12 forecasts for the retail industry in the coming year

What is the future of retail? While there’s no magical crystal ball that can predict what will happen in the coming year, there is research and there are trends that can help innovative retailers gain an edge on the competition.

So what can retailers expect?

From private label growth and partnerships to expanding payment options and subscription services, here’s what you need to know as you move forward through 2019.

Expect more retailers to be part of the circular economy, in an effort to minimize waste and promote sustainability

When talking about a circular economy, it’s referring to an economic system aimed at eliminating waste and the continual use of resources, meaning retailers who recycle, reuse and remanufacture to create a closed system and minimize the use of resource input and the creation of waste.

“Why are (some) retailers now focusing on sustainability? Because they have to. Full stop.

Why do they have to? Because in the short term our environment desperately needs it. In the midterm social & environmentally conscious retailers will benefit economically by being able to justify increased margins to support their triple bottom line.

Long term, our global economy will also depend on it.”

- Carl Boutet, Retail Executive in Residence at Highline Beta

If you’re trying to appeal to Gen Z — a key demographic for many retailers — it will make sense to adopt a circular economy model, at least partially. According to a study from OC&C Strategy Consultants, 15 percent of Gen Z respondents said they're dedicated to "reducing the amount of waste I create," 14 percent to "reducing my carbon footprint" and 13 percent to "reducing use of single-use plastic".

There’s selling power in sustainability, and even the big names are taking note. Nike’s launched a “Grind” program that uses old shoes and some of its own manufacturing waste to develop usable materials for other uses, like gym floors, new Nike footwear, playground equipment, apparel and play surfaces.

Even smaller retailers are making a move towards the circular economy. In Australia, we can see this in action in Dresden, an eyewear retailer that sells sustainably-made glasses. The company takes plastic waste and discarded fishing nets from Australian beaches then upcycles them into affordable eyewear frames.

In addition to selling great products, Dresden also offers an interesting in-store experience. Unlike other eyewear retailers that sell ready-made products on their shelves, Dresden lets shoppers create their own pair of eyeglasses or sunglasses.

Community-building and participation will be more important than ever

Retailers are finding that creating a sense of community can help brands set themselves apart and build stronger relationships with their customers — which, in turn, drives sales and loyalty.

In other words, you have to do more than just market your products. You have to build a sense of belongingness among your customers, followers and target audience.

Consider the case of Pace Athletic, a specialty store for running footwear and gear in Australia.

Pace Athletic’s co-founders, Will and Stuart opened their first store in 2014, and while things were going fine, they realized that they needed to do something different to set Pace Athletic apart from big chains and ecommerce sites selling the same things.

So, they decided to focus on community-building. Will and Stuart started the Pace Run Club, a casual and inclusive club that brought its customers together.

The initiative was a major success. In the 2 years since the first Pace Run Club started, Will and Stuart have grown their business to 5 stores with the support of hundreds of members who also shop regularly at Pace. There are now 3 Pace Run Clubs in Manly, Mosman and Rozelle and a Pace team for races.

We’ll see more private label growth in the retail sector

If you’ve been to a Target store in the past year, one thing you’ll notice is that they carry more than 40 private label brands, or what they call “owned brands.” According to the company, curating a selection of owned brands is core to the company’s strategy and it’s “what guests expect from Target.”

Then there’s Amazon, which now has more than 560 of its own exclusive and private-label lines.

“Retailers remain relevant by being brand and customer-focused. It’s analyzing and understanding what your brand means to your customer, and the relationship they have with each other.

Why does your customer love your brand? What makes it unique in their eyes? How can you continue to best serve your customers? Answer those questions, then focus on carving out your niche in the way that aligns both to your brand and also honors your customer.”

Through a private label, you’re both offering your customer product that is personalized to their wants and needs, but also exclusive to your brick and mortar store.”

