THE 20 RETAIL TOP TRENDS FOR 2020

Articles

As technology continues to evolve at the speed of lightning, consumer behavior is also changing at the same pace. The modern consumer is tech-savvy and more connected than ever before, which has forced retailers to go digital so that they remain relevant. The trends that are anticipated to drive the digital retail sector in 2020 are primarily influenced by consumer expectations such as the need for speed and enhanced experiences. Some of the top trends that every retailer should have their eyes on include

1.  PROFITABLE RETAILERS WILL FURTHER FRACTURE INTO THESE 5 DIFFERENT ARCHETYPES

The trend towards the digital world for analytics will shape successful retailers into 5 categories: “ecosystem players, scale fighters, value champions, hitchhikers and regional gems.” Ecosystem players, or around 20% of the global profit pool, includes retailers who sell everything and anything. They depend on efficiency and fluid customer experiences in order to retain users.

Ecosystem players also profit from retail partners by offering data analytics, cloud services, efficient logistics, and much more.

Those who can not grow to the size of ecosystem players such as Amazon and Alibaba will still profit as Scale Fighters. These companies are masters of efficiency and scale, and a large local presence. Research shows that Scale Fighters are already a third of the US’s profit pool. Companies such as Tesco and Carrefour can maximize profit through omnichannel opportunities, analytics, and M&A.

Value Champions are retailers capable of maintaining low costs for their customers. Aldi, Lidl, Costco, and others must maintain low supply costs, introduce variety in their products, and introduce better user experiences despite the low prices. Hitchhikers, which comprise 8% of retail profits, describe those who use larger retailers to make up for their lack of size, scale, and analytics. They can more than make up for these weaknesses by providing superior product and design R&D. These companies can separate themselves from the pack with unique and personalized marketing and recommendation. Regional Gems maintain a local niche derived from quality, trust, and customer relationships. They also have advantages of scale in smaller, more specific situations, despite losing that edge in a global setting. Yet, these advantages can diminish in the 20’s if these regional gems do not also invest in digital analytics and maintain their strong customer bonds.

2. LOSING RETAILERS CAN BE SPLIT INTO THESE TWO CATEGORIES

In our digital world, static companies with no growth or adaptability will be left behind. Although these retailers may hit short-term goals by quickly expanding and investing in real estate, their lack of innovation in digital analytics of customer needs and supply costs will hurt them in the long run. The 2020’s will be hard for “Legacy Laggards” and Flashy Innovators. Legacy Laggards are shortsighted, large companies led by management focuses on operating rather than innovating. This type describes 27% of the current profit pool–therefore, a third of the market is either unable or unwilling to redirect towards data analytics and new digital applications. Although Flashy Innovators may seem poised to control a piece of the market, they lack the necessary scale to back their modern and perhaps sophisticated models. They make headlines despite only controlling 1% of the market, but unless they pivot, these young retailers face heavy risk. Flashy Innovators are often acquired by larger retailers, or like, Bain’s example Ocado, transition to selling the software that made them initially successful.

3. PERSONALISATION INCREASING IN IMPORTANCE

The trend of personalized retail is driven by increasing access to data, as well as increased customer demand. In 2016, a surveyors noticed that 57% of customers were interested in personalized recommendations. That figure jumped to 63% overall, and 69% for millenials in 2018. 70% of the general public expect the same personalization whether they are shopping online or in person; this proportion will only keep growing into the 2020’s.

Others deduced that as customers depend more and more on personalized shopping, they can be increasingly influenced to spend more due to these personalized services. The best retailers spend more than average on personalization investments, at 1% of revenue (more than 30% of the average retailer), and will increase their investments by 30% in the coming years. The most impressive figures show that strong personalization can lift revenue by 40%.

4. BRICK-AND-MORTAR AND E-COMMERCE CONVERGING

In 2018, “E-commerce retailers [planned] 850 physical stores in the next 5 years.”

Digital Retailers are actually taking advantage of the fact that 44% of the 2018 general public shops weekly in physical stores, compared to 40% in 2015.

The trend of personalisation is driving this trend- smaller stores and pop-ups, collectively known as Micro-Retail, help retailers target demographics with targeted products (again, driven by digital data analytics).

