Retail Trends of 2020
While we write about the retail apocalypse of store closures at the Last Futurist, it’s important to note that a multitude of trends in the retail sector are impacted by technology in general that boosts the customer experience and not just consumer sentiment or product demand.
The emergence of e-commerce as a broad trend really is transformative. The retail industry is also just a very dynamic space, with a war of brands and changing consumer sentiment and preferences that make the retail sector pretty fun to watch.
2019 was the year of BOPIS, the trend of shoppers buying online and picking up in-store for the total control and speed of the experience.
From experiential physical retail to e-commerce innovations, retail is very much an industry in flux. This makes it one of the most interesting to watch as technology, automation and algorithms creep in.
By 2030, AI will be managing Walmart stores, not actual humans. These locations will also be filled with different kinds of retail robots. That’s just the future of society that will be mirrored in the retail sector.
As NRF has started I always get a bit more in the mood to write about the ever-changing retail industry. Digital transformation lives with how we shop too, and this changes a bit each year.
NRF 2020 Vision: a week ago Retail’s Big Show kicked off on Sunday, January 12 in New York City with a record breaking 40,000 attendees including 16,000 retailers, 800 exhibitors, 200 sessions, and more than 100 hours of content anticipated — though it never really seems to move the dial.
Retail has the same watchwords as it did a few years ago, but there’s room for more automation and machine intelligence to creep in with better personalization.
1. Smart Stores
Between Alibaba’s New Retail movement and Amazon’s AmazonGo stores, the future of the physical store is getting a lot more data orientated with new customer experiences embedded with the potential.
Cashier-less stores will become more common. Omnichannel retail will get smarter in a 5G world and younger shoppers will prefer NOT to be served by humans.
Smart stores of various sizes will leverage customer experiences that are more convenient, intuitive and minimalistic. This includes even pop-up stores.
AmazonGo has been slow to roll out in the U.S. with very cautious and conservative pilots. This could change somewhat in 2020, as more big cities get access to the LiDAR-like convenience of being able to grab and go.
2. BOPIS Will Continue to Evolve
In 2019 buy online pick up in store really went mainstream and in 2020 it will become even more convenient.
Part of why consumers prefer and love BOPIS is the speed and control it provides. This past holiday season shoppers took advantage of BOPIS services in order to save money. Additionally, 49% of consumers stated that in-store pickup is quicker than at-home delivery.
3. Omnichannel Gets Creative Technology in 2020
With 5G rolling out, how omnichannel works could also be impacted by new kinds of customer experiences and better-connected devices and layers of devices and technologies.
Stores and retail brands more than ever need to become pioneers and morph into customer-centric omnichannel retailers.
More Big Data on shoppers means the facilitation of better customer journeys. Innovations around the POS, mobile, e-commerce and new product categories can all help.
Omnichannel also means in-store optimization, better digital experiences and the development of new partnerships. Merchants need to provide shoppers with an integrated shopping experience across all channels that allow shoppers to browse, shop and return items across in-store and online channels.
For brick-and-mortar stores, it’s a challenge to compete with pure-play e-commerce brands. Retail is a customer-focused environment and the best retailers tailor their brands and experiences to their customers the best in terms of convenience, speed, mobile and shopping periods.
4. New Forms of ID Authentication & Payment
In addition to LiDAR technology or QR code sign-ins before you enter an AmazonGo type store, it might make more sense to have some kind of biometric ID.
For instance, Amazon reportedly wants to turn your hand into a credit card. Technology giant Amazon is working to allow customers to connect their credit card information to their hands, The Wall Street Journal recently reported. Biometric IDs are interesting and patents abound.
Amazon has reportedly begun working with Visa on testing out the terminals and has discussed the project with Mastercard, JPMorgan Chase, Wells Fargo and Synchrony Financial. The company has already filed a patent for a “non-contact biometric identification system” that features a “hand scanner” to produce a picture of a person’s palm.
While Amazon can outdate cashiers and the POS with its automated stores, biometric ID capture would be faster than QR style log-ins at the entrance of AmazonGo type retail stores.
Either way, smart stores are coming to put data into grocery stores and make shopping faster.
5. Speed and Convenience
While Alibaba’s Taobao still has better return policies (insurance and convenience), Amazon is still investing in speed.
Amazon has set the bar high for delivery in the West, but in China JD and Taobao are already as fast if not faster.
A recent study by Forbes showed that 88% of consumers are willing to pay for same-day (or faster) shipping.
Of course indie and smaller (SMB) retailers who don’t have the logistics infrastructure will need to partner with delivery experts to satisfy consumers’ demands for instant gratification.
To that end, even large apparel retailer Old Navy recently partnered with Postmates to offer same-day delivery. Customers now expect speed and convenience, and if they don’t get it it can be a bottleneck for retaining them.
6. Stores Don’t Always Matter
In an era of omnichannel, pure play has also shifted. While some brands need to make stores to increase their brand and product experience, others need to get out of brick-and-mortar retail altogether.
Case in point? Bose headphones. Bose is closing more than 100 stores worldwide. With e-commerce in the West growing by 15% each holiday season, that’s a gradual shift in how we buy certain kinds of products.
Bose is closing all of its retail stores in North America, Europe, Japan, and Australia. So you would think that DTC brands have continued to learn from traditional retailers, first by recognizing the potential in e-commerce and now by opening up physical stores to complement it.
However, not all brands require physical stores. The era of buying toys or electronics in-store is sort of over in many cases, as Target and Bose have recently discovered.
