Looking at the news and finding yet another retailer shutting down a few stores and declaring bankruptcy is a new normal, which makes us think about future of retail. At the same time, based on NRF estimates, retail sales will increase 3.7- 4.2 percent in 2017 over the previous year. Retail is evolving and consumer needs are changing. In the quest to gain mindshare and, more importantly, share of the wallet of a customer, getting to know the customer and responding to its needs are the key.
What is shaping up retail evolution?
The biggest piece of this puzzle is the consumer. After all, the retail industry is all about consumption. Since the consumer base is changing, it is all too predictive to see the light of the consumer demand in action.
Millennials, as we know them, are the driving force for consumption. This generation is more utility focused, value driven, and time conscious. Hence, we see the rise of retailers like H&Ms and Zara, which provide you a unique style statement and a quick turnaround in the way trends are captured and made available. The brand is certainly important, but it’s the value for the consumer that is driving the retail industry growth.
A few key trends that are worth elaborating:
Value and availability
Customers are looking for items as soon as possible in their hand with as much convenience as possible. Retailers, enabled by technology and other fulfillment initiatives, are trying to get to a shorter window of delivery. A lot of new models have cropped up to provide the value, speed, and cost benefits like Dollar Shave Club, Birchbox.com, etc. that are driven by the speed, availability, and variety for the consumer needs.
Health and wellness
Consumers are getting more health conscious and its showing in many ways. For example, based on a study, the global market for yoga mats was estimated at more than USD 1 billion with a growth of 6% year on year.
The health and wellness segment is impacting in multiple ways:
- Athleisure and active lifestyle-related products that are becoming more mainstream and millennials are adopting athletics wear as all around lifestyle
- Wearables that are gaining high adoption rates especially with the ease of monitoring. Wearables are expected to cross 200 million units in operation by 2020. Companies are going ahead and linking the wearable data with loyalty programs to provide a reason for consumers to connect with their brands.
- The superfood and supplements market, according to a report, is anticipated to grow at 8.8% between 2017 and 2022 and is expected to reach USD 220.3 billion in 2022.
- Natural/Organic/Plant-based and ‘free from’ food trends are visible across the geographies. Organic food is expected to be a USD 1 trillion market in 2017. Consumers are looking for lower levels of processing and have been open to try new products that are considered natural, fair, and free from dyes and chemicals.
Millennials are very comfortable with the pay-per-use concept instead of ownership and hence, the models for the product ownership are evolving.
A lot has already been said about how mobile has changed the way a consumer shops, and retailers have been quick to take note. Every retailer has been investing for an omnichannel environment.
The only caveat is how omnichannel itself is evolving. Ecommerce is a passé and mobile commerce is usual - now retailers need to think about voice commerce using Alexa and google home.
Technology has not been an only driver, but has also been a big enabler for the retail industry to take advantage of global opportunities. Collaborative technologies have helped retailers reduce the time to market, and breakthrough technologies like 3D printing have just started to make an impact.
Similarly, innovative usage of augmented reality and virtual reality are being adopted to provide more brand and product experience to improve customer intimacy.
Globally, the number of cybercrime activities has been growing exponentially and the retail evolution has had more than a fair share of its impact. Almost all big retailers have suffered security breaches related to the personal information of their customers; this has been a driving factor for technology investments by retailers.
Retail is on the receiving end on multiple fronts as far as the regulatory environment is concerned. There are regulations coming up not only to provide consumers more knowledge about products like its GMO components, calories, sodium content, etc., but also the impact on the environment (carbon footprint, material used, fair trade, etc.).
Apart from the consumer-centric regulations, retailers are getting more impacted by the product and waste management; these are impacting how the logistics and reverse logistics are managed. For example, lithium-ion batteries have been a cause of concern. Similarly, retailers like Walmart, Walgreens, and Target have been penalized for not managing their reverse logistics and waste management properly, and violating EPA regulations.
The regulations impacting retailers have gone beyond products, into the employee management as well, especially in the US, where healthcare laws had a big impact on how retailers, specially the smaller retailers could do business.
Additionally, the new minimum wage regulations that may come up in different stages in the US will also impact the way retailers operate
Retail is a mirror of global changes — which might be from either supply or demand perspective. This is an ever-evolving space. The Darwinian model just fits in perfectly on retailers – survival of the fittest. Retailers that get an understanding of the consumer expectations and are nimble enough to meet these needs will succeed.
- Global Yoga Mat Consumption Market 2016 Market Research Report. Market Research Reports. July 21, 2016.
- Dietary Supplements Market by Ingredients (Botanicals, Vitamins, Minerals, Amino Acids, Enzymes) for Additional Supplements, Medicinal Supplements, and Sports Nutrition Applications - Global Industry Perspective, Comprehensive Analysis and Forecast, 2016 – 2022
- Pofeldt, Elaine. The organic food revolution that is minting millionaires. CNBC.com. May 6, 2016.