- Sarah Ferrence, Founder of Mod. Merchant

Spurred by their success, many retailers are accelerating their private-label push, launching brands in multiple, wide-ranging categories. Traditionally, a private label’s competitive advantage is its low price, with retailers able to pass on savings to consumers without sacrificing quality.

But that’s beginning to change.

Research from NPD found that “premium private labels” are growing and “customers have shown increased willingness to adopt these products in recent years.” The key to winning, according to NPD, is for retailers to identify gaps in their portfolio and offer "a compelling value proposition that builds its own unique identity."

Social media and retail will be even more intertwined

Social media has always played a big part in retail marketing, but expect that to increase even more in the coming months — especially in the form of social shopping.

“One of the top trends that we’ve identified at TheMarket is the growth in social shopping – through visual search, Instagram & Pinterest for example. It’s no surprise really, given the exceptionally smooth shopping experience it offers consumers. It’s still very much in its infancy stage, but with adoption growing and social platforms continuing to push this technology, this is definitely one retailers should watch out for.”

- Justus Wilde, CEO at TheMarket

How is that different from social media marketing? While you can still use the marketing method of redirecting users to an online store through certain channels, with social shopping, you’re offering them the chance to checkout directly within the network they’re using at that moment. According to BI Intelligence, the top 500 retailers earned an estimated $6.5 billion in 2017 from social shopping.

In particular, shoppable Instagram posts and stories have really gained traction in the last year, with 41 percent of ecommerce brands using this feature.

Many retailers have already jumped into the trend. Crushes, a store that celebrates NZ-made and vintage products, offers an excellent example of social shopping done right.

Crushes regularly publishes shoppable posts on Instagram. Whenever they post an image that features products that they sell, users can simply tap on the product tags to view and purchase them without having to leave Instagram.

Take a leaf out of Crushes’ playbook and find ways to leverage the power of Instagram to drive sales.

We’ll see some exciting partnerships and collaborations going forward

With retail changing as quickly as it does in today’s marketplace, you have to constantly innovate and look for the next opportunity. One way to do that is through partnering and collaborating with other brands and businesses to expand your message, reach new audiences and break into a new niche.

Take note from some of the bigger brands out there who partnered up to expand their reach and increase sales. For example, there’s Starbucks and Spotify, giants in the coffee and music streaming business. Through the partnership, they integrated the Spotify mobile app with the Starbucks My Rewards program and app. When customers were in the store, they could use either app to find out what music is playing in the store and add it to their saved music in Spotify.

The payoff for Starbucks was that the collaboration drove customers to download the app and join their customer loyalty program. As for Spotify, users who subscribe to their paid memberships get extra points for Starbucks My Rewards program. The partnership is mutually beneficial, and both companies have the potential to reach the other's audience without sacrificing their brand.

Payment flexibility will continue to be paramount

While cash will never completely go away, it will diminish in popularity as customers look for more convenient and flexible ways to purchase. Around 90 percent of shoppers say they use multiple devices to make online purchases and 46 percent of smartphone owners use peer-to-peer payment apps regularly.

In fact, around 2.1 billion consumers worldwide are expected to use mobile wallets for payments or money transfers by 2020. Retailers need to take a proactive approach to the consumer demand for app-based payment methods, and once again we can look to Starbucks for an example. The coffee giant’s payment app leads the field in mobile payments, ahead of Apple Pay, Google Pay, and Samsung Pay. Whereas Apple Pay was used by 22 million people in 2018, around 23.4 million people used the Starbucks app to make a point-of-sale purchase.

And while things like Google Pay, Apple Pay, Android Pay and Afterpay will continue to rise in popularity, don’t forget about PayPal, which has more experience processing mobile payments than many other big name providers. The company has partnered with Google and Alibaba, among others, and has started to use Venmo for more than just a social media-friendly money transfer platform.

While retailers can’t be everything to everyone, offering flexible payments creates shorter lines in stores and a more personalized checkout experience.

