Welcome to 2020 … well, almost. For a very long time, 2020 seemed to be in some mythical Orwellian future. Not anymore.
As we step into the third decade of the 21st century, there are a few things we can anticipate with confidence. The next 12 months will be characterized by uncertainty, driven by the upcoming presidential election and the ambiguity that hangs heavy in the air. Look for greater attention to be focused on climate change, the sharing economy to continue surging ahead, Apple to introduce a low-cost iPhone and Social Security checks to bump up ever so slightly.
Trend-watching experts say Wi-Fi and battery life have officially taken their place on a “revised” version of Maslow’s hierarchy of basic needs — a droll yet direct read on what matters to today’s consumer. There’s heightened speculation about a recession, raised eyebrows about the likelihood of a substantial rollout of autonomous driving cars and more context than conjecture about 5G cellular technology.
What about the retail industry? What can it expect in the next 12 months? STORES has been making predictions for nearly two decades, and it’s an exercise that mixes facts and figures with input from experts, reams of reading materials and a fair amount of intuition. Right or wrong remains to be seen, but taking stock of where we’ve been, where we’re headed and how long it might take to get there is never a bad thing.
With special thanks to Bain Capital, TrendWatching, Code Commerce, NYU Stern School of Business Professor Scott Galloway and the endless stream of insightful research that fills editors’ in-boxes, STORES offers its top 10 predictions for 2020.
Consumers’ appetite for resale and recommerce will be voracious in 2020.
Described by Galloway as “retail’s new disruptor” and “the new gangster that’s going to create hundreds of billions of shareholder value,” the resale market is expected to nearly double in size in less than five years. Figures from online store ThredUp and retail analytics firm Global Data show the U.S. secondhand apparel market was worth $24 billion in 2018 and is likely to reach $41 billion by 2022. By 2028 the used-fashion market could climb in value to $64 billion in the United States.
Fueling the success of this once-fringe business are frugal, value-conscious millennials (and, increasingly, the generations outside those boundaries). Consumer attitudes toward ownership have evolved from stockpiling fashion to a more circular notion, with the desire for greater sustainability at the forefront.
Look for more retailers to dabble in rentals, targeting a piece of Rent the Runway’s sweet success to win favor with shoppers who will forever be seduced by what’s new and now, but are refusing to comprise their environmental ethos.
Tumultuous change will define retail supply chains; investments in supply chain agility will separate leaders from losers.
Never has the pressure to rethink supply chain strategies been more acute. Retailers’ competitive advantage from first- to final-mile comes down to reengineered processes including improvements in forecasting and predictive analysis, embracing automation in the form of robotics, making blockchain education a priority and crafting a real-time business case for sustainability.
Where should they start? It’s time to fully embrace their superpower — leveraging their network of physical stores as one unified distribution center. Doing so can lead to massive margin gains. And, while many retailers have tapped into the value of advanced analytics, 2020 will be a tipping point: The critical insight gained from artificial intelligence and machine learning will be applied more consistently to yield gross profit and sell-through increases.
Sustainability will continue to be the elephant in the room. Companies acknowledge that shifting to more sustainable practices is a move the industry needs and customers demand. Still, it’s fraught with years-long, protracted processes and stringent requirements; half-hearted efforts won’t work.
Success in 2020 is grounded in offering an incredible retail experience: How retailers tell a story, how shoppers experience it and the emotional connection that’s left behind will allow vigilant businesses to raise the bar.
The retail industry has been talking about experiences for decades — remember “The Experience Economy,” written by Joseph Pine and James Gilmore in 1999? Today it’s imperative — regardless of whether a company is selling apparel, personal care products or tires. Customers can buy just about anything online; snag their attention with storytelling and hands-on interaction and your “audience” will remember the experience.
The concept of experiential retailing is speeding headlong toward a mainstream business practice. The newest crop of retail businesses were early adopters. Now, shopping malls are embracing the idea, infusing entertainment options into the mix and beckoning mallgoers with the promise of environments that will transform periodically — not just at the holidays.
But therein lie a few challenges: It’s imperative that the experiences are regularly refreshed (focusing on Instagrammable moments is tiring). And, while experience matters most these days, the retailers who remain the most vulnerable will be those who refuse to change. Rushing headlong into creating an experience when your business strategy is tired is not a panacea. The key to success when it comes to creating a store experience that shoppers want to return to again and again is grounded in engaged associates; investing in human capital is vital.
