As the dust settles after a tumultuous 2016 and record-shattering holiday shopping season, it’s time to look at the new year and the new opportunities and challenges.
Already, there are many overarching forces that will shape the marketplace in 2017, including a complex US political climate unlikely to stabilise soon, the UK government beginning their negotiations to leave the European Union after Brexit, and the thawing of Hong Kong’s retail “ice age” and how the economic relationship between China and US will fare.
The key to succeeding for retailers in the future is to anticipate it. But, that’s easier said than done. Retailers find themselves challenged by everything from changing consumer behaviour and their shopping patterns to mobile payment methods and inventory management issues. This week, Endaba forecasts the trends and issues facing the retail industry in 2017.
1. It’s a real life shopping cart!
Whilst ecommerce continues to grow rapidly, the channel is still only a fraction of total fashion and apparel sales. In fact it’s expected to plateau at about c.20% of the market, meaning that for the foreseeable future, the vast majority of sales will happen in physical stores.
Bricks and mortar retail has an advantage! Customers love to touch, feel and experience great shopping. However, a customer’s path to purchase does not mean they’ll always make the purchase in store! Retailers need to be prepared to offer a personalised experience to shoppers.
2017 will see the rise of more showroom stores. They will house products to look at in all sizes to try, but offer no stock and allow customers to complete purchases online in-store or at home
E.g. Bonobos opened their “guide shops” in 2015 and are about to open their 31st next month. Zalora offers a different variation of this theme in Asia
The “guideshops” drive higher conversion rates and increase average purchase values, compared to online. The idea is to divorce the purchase of a product from its distribution. Bricks and mortar store are in the midst of an identity crisis. This is an option to change for the future, solving the problems of markdowns, helps limit in-store inventory, as companies can never predict perfectly which items will sell in which shops, and solve square footage problems, thus lowering real estate costs.
We’re surprised we haven’t seen more of these yet!
2. Time to close up shop?
Legacy retailers such as Macy’s and Sears have been in trouble and turmoil for a while. Previously, the more space the better! However, with the rise and impact of fast fashion and ecommerce on traditional department stores, the market has become densely and overly populated. There’s too much stuff and not enough demand! Coupled with savvy merchants leveraging physical space in new compelling ways – showroom stores, virtual and smart stores, auto galleries – technology disrupts every facet of the shopping experience
Traditional retailers have found ways of quickly propping and patching themselves up and cutting costs – but there’s inevitably going to be huge shake out. Is 2017 the year? We think so!
3. Mobile commerce is the best sales weapon in 2017
This is an easy prediction – it’s a no brainer that online sales will continue to grow as will mobile’s share continue to rise as more and more customers are putting mobile-first. GHD are seeing 65% of their traffic and 45% of their revenue on mobile. Retailers who still don’t have a mobile sales offering in 2017 are going to lose out and retailers without apps will be missing out of the biggest growth area of all. Apps probably won’t outpace the web in 2017 but they’ll get closer!
4. Delivery will get faster
Again, another easy one. Customers want more options on how to get their products. Customers expect same-day shipping, same-delivery or next-day delivery, click and collect or buy in-store and home delivery. Less than half of US or European retailer offers those options. In the meantime, Amazon has completed their successful drone delivery in 13 minutes from click to delivery! This will become the norm in 2017
5. It’s just commerce!
Will 2017 will be the year we finally ditch the silos and titles? Since customers don’t think in online, offline or channels, retailers shouldn’t either. There’s an ever-growing demand on retailers to provide customers with the best digital experience possible combining efforts of online, mobile and in-store into one seamless customer experience
In 2017 we’ll see offline and online finally blur and become easily interchangeable. Retailers who are dragging their feet will get to grips with omnichannel services and break down siles. The stakes are high. If they don’t and customers have bad service, they’ll just go to a competitor!
6. Ecommerce crossing borders
Ecommerce will continue to make the world a smaller place in 2017. We’ll see a shift towards more specialty and unique products, to small-medium sized businesses who are offering something different because ecommerce and marketplaces gives them the international platform and reach without having to go international!
As a result, we’ll see a decline in distributors. There’s no longer the need for the middle man!
7. Workforce supply needs to meet customer demand
Technological advancements, increasing competitive pressure and savvier customers continue to impact retailers across all categories. Staffing is still the single largest controllable expense item on the balance sheet.
The need to finely match customer demand with workforce is critical. In 2017 we’ll see elimination in efficiencies in managing staff. It’s about making sure the right person with the right skills is in the right role! Traditional is no longer a benefit in business. Businesses looking for great talent – progressive, agile change agents – as opposed to great technical talent.
Looking to the future, we can expect retail to be transparent, dynamic, and seamless.
That’s our retail predictions for 2017. We wait to see how right or wrong we are in the beginning of 2018 … but no pressure. A lot can happen in twelve months!