Values and social responsibility will be more important than ever

Corporate social responsibility (CSR) is more than just a buzzword; it’s becoming an increasingly popular concept in the retail world. More and more retailers have come to realize that giving back isn’t just helping to make the world a bit better, but that it’s also good for business.

According to research, 87 percent purchase a product because a company advocated for an issue they cared about, and 76 percent refuse to purchase a company’s products or services upon learning it supported an issue contrary to their beliefs.

Clothing company Patagonia is leading the way in CSR, pledging to give $10 million — the full refund from a federal tax cut they called “irresponsible” — to fight for environmental causes threatened by the tax cut itself. It wasn’t done as a PR stunt, but rather as a heartfelt, genuine mission, and their profits have quadrupled in the last few years.

Of course you don’t have to be a giant retailer to make a difference that can help both the planet and your bottom line. You can create special products for charity, participate in events that promote giving, be conscious of how your products are sourced or manufactured and include your CSR in your marketing efforts to celebrate the success of your efforts. It’s not bragging, as customers love to hear that their money is being put to great use.

Experiential stores will continue to thrive...but so will retailers that provide tremendous value and convenience

In today’s retail climate where everything can be purchased with just a click of a button, brick-and-mortar stores have to offer both convenience and value, but also something that shoppers can’t get online — a unique experience. Stores that offer shoppers something more than just a product will win their attention and their loyalty while creating a buzz around their brand.

“Across the board, retailers will offer strongly curated assortments that are heavy with local flavor, along with a deliberate effort to support sustainability, recycling and recommerce. The word static has disappeared from the retail dictionary.

Consumers who choose to visit stores will expect to find exciting new products and continuous change. They will hold retailers to a higher standard; those that want to keep their business will rise to the occasion.”

- Rich Kizer And Georganne Bender, Consumer Anthropologists, Kizer & Bender Speaking!

Jeans brand Levi’s has been around since 1853, but yet they remain relevant to each new generation, due in large part to the experience they can provide. In their storefront in Times Square, most of the multi-level store is dedicated to apparel, as you would imagine. But in the back you’ll find the Tailor Shop that integrates both craft and tech.

Shoppers can watch as tailors add customized elements to their jeans including buttons, patches and chain stitch embroidery. One of their most popular services will “distress” your jeans, and customers can also create a personalized T-shirt design through a direct-to-garment printing service.

What constitutes an “experience” will differ from store to store and retailer to retailer, but don’t underestimate “retailtainment,” fusing retail and entertainment to enhance the shopping experience. Give them something they’ll remember long after their purchase, and they’ll remember you the next time that they shop.

Health and wellness will permeate the various aspects of retail strategies

Health and wellness can mean different things to different people, but the numbers indicate that regardless of if you’re selling kale or organic makeup, customers are buying in. According to Technavio’s Global Natural and Organic Personal Care Products Market 2017-2021 report, for example, it’s projected that the global market for natural and organic personal care products will grow to $17.6 billion by 2021.

There are many “non-traditional” retailers dipping their toes into this realm, and with great success. Saks created The Wellery, a department that offers wellness as a luxury experience with things like weight loss treatments, salt therapy rooms and group fitness classes. Womenswear retailer Anthropologie now includes a wellness section in their stores that feature items that promote mindfulness and self-care — think elixirs, essential oils and yoga mats.

Understand your customers’ behavior and tastes, and implement the health and wellness products that are in most demand. Be sure to tailor your marketing in a way that educates them about the ingredients, sourcing, benefits, etc. and how it offers additional value to their life.

Backoffice technology — and 5G — will continue to make inroads into the industry

While “fancy” customer-facing technology like virtual reality and touch screens are having an increasingly large presence in modern-day retail, the coming months will also show that retailers are prioritizing their backend tools for inventory management, supply chain, and customer data.

Retail tech that enables the "behind the scenes" action like ensuring retailers have the right products at the right time are critical to every merchant’s success.

Consider Shooshoos, who sells their own locally produced, high-quality footwear for babies and toddlers both in brick-and-mortar locations and online, but was suffering from a system that couldn’t keep up with demand and didn’t connect with their online store.

