Seven Retail Megatrends for 2020
By Shah Karim, Saferock
If it hasn't done so already, the consumer experience will undoubtedly include omnichannel shopping, mobile, and social media as part of what consumers do naturally. Based on this inevitable evolution of how customers engage with retailers, here are seven retail “megatrends” which will become reality by 2020.
1. Our daily quality of life will improve with wearables and IoT: The customer of tomorrow will be vastly better informed than ever before. Bill Brand, president of HSNi, and I spoke recently on our views of how consumers will interact naturally and effortlessly with society, content, and fashion using the latest in wearables, smart devices and consumer technology. Retailers will benefit when they help the customer shop “on the go” and influence the store from outside.
The “Internet-of-Things” will lead to more connected devices, improved in-store systems and better customer support. Accordingly, the in-store experience for shoppers will improve. Customers will be more informed about items, understand proximity to their friends, and be able to share with others.
2. Retail will go from merely local to hyper-local: In the coming years, retail will grapple with the challenge of being hyper-local. This will lead to greater variety, excitement, and experience. 3D printing, same-day delivery, shift from location to understanding of proximity, as well as the 'Maker' and 'Share' economies will drive this revolution.
Operationally, this will be quite challenging. Retail competition is not just store-based retailers -- brands and online retailers now sell directly to consumers. Even private individuals are selling both new and refurbished products. It seems that brands and retailers are competing with everyone.
3. Big Data, in small ways, will help anticipate customer needs: At a global level, big players will improve on core execution and get stronger. Technology barriers will go down and use of Big Data analytics will go up. This will help to anticipate customer needs and support service providers to deliver outstanding customer service.
As Bill Simon, former CEO of Walmart US, exulted as he described his personal experience ordering a suit in one store, but having the right size shipped to his home from another store: "I could not tell you whether that was a physical sale, a digital sale, or an omni-channel sale ... but what I can tell you it was great merchandise and very good customer service. And that's what the secret of retail is, to use technology to try to deliver great product at great prices with great customer service."
4. E-commerce remains on the rise: Online retail continues to gain share from physical retail. U.S. non-store sales, at $449 billion, exceeded 10% of physical store sales for the first time in February 2013. Similar patterns can be seen in the mature markets of North America and Europe, while in Asia and Middle East there is a growing middle-class with higher disposable income and aspirational demand who are also shopping online.
5. We will be truly globally connected: The global increase in use of social media and smart devices. Facebook now has more than 1.3 billion users, QQ and Qzone, both of Tencent, have more than 600 million users each, Skype and Instagram each have 300 million users, and Twitter has 280 million-plus users. Gartner predicts worldwide shipment of more than 2.2 billion smartphone and tablets for 2015.
6. Private equity and IPOs will fuel both competition and consolidation: Financially, there is consolidation in retail, emergence of new private equity owners, and growth in IPOs. Opportunities for private takeovers abound.
We see Tesco and RadioShack, both iconic retailers, in financial turmoil. Target shuttered 133 stores and Sony 14 stores in Canada, while others that downsized include Family Dollar (370 stores) that merged with Dollar Tree for $8.5 billion, Sears (339 stores), Abercrombie and Fitch (180 stores), JC Penney (33), and Wet Seal (338 stores).
PetSmart went private at $8.7 billion, bought by BC Partners, in the largest retail deal of 2014, and we saw IPOs from tech-fueled companies like Alibaba, at $25 billion the world's largest IPO, and Box, a newcomer in online storage.
Dick's Sporting Goods, Best Buy, Pier 1 Imports, American Eagle Outfitters and Aeropostale, are mentioned as potential takeover candidates. Whatever happens, it is clear that we will see more private transactions, transitions, and IPOs in the next few years.
7. Effective data security and privacy policy are table stakes: Privacy and data protection are top priorities for the CIO to execute on. If companies do not police their internal walls and adequately protect the customer data entrusted to their care, then policymakers in the US and Europe may be compelled to step in. The massive data breaches at Target, Home Depot, Michaels, Neiman Marcus and Anthem highlight the concerns of data security.
These seven megatrends inform retailers some of the challenges they face. In the end, it's about finding and delivering value by connecting to customer engagement - one retailer at a time, and one brand at a time.
Shah Karim is CEO of Saferock. You can reach him at [email protected] or visit Saferockretail.com.