Look for the “darling” status of direct-to-consumer brands to crest.
It’s been quite a ride for many direct brands; some have even reached the coveted “unicorn” level of prestige, but chinks in the armor are beginning to show. For starters, it appears once free-flowing venture capital is being tempered with gut-check realism. Investors are looking for more proof that a business is viable before they commit.
Many of these brands are finding that traction and loyalty lags without some physical connection to shoppers. They need to transition their online strategies to the offline world, and ensure the experience is in line with the authenticity and efficiency shoppers have come to expect. And, the need to stand out is imperative. Let’s face it: Not all the dozens of mattress providers selling directly to consumers will survive.
Big conglomerates are launching their own startup studios and others are acquiring some of the early players — think Harry’s Shave Club and Drunk Elephant. There’s room to grow, for sure, but the price of entry and the path to profitability are getting tougher.
Positive trigger words for 2020: wellness, health and CBD.
Retailers know a thing or three about triggering emotions and stimulating sales. Those who have embraced any or all of the above can attest to the powerful ripple effect. But like everything retailers do, efforts toward health and wellness need to be authentic and in sync with a brand’s ethos. While plenty of newcomers have tossed their hat in the ring, look for the next 12 months to separate effective elixirs from placebos.
Case in point: Walmart. Health and wellness are already a large part of Walmart‘s business model, which includes prescription drug sales, vision services, medical product sales, over-the-counter drug sales and additional services offered in its 19 Care Clinics. The newly opened Walmart Health Center will add more to the mix and bring the entire offering under one roof.
The Vitamin Shoppe, which debuted the first of four next-generation stores in October, is beckoning customers to engage with its “health enthusiasts” (aka store associates). The new stores blend digital technology, including on-demand digital product guides, enhanced mobile point-of-sale checkout and a complimentary body composition analysis station, with the personal touch of informed health enthusiasts focused on helping customers build a wellness plan.
And, all eyes will be on cannabidiol, the current trend du jour. The Brightfield Group estimates sales of CBD-based products will increase by 700 percent in 2019, making it a $5 billion market. Given that every retailer from food operators to beauty purveyors to furniture companies have a CBD story to share, another year of three-digit growth seems probable —
until, of course, some sort of regulatory measure kicks in.
Retail won’t be boxed in; the operative catchphrase for 2020 retail is blurred lines.
The lines between channels, products, technology companies and social media entities are no longer clearly delineated. Retailers have been branching out for some time now, far beyond familiar “channels.” They’re continuing to try their hand at hospitality, health services and rentals. Over the last six months, Walmart, Kroger, Macy’s and e.l.f. Cosmetics have launched campaigns on social media platform TikTok, garnering impressive levels of consumer engagement along with millions
Under the heading of strange bedfellows: Le Tote, a relative newcomer in subscriptions, inked a deal to acquire legacy department store Lord & Taylor in August. More recently, Simon Property Group entered into a joint venture with Rue Gilt Groupe. In the deal, Rue Gilt’s websites will keep their individual identities and be operated separately, while Simon’s Shop Premium Outlets will transition under the operations of Rue Gilt.
McKinsey & Co., best known as the management consultancy of choice among the Fortune 500 crowd, opened its first bricks-and-mortar concept store. Modern Retail Collective debuted in September at Minnesota’s Mall of America, the nation’s largest shopping complex. Impossible Foods, the company behind the plant-based burger, recently launched in 27 grocery outlets run by Gelson’s Markets in Southern California. And Target Corp. announced in October that it was teaming up with the owner of the Toys “R” Us brand to relaunch the company’s ecommerce site, ToysRUs.com.
Don’t even try to keep score. It’s futile. It’s also brilliant. Driving this blurring of lines is retailers’ realization that the newest evolution of retail is about providing a holistic experience for consumers. Always looking for ways to create a competitive advantage, retailers are opening their minds to innovative ways of servicing and supporting the customer journey.
Personalization will continue to be the target of industry skeptics’ side-eye.
Despite progress, very few retailers have achieved a level of personalization that rivals consumers’ expectation, e.g., Spotify, Netflix, YouTube. These platforms have developed AI recommendation engines to suggest new content to people based on what they’re already listening to or watching and what people with similar interests are enjoying. Most retailers are still struggling to get there.