Expect many to follow Target’s footsteps and transition from 100,000 square feet or more stores to 45,000 square feet locations.

5. PREDICTIVE ANALYTICS WILL DRIVE BUSINESS DECISIONS

Collecting data is difficult, and implementing it is exponentially more so.

The 2020’s will see a revolution in how much and how quickly data can be used to predict future trends and customer needs. The retail world is poised to capitalize on AI’s potential to save them $340 billion in supply chain and logistics inefficiencies 8 Shortening product and trend cycles will lead to the increasing importance of predictive analytics.

Markdowns, pricing, and product selection are “significant” impact areas for big-data analytics. These forces will drive the analytics from from $3.5 billion in 2018 to an estimated $10.94 billion in 2024, for a CAGR of 21.2%. 

6. MICRO MOMENTS INCREASING IN FREQUENCY AND IMPORTANCE

Micro Moments describe the near instantaneous occasions when customers look for information, often on mobiledevices just before or during a purchase.

Surveyors reported that 91% of the public use their phones during a task, and 82% look up products while in a store.  Even more importantly, more than 70% of users are influenced by a product’s website’s ease-of-use. 

With big data growing in importance, these micro moments, will only grow in importance, as targeted ads and immediately personalised products influence customers more.

10. THE 2020’S WILL SEE THE RISE OF NEW SEARCH AVENUES

Software and hardware will further work together to increase sales and customer satisfaction before, during and after the sale. Not only will AI sophisticate, but we will see increasing use of voice assistance as well as physical robotic assistants.

Statistics already describe a jump from 14% smart speaker use to 27% in developed countries from 2017 to 2018, and projections see adoption by up to 55% of households in the 2020’s.

 Gartner estimates that by the end of 2020, 30% will not require a screen, and Perficient digital notes another 50% will use visuals rather than text.

7. DIGITAL SECURITY WILL PUSH OR PULL CUSTOMERS TO USE RETAILER’S APPS

Retail’s dependency on data, digital analytics, and internet connectivity will open the door for many new customers, but many remain sceptical of their information’s security. Retailers in the 2020’s will need to convince the 60% of shoppers who don’t use retailer apps and online services that their data is safe.

Only 12% of shoppers currently use a retailer’s app. This number must be increased by the industry in order to drive sales and maintain high levels of customer satisfaction.

As PYMNTS puts it, “Merchant apps are essential rather than optional components of brick-and-mortar retail… If they cannot use merchants’ own offerings, however, chances are they will turn to those provided by aggregators.”13

8. AUTOMATION IS COMING

The rising use of autonomous mobile robots (AMR’s) is one of the largest growths in the retail industry. By 2020’s end, there will be an estimated 100,000 AMRs in use (excluding Amazon’s).

The count will jump to 600,000 by 2025. Shortages of warehouse laborers, lowering costs for automation, and increasing customer demand for quicker product delivery will drive this trend well into the 2020’s.

9. FACIAL RECOGNITION – FINALLY VIABLE

Facial recognition will finally have the data and sophistication it needs to succeed in 2020, due to advances in AI and Big Data software structures. The facial recognition market stands to grow from $3.2 billion in 2019 to around $7 billion in 2024, at a CAGR of 16.6%.

The largest areas of growth are Asia and Latin America. In retail, facial recognition can be used for customer tracking and profile building in stores, as well as payment and security. The largest concerns for this trend include viable software and legal issues.

11. DIGITAL SECURITY WILL PUSH OR PULL CUSTOMERS TO USE RETAILER’S APPS

With 5G already rolling out in some developed countries the Internet of Things becomes even more relevant to retail in the coming decade. The IoT describes the interconnectivity of mechanical and digital object and machines, and provides greater support for any endeavor.

Juniper Research projects retailers to invest $2.5 billion by 2020, up 4 times from 2019’s $670 million budget. Connectivity from Bluetooth and RFID will permit realtime tracking of products, as well as “dynamic pricing” and lowering costs. 

Phones, Smart shelves and other products connected to the IoT will multiply from 21 billion in 2018 to 50 billion + during 2022.These products