Bose opened its first physical retail store in 1993 and currently has locations in many shopping centers and the remaining malls scattered across the US. No longer needed, no stores are necessary.
7. Retail Apocalypse Accelerating
Stores closures a myth? I think not. Store closures in 2019 exceeded 9,000 in the U.S., far surpassing openings, according to Coresight Research. What does 2020 hold? It’s really simple: more store closures.
America is still over-saturated with retail space. With rising rents and disappearing foot traffic, that’s a triple threat for physical retail and related business segments.
As consumer habits evolve, companies are searching for ways to evolve their stores to best serve customers’ needs. But that’s not always enough. For every rise of a Stitch Fix, there’s the demise of about 20 store chain brands. Innovation favors consumer behavior.
As Retail Dive insinuates, the reality of retail stores is this: there are still plenty of retailers with sagging sales, large debt loads and fragile or deteriorating finances. It’s the end of the line for many retailers who cannot keep up with the changing of the guard with the impact of digital transformation and the e-commerce trend. You don’t have to call it an apocalypse, but how many of us even have time to browse physical stores?
E-commerce penetration is still increasing. There is still a price war ongoing among the largest players. That’s simply not a thing most smaller retailers can survive as more stores closing than opening could last until 2025 as this “retail correction” continues.
8. Amazon Exodus and Amazon Ad Gains
While stores are leaving Amazon, its advertising segment will see incredible gains in 2020. More big brands are using Amazon each month.
Amazon is expected to reach $38 billion in advertising sales by 2023, according to Pivotal Research.
Amazon relying on AWS and Ads for revenue only means more of an ability to get into retail stores with its AmazonGo-like technology to push retail forwards into the 21st century and to be able to compete with China’s “New Retail”.
9. Augmented Experiences in Retail?
Retail pundits once again are touting AR and VR in retail settings. I don’t buy it. We’ve only been saying things like this for the last 5 years. That being said, progress is slowly being made.
IKEA’s Place App uses AR to let you view its furniture at full scale in your home — a big time saver and fun at the same time. That’s fun in theory at least!
Retailers will now have to optimize visual and voice search as well though. AR is seen by some as the critical technology behind visual search. Voice search is gaining in popularity, with some sources indicating voice search already comprises 20% of Google searches.
However, voice commerce has been very slow to take off in the U.S. Perhaps Baidu and Alibaba are having better luck in China. Advertising, voice and AR will all merge better in the 2020s, but it will take some work and optimization.
10. What is Social Shopping?
According to GlobalWebIndex, 28% of Internet users search for products in social media. While I don’t see social commerce having an incredible year in 2020, I do think group discount buying like we see in China could come to the West. That at least makes more sense.
The reality is Instagram, Pinterest and social media in the west are failing pretty hard at social commerce. Social shopping should not mean buying from social media apps, it should mean the kind of group discount purchasing that takes place on WeChat via Pinduoduo and such collaborative buying in Asia.
11. Using AI to Create Better Retail Experiences
The idea of using artificial intelligence to create better customer journeys is interesting, but mostly a fringe and hype exercise.
AmazonGo stores have been slow to roll-out of pilot stage, robots have not replaced sales associates and personal assistants in our AirPods and ear buds have not suddenly become smarter. It’s all very gradual for retail AI startups to mature.
It’s more like a crawl than a revolution. Even algorithms and data in the customer experience are slow to work themselves out in a meaningful way.
The elimination of cashiers, sales assistants and improving product discovery is inevitable with a combination of machine learning, LiDAR, VR, facial recognition and AI. This is a question of decades, not years.
Already with mobile, shoppers prefer dealing with AI over people in many respects and in an increasing array of retail verticals. This means eventually AI will replace a lot of retail jobs and sales associates (i.e. women in the service sector). In most cases, I see this occurring more in the 2030s than the 2020s.
12. Diminishing Middle Class Impacts Consumerism
As the economic reality is harsh for most young graduates, with static wages and increasing costs of living, churn from the middle class is happening at higher rates. This was one of the trend insights by Retail Dive that made the most sense to me.
Whether it’s the student debt crisis, the decline of cooking at home or the unaffordability of healthcare in the U.S., discretionary income is likely down for young Millennials and older GenZ entering the labor force. This simply means less money for shopping and the typical consumerist activities. It means young consumers are spending their money differently.
Many retailers don’t understand the experience economy of the reality of the new shopper. Instead of thriving in the post-Great Recession, for example, department stores, malls and others catering to middle-income shoppers have struggled and slid. It’s not just less foot traffic, it’s less discretionary spending and changes in how that budget is spent.
The demise of the middle class is not talked about much, but churn from it is on-going. The situation led Kantar to spotlight the “demise of the middle class” as one of its top trends that will bridge the prior decade and carry over into 2020.
I feel this gets a lot worse in the U.S. in the 2020s, impacting retail and consumer sentiment pretty hard. Many of these new consumers aren’t even prepared for a recession because they have never actually lived through one as an adult.
13. Walmart’s Robotics Push
Walmart is piloting a number of promising robots that could change the face of the retail store. We have to consider robots are likely good for investors and bad for employees. Floor scrubbing, shelf scanning, E-commerce warehouse automating and AI supervising — all the usual suspects are going to scale robotics at Walmart.
This means retail will never be the same with China’s New Retail and the projects Walmart and Amazon are doing in the West. The gradual replacing of cashiers and sales associates from retail sounds unthinkable until it’s inevitable.
What will we do without our Costco cashiers? Eh! There’s a robot for that. Well, maybe not yet.