There are some standouts. Stitch Fix and Rent the Runway use masses of data to hone their personalization prowess. At the Code Commerce conference in September, CEO Jennifer Hyman described RtR as a data company that focuses on fit. “Traditional retailers know what sells,” she said. “We get post-order data (on fit, wear, etc.) and it informs what we buy.” Nordstrom leads the personalization push from a customer service platform and Sephora topped Sailthru’s Retail Personalization Index for the third year in a row. Sephora’s score of 79 out of a possible 100 comes in part because the beauty retailer’s mobile app, in-app messaging and links to its loyalty program are top-notch.
Artificial intelligence and machine learning should be making it much easier for retailers to personalize their efforts in ways that go beyond email. Still, every indication suggests most companies are still swimming in so much data that figuring out how to tap this repository in a way that engages shoppers — not enrages them — remains a challenge.
Cue the video: Seeing leads to selling.
Heard of NTWRK? If not, tune in — Foot Locker recently announced it has invested $3 million in Commerce Media Holdings LLC, which does business as NTWRK, a video-based shopping app that works with celebrities and brands to sell limited-edition merchandise. CEO Aaron Levant describes NTWRK by saying, “We’re focused on all things fandom and the most meaningful moments in pop culture across multiple categories.”
He’s far from alone in the quest to create a version of QVC for the 35-and-under set.
Walmart this summer announced a partnership with Buzzfeed’s Tasty video platform to launch a first-of-its kind feature — shoppable recipes. Customers will soon be able to add the entire ingredient list from a portfolio of 4,000 Tasty videos right to their Walmart online grocery cart.
And there’s more. In mid-September, Walmart’s Vudu streaming service debuted “Mr. Mom,” a modern adaptation of the 1983 film starring Michael Keaton. The pièce de résistance: Vudu’s nascent offering of shoppable ads that are embeddable in its content. Viewers can use connected TV remotes to click on small banner ads on their screens, which puts the product in their Walmart shopping cart. Once purchased, items can be shipped or picked up in a store.
On the global front, live shopping shows from Alibaba and JD.com are gaining traction, and micro influencers are using their own platforms to sell branded merchandise and earn a cut. ShopShops influencers stream videos from inside U.S. stores, giving new perspective to the idea of connecting with global shoppers.
Consumers will form deeper connections with brands that embrace gender identity, diversity and inclusion.
It’s time for brands to be authentic in messaging and in action. Those who do so will win over today’s “woke” shoppers; those who miss the mark stand to lose some consumers for good. Successful retailers need to embrace these tenets in their storytelling; it’s not just about marketing, it’s about reflecting that storytelling across
Athletic apparel brands, beauty companies — even Mattel, which recently introduced gender-neutral dolls — are making strides, willing to exchange longstanding ideals of beauty for the sake of inclusion. Sephora leads the way: The retailer’s “We Belong to Something Beautiful” campaign takes inclusion to a new level. It brings viewers face to face with non-binary experiences across race, ability, body type, age and transition. In June, Sephora released a brand anthem and call to arms to support inclusivity. The nearly two-minute video spot begins with text that reads, “They, She, He, Xe, We” — a reminder of how deeply personal names and pronouns can be.
Expect to see a lot of progress in 2020 as more companies designate a chief diversity officer and retailers embrace the tenets of diversity and inclusion as a business imperative.
3D pushes to the forefront as the business case for adoption flourishes.
Companies are moving quickly to adopt 3D tools as understanding grows of the value it can deliver across multiple stages of the product lifecycle. Using 3D lessens the number of fit samples typically produced, reducing the cost and time involved in sampling and fitting, improving margins and giving brands a means to fight against the need to raise the retail price of products due to operational inefficiencies.
On the store design side of the house, investments in 3D virtual visualization help retailers more effectively plan store layout and determine product positioning. Some have used 3D software tools to study customer behavior in different layouts; 3D retail merchandising software allows more immersive smart shelving and brand engagement.
The technology is also being used by shoppers. Earlier this year CGTrader began working with apparel design and manufacturing company IKAR (which designs and manufactures product for the likes of American Eagle Outfitters, Target, Ross and Nordstrom) to transform traditional fashion visualization 2D images and paper catalogs into engaging and immersive 3D and AR customer experiences for its intimate apparel and activewear lines.
CGTrader also teamed up with Magic Leap, a leading spatial computing platform, to explore new interactive spatial 3D applications for consumers purchasing garments, both for at-home shoppers and end-of-aisle experiences. In the not-too-distant future, IKAR will be able to use spatial computing platform technology to allow shoppers to see how items would look on them at home, using their body specifications.