4 trends retailers should be prepared for this year
Photo by iStock.com
By Kurt Heinemann, CMO, Reflektion
2017 was transformative for the retail industry. Brands that have been household names for decades closed their doors or filed for bankruptcy at a time when pure play e-commerce newcomers entered into the fray and found immense value in opening up their own physical stores.
The term "retail apocalypse" also became ubiquitous, and artificial intelligence was once again touted as everything from the savior of retail to the reason civilization will collapse.
As we hit mid year, some of these factors will influence what we expect will become important retail trends in 2018 and beyond.
Individualization will go from buzzword to urgent initiative
Apps and other cutting-edge technologies have engaged shoppers on a personal level for years. Comparatively, retailers have lagged behind. The cost for retailers is not only revenue, but also a widened gap between what they deliver and what consumers expect.
At the same time, individualization is increasingly expected. Whereas segmentation sought to lump individuals into segments (e.g. by age or gender) and engage accordingly, and personalization sought to get the right content to the right user, individualization seeks to understand the user and their context. It's one thing to know a customer likes button ups, but displaying these when they're shopping for their trip to the Bahamas isn't helpful. The technology exists, as does the customer expectation, and the proof of greater revenue is clear; retailers have no excuse but to adapt and offer individualized experiences.
To succeed, retailers must embrace omnichannel. This means fully understanding the moment-to-moment experiences of the customer journey, and beginning to replace the segmentation they're comfortable with for the individualization customers demand.
Retailers will demand practical examples of AI
One of the most important factors is retailers' interest in AI, which peaked in 2017. In fact, a Forrester study from last year found that more than half (51 percent) of brands are implementing, have implemented, or are expanding their use of AI.
In the emerging technology hype cycle of 2018, we will discover whether or not artificial intelligence is at the peak of inflated expectations, the slope of enlightenment, or both. We'll also learn if the available AI-powered solutions are blowing smoke or actually solving retailers' personalization challenges.
We can expect that the companies shouting the loudest about AI will be forced by retailers to put up or shut up. They'll need to show accessible and transparent examples of how AI is driving revenue, stronger customer engagement, and better customer experiences on-site and off.
For many reasons, this is why practical AI — i.e. the valuable application of intelligence rendered by machines and rooted in present-day use cases — is so important; it breaks free from the fun-to-discuss future manifestations to offer an immediate look at what can help the public (including consumers and vendors) right now.
The battle between Amazon and Walmart will continue
Throughout this year, both retailers will continue to play their advantages and likely acquire more companies — or expand in new ways — that shore up gaps in their weaknesses.
Take for instance, the spread of Amazon Go. With the wealth of customer data Amazon has access to, Amazon is able to provide a fully integrated and engaging experience for the customer — engaging them online, offline and in-person using this data. Other retailers should take note and ask themselves questions rooted around the customer experience — such as "what other customer pain points exist?" and "how can I try to solve them?" To get to this point, retailers will need to think empathetically from the perspective of their customers. Collecting customer data will be invaluable to this process.
Similarly, we also expect that both behemoths will redefine the concept of an all-encompassing department store in the digital era, and in doing so, they'll set new customer experience bars that retailers will be forced to compete with. These changes won't happen in silos. Every punch the other retailer throws will ripple through the entire industry. Instead of just tuning in, retailers should be taking notes.
Direct-to-consumer strategies will insulate established brands and launch new capabilities
Department stores will likely continue to close retail locations in 2018 and beyond. Most recently Toys R Us announced plans to shutter all stores — causing established brands to quickly realize they need more direct relationships with customers to protect themselves from the potential lost revenue of closed stores.
This desire for retailers to own more of their destiny by not building their house on fragile land will cause the industry to invest heavily in direct-to-consumer strategies. This will drive customer engagement innovation and will continue to upset the brand/wholesale relationship.
At the same time, we expect new direct-to-consumer brands to launch, which will only further disrupt the retail industry. Brands entering the space, such as Allbirds, Casper, Warby Parker and others, will disrupt retail brand verticals through their unique product offerings and expanded footprint of well-executed stores.
In this highly digital and social-media driven product world, this new era of brands will continue to redefine both what it means to be a consumer brand and how brick-and-mortar stores should operate.