Trends and Predictions 2020: Retail

Stephen DeAngelis

February 03, 2020

The big news in retail over the past two decades has been the rise of e-commerce which has resulted in the so-called retail apocalypse. Daphne Howland (@daphnehowland) reports any eulogies being written about brick-and-mortar retail’s demise are premature. She explains, “Retail may be on a store closure tear — more than 9,000 announced last year, with another 757 already this year — but it’s clear from several analysts and executives speaking at the National Retail Federation Big Show that the key to the industry’s future success is found in brick and mortar.”[1] She adds, “Getting customers, and loyal ones, is more easily achieved when physical stores are in the mix. … The human desire for gathering and connection represents one of retail’s most highly prized elements, a driver of traffic.”

The human penchant for gathering, however, has historically been tied to purpose. Why do people gather? The answer for many of today’s most successful retailers is customer experience. Satta Sarmah-Hightower (@SattaSarmah) explains, “Today, the customer experience isn’t bound to any one physical or digital space, as 73% of consumers use multiple channels to shop, according to a Harvard Business Review study of 46,000 shoppers. Modern retailers understand this new omnichannel reality and are adopting retail innovation strategies to meet shoppers wherever they are — and on whatever device they choose.”[2] Colin Stewart, Executive Vice President of Business Intelligence at Acosta, notes, “Millennials are responsible for changing the way brands interact with customers. Seventy-two percent of millennials would rather pay for experiences than material items, with FOMO — fear of missing out — being their main concern.”[3] Below are few of the retail trends and predictions provided by subject matter experts.

Retail trends

Trend 1. E-commerce. Doug Stephens, a self-proclaimed Retail Prophet, describes the current state of retail as “the end of the beginning of e-commerce.”[4] He explains that, to date, people have been able to make simple online transactions (i.e., straight forward buying and selling). In 2019, he notes, these transactions resulted in $3 trillion of sales. He asserts, “The outstanding opportunity is $27 trillion remaining in the global retail economy, including things that are fundamentally more complex purchases.” He predicts, “As early as 2033, the majority of our daily consumption will be transacted online.”

Trend 2. Direct-to-Consumer (DTC) retail. Reporters from Retail Dive observe, “Direct-to-consumer brands [are] solidly here, introducing the next stage of growth (or reckoning) for digital natives. Some of the most popular direct-to-consumer brands achieved unicorn status in 2019, indicating a $1 billion valuation and their status as a hard-to-ignore presence in their markets.”[5] Susan Reda (@Susan_Reda), vice president of education strategy at the National Retail Federation, isn’t quite so sanguine about this trend. She writes, “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.”[6]

Trend 3. Faster delivery. One of the most onerous consequences of the so-called “Amazon Effect” is increased customer expectations about delivery times. Products consumers used to wait a week or more to receive are now expected to be delivered in two-days or less. The trend is clearly towards same-day delivery. As a result, companies are increasing the size and number of automated warehouses and they are experimenting with new modes of delivery — everything from buy-online-pickup-in-store (BOPIS) strategies to drones. Robert Hetu (@Bob_Hetu), a research vice president with the Gartner, predicts, “By 2025, the top 10 retailers globally will leverage AI to facilitate prescriptive product recommendations, transactions and forward deployment of inventory for immediate delivery to consumers.”[7]

Trend 4. Social shopping. Sarmah-Hightower writes, “Apparently, social media is no longer just for posting viral video outtakes or vacation photos that inspire FOMO. As of 2018, according to Gartner, “66% of analyzed brands have adopted a social commerce feature within the past year.” And this year, the top 500 retailers will earn an estimated $11.9 billion from social shopping, according to a Business Insider Intelligence study. Shoppable Instagram posts, in particular, are one retail innovation that could change ecommerce. Consumers already spend about one hour and 15 minutes a day on social networks, so it makes sense that retailers would bring the shopping experience to them on these platforms and allow them to make purchases in just a few clicks.”

