with creative fulfillment strategies that meet consumer demands or you will risk losing customers to other retailers who can meet their needs.
We’re living in the experience economy where consumers shop for more than just a good or service, they shop for the memorable experience of time well spent. Yes, you may be selling a good or service, but it’s important to ask yourself what else are you offering your customers.
Today, successful retail companies rely on much more than physical brick and mortar stores. Consumers demand an omni-channel experience with the ability to purchase items on their own terms via e-commerce sites, they expect to be able to reach out to brands across every platform, and they expect to be heard by those brands. Interactions with a brand have become not only digital and more cross-cutting, but seamless between the various touch-points. Retailers must devise an omni-channel strategy now if they want to continue to do business tomorrow.
This omni-channel reality has made it so actual stores are just one point in the whole shopping experience. When they do go into a store, consumers expect to have a memorable and enjoyable experience there. This is why experiential retail—a 360 degree experience that allows consumers to interact more deeply with a brand—is one of the biggest upcoming trends. Experiential retail manifests itself in many forms, such as a department store incorporating in-store spa and fitness services, a kitchen supplies store luring in customers with fun cooking classes, or an athletic shoe brand inviting customers to test their sneakers out on an in-store basketball court. The possibilities are endless and meaningful store experiences will be different for every retailer. But leaving your store as is? That’s not an option.
There’s a growing population of consumers who are willing to pay good money for the privilege of not having to own something. For them, short-term access to products like clothes, furniture, sneakers, sports equipment, camping gear, jewelry and housewares, is preferable to owning, storing, moving, and eventually having to dispose of such purchases.
According to retail analytics firm GlobalData, rentals of consumer goods (excluding vehicle and home rentals) generated $60 billion in revenue in the United States last year. As Millennials and Generation Z make up more and more of the consumer base, this trend is only going to get bigger. These younger generations do not have the expectation of buying, owning, moving, selling, and storing furniture every time they go between different jobs or different life moments, and over 70% say they are willing to rent rather than buy if the products are “well-made and trendy.”
The shift toward the sharing economy, evidenced by the rise of Uber to Airbnb, now has startup entrepreneurs and traditional retailers looking at rentals as a new source of revenue. Mainstream brick-and-mortar retailers, including Macy’s, Crate & Barrel, West Elm and Ann Taylor are also jumping on the trend.
Staying abreast of rapidly changing trends in the retail industry can be overwhelming and exhausting. But choosing a few to focus on will keep your brand fresh and position you for success in the coming year, and decade.