Retail is in the middle of a high-stakes poker game that started a few years ago. At the beginning, there were several players at the table including Amazon, Walmart, Best Buy, Circuit City, Target, Macys, Nordstrom, Sears and many others. What we saw in the past few years is some of the retail players folding or having to leave the table, such as Circuit City and Radio Shack. We also saw Amazon dominate the last few rounds by continuing to play the low-margin game, thanks to lower-cost and lower-margin expectations from their shareholders.
What has been clear is that the retailers still at the table are the ones who have made the required investment in understanding their consumers’ needs and tailoring the rest of the organization to meeting those needs. Different retailers have responded at different speeds, and some admittedly have taken a few wrong turns; JCPenney, for example, was recently forced to make the decision to close several of its smaller-market stores.
Here are what we believe are the significant retail trends to watch for in 2016. Admittedly though, some of these trends will depend on the direction the overall global economy takes. A global economy that stutters will have the unfortunate side effect of some players exiting faster than anticipated.
Attention turns to the supply chain
If the previous years were about understanding the consumer, we believe 2016 will be the year that supply chain investments will come to the forefront. Thanks to the democratization of price, price will increasingly move to the background as a distinguishing factor. Higher interest rates and a slower global economy will put more emphasis on improving the efficiency of the supply chain to cater to omnichannel. Retailers will ask themselves important questions, including: Can I use stores as a fulfillment location? Is it better to ship from a store or a distribution center in response to an order placed online? If it’s a store, which one?
Location still matters
It used to be that retail was about location. It still matters, but what also matters is virtual location on search engines. How easy is your store to find—not just physical, but in terms of search ranking in response to a consumer need, as expressed in results from Google or Bing. Across a number of retailers that we work with, we have found that there is a significant drop in loyalty; fewer consumers now visit the retailer’s website directly to search. Instead, they rely on search engines to begin their research.
Blurred lines between retailers and brands
Who is a retailer? Who is a brand? The lines are getting blurred. Retailers, in order to reduce costs, will increasingly invest in private-label products. Brands, in order to reduce costs, will increasingly invest in getting to the consumer directly. The previous years had a few brands tentatively test the waters, in terms of trying out the direct-to-consumer model. This year will see more of them getting into the act.
Mobility: Is it even a trend?
A number of retail trends have continued to point to mobility as a trend. I actually think it’s not a trend as much as it is a transformation that has already happened. The number of devices that can access the Internet is increasing, and those devices are increasingly location-aware. The Internet of Things will put many such devices in the hands of the consumer. As far as retailers go, the trend is about the opportunity to further enhance personalization and targeting by leveraging the location context.
Democratized multi-level marketing
In the retailer context, what is social, if not a changed version of multi-level marketing? Get rewarded for posting reviews. Get rewarded if three of your friends buy the same offer. Like me and I will give you 10% off. I do think that the previous years were still about discovering what can be done with social. I see a distinct trend in 2016 of trying to increase social ROI by further blurring the boundaries between social and multi-level marketing.
Offers get personal
It is no longer “what is your price?” Thanks to the investments made in understanding the consumer, retailers will become better at targeting consumers with an offer. An offer is a combination of products, price, discount or incentive and the marketing channel. A well-structured offer can achieve a higher ROI than a price discount. A well-structured offer made through the right affiliate channels can further increase the ROI. 2016 will see personalization and price optimization combine and morph into “offer optimization.”
Beacons and Consumer Tracking on the horizon
Everybody talks about beacons. I think the larger trend is towards tracking technologies that can monitor consumers in a legally permissible way, so that the additional context can be used for better targeting. I think, however, that while experiments will continue in 2016, 2017/18 is when we will see this really take off.
Bigger Data gets actionable insights
Big Data … bigger data … humongous data. All commerce is digital now and there are lots of digits being generated thanks to social, mobile and search. It is not the size of the data that matters, it is the insights and actions that can be derived from that data that will drive the adoption of Big Data. If 2015 was the year of the Big Data fad, 2016 is when rubber hits the road, in terms of deriving actionable insights.
I am not a millennial, but my wife is, and she definitely leads the way in all decisions. When it comes to the impact of millennials on retail, there has been enough said. This generation is well-connected, socially responsible and spends more time on their mobile devices than previous generations. Their impact is reflected in all the trends highlighted above.
Stores’ identity crisis
For the last trend, let us look at stores. Are they actually stores? Are they entertainment centers? Are they distribution centers? Are they information centers? My point being that thanks to technology, it is now possible for a girl scout to sell cookies and accept credit cards. It is also possible for store associates to be sent “picking” instructions for an online order. What you make of the stores is now completely up to the creativity of the retailer, and that creativity dictates the profitability of the store.
Ugam provides online retailers and brands analytics technology in areas such as pricing and assortment.Favorite