Trend 5. Circular economy. A surprising number of experts point to the circular economy movement as a new trend in retail. Retail Dive reporters write, “From rental services to resale, the circular economy really took hold in 2019. More brands are jumping on the trend, joining apparel services like Rent the Runway and e-commerce platform ThredUp and furniture rental companies like Fernish and Feather.” Analysts from Lenzing write, “Consumers are embracing the circular economy, which eliminates waste and makes continual use of resources by reusing, sharing, repairing, refurbishing, remanufacturing or recycling to create a closed-loop system that minimizes the use of resources and conserves energy. … The drive to capture customers in today’s omnichannel environment has produced strange bedfellows among ostensible competitors. These collaborations happen in the circular economy; for example, online consignment site thredUP has partnered with J.C. Penney and Macy’s to feature thredUP resale boutiques inside their stores.”[8]

Retail predictions

Prediction 1. Automation. Scott Thompson (@ScottThomps74), founder and editor of the Retail Technology Innovation Hub, predicts, “Automation will be huge in 2020.”[8] He explains, “59 percent of consumers who have previously visited stores with automation would be willing to shift their in-store purchases from a retailer without such technologies, to one that offers them. And that rises to 67 percent for 22-36 year-olds, according to a report from the Capgemini Research Institute.”[9] Hetu predicts, “By 2025, at least two of the top 10 global retailers will establish robot resource organizations to manage nonhuman workers.”

Prediction 2. Tumultuous change. Reda predicts, “Tumultuous change will define retail supply chains; investments in supply chain agility will separate leaders from losers.”[9] She explains, “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.” Jamie Merrick (@jamiemerrick), Director of Industry Strategy and Insights at Salesforce, agrees. He states, “Survival in retail demands more innovation, imagination, and efficiency. … Only the imaginative and operationally nimble will be able to take advantage. Even those who fall into this category won’t always get it right, but trying and failing fast will also be an important part of the process.”[10]

Prediction 3. Wellness, health, and CBD. Stewart notes, “CPG trends that took off in 2019, such as self-care, plant-based products and CBD, will continue to grow.” Reda adds, “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.”

Prediction 4. The retail box becomes the retail blur. Reda notes, “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. … 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.”

Prediction 5. Inclusivity. Reda predicts, “Consumers will form deeper connections with brands that embrace gender identity, diversity and inclusion. … 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.” She adds, “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.” Kristyn Levine (@kristyn_levine), Saleforce’s Vice President for Customer Success and Digital Customer Experience, predicts inclusivity will also include people of all sizes. She explains, “In 2020, more retailers will offer extended size ranges — not just online but in stores. Why? The plus-size fashion market value is worth more than $22 billion in the United States alone according to statista, and approximately 70% of American women wear a size 14 or greater. And these stats continue to rise.”

Concluding thoughts

Sarmah-Hightower concludes, “Retail innovations are changing how consumers connect with brands. Customer experience is now at the forefront of how companies set themselves apart in the marketplace. Whether it’s social shopping, voice-based commerce or drone deliveries, companies are using every technology tool at their disposal to differentiate their brand — and it’s transforming the retail experience as we know it.” Stewart adds, “The next decade will surely bring further change to the CPG industry as consumers’ priorities and appetites evolve and digitization continues to expand. Retailers will need to be nimble and adapt to the seemingly never-ending changes, or risk getting left behind.”

Footnotes
[1] Daphne Howland, “The comeback of the brick-and-mortar store,” Retail Dive, 13 January 2020.
[2] Satta Sarmah-Hightower, “5 Retail Innovation Trends that Reshaped 2019,” SmarterCX, 27 November 2019.
[3] Colin Stewart, “2020 Predictions for the CPG Industry,” TotalRetail, 14 January 2020.
[4] Daphne Howland, “The future of retail: What 2020 and beyond will bring to the industry,” Retail Dive, 8 January 2020.
[5] Kaarin Vembar, Ben Unglesbee, Cara Salpini, Daphne Howland, and Caroline Jansen, “10 retail trends to watch in 2020,” Retail Dive, 6 January 2020.
[6] Susan Reda, “Coming soon,” National Retail Federation, 2 December 2019.
[7] Robert Hetu, “5 predictions for the future of retail,” Retail Dive, 9 January 2020.
[8] Lenzing, “3 consumer retail megatrends in 2020 and beyond,” Supply Chain Dive, 10 January 2020.
[9] Scott Thompson, “Five retail technology predictions for 2020,” Tech_HQ, 15 January 2020.
[10] Rob Garf, “The Salesforce 7: Retail Predictions for 2020,” Salesforce Blog, 16 December 2019.
[11] Ibid.