They decided to focus on updating their system to Vend, and are now able to ring items up and complete transactions five times faster than their previous system. With their new retail management system, they’re able to control stock management, download and send reports in just minutes and improve customer service by being able to process purchases and returns at a much quicker pace. Shooshoos can also sell throughout the store with Vend on iPad.

Another important backend component is the network or infrastructure on which your run your business. To get the most optimal performance out of retail technology you need to ensure that your network can handle the amount of data required.

This is where 5G comes in.

5G is the fifth generation of cellular network technology. It's fairly new, and the top major carriers in the US have rolled it out in limited cities.

As PCMag puts it, “5G is (barely) real.” But that doesn’t mean it won’t make inroads in the coming year.

As carriers continue to develop the technology, forward-thinking retailers must start to adapt. Data will be accessed much more efficiently, and this will lead to more exciting and streamlined customer experiences. Think: higher levels of personalization, smooth, interactive experiences, and faster processing.

We’re not saying it’ll happen today or tomorrow, but any retailer who wants to stay competitive should watch this space.

More retailers will explore subscriptions

If you’re looking to drive up your retail revenue, consider adding a subscription service to your business plan. According to McKinsey & Company, subscriptions have grown 100 percent in the past five years, making then a viable way to add an additional revenue stream and a convenient avenue to inspire consumer loyalty.

One of the best examples of this success is clothing company Stitch Fix, the company widely credited with popularizing the subscription model. They’ve grown their client base 30 percent to more than 2.7 million active customers.

They’re no longer just “personal styling for men, women and kids that sends clothing to your door — with free shipping and returns” They added a number of extras to make its boxes more appealing to existing customers — underwear and socks that can be added to the five pieces sent in each box, Plus Sizes and a Style Pass that allows unlimited styling for an annual membership fee.

And just because most subscription boxes are online doesn’t mean they always have to be. A great way to stand out from your ecommerce competitors by allowing customers to try out the products or assemble their own boxes in-store.

Retailers with tight online to offline integrations will gain a competitive edge

People don’t just buy in store or online anymore — everything is connected. Shoppers check prices, compare products, research reviews and consult social media before making a purchase, and if you have a limited presence, it can negatively affect both the user experience and your bottom line.

“Shopping a brand needs to “feel” the same, regardless of channel.More than ever, a holistic shopping experience across all customer touch points is vital for brands. With an increasingly complex customer journey and dozens of customer touch points with brands from apps to websites to brick-and-mortar stores, companies need to present a seamless experience across touchpoints for customers.

As an example, REI, the camping/outdoors clothing company, does a tremendous job providing a great online experience and, for those seeking more information on product, they’re able to come into a store and speak with a highly knowledgeable expert to match the product to their need. The ability to shop conveniently online complemented by an elevated in-store experience provides REI customers with the best of both worlds.”

- Carlos Castelán, Managing Director of The Navio Group

Customers are looking for a fully-integrated shopping experience that unites the user experience from brick-and-mortar to mobile-browsing and everything in between. According to the Harvard Business Review, a survey of 46,000 shoppers revealed that 7 percent shopped online exclusively, 20 percent were store-only shoppers and 73 percent used multiple channels.

Beauty brand Sephora is a great example of an online-to-offline relationship with their mobile application. While shopping in-store, you can use their app to find out-of-stock items or look for special discounts via their loyalty program. When you’re out of the store, you can use the app to virtually test the colors of their products and add them to your cart for in-store pickups at your convenience.

The goal is to unify your marketing and sales structure, so make every touchpoint shoppable and and create an experience that isn’t only available on a single platform. Instead, offer an experience that can be completed and repeated on each and every channel.

Looking Ahead

People are going to continue spending money in the future, and it’s up to each retailer to evolve with the changing landscape to seal the deal. Those who continue to innovate and offer more than just a product will not only survive — they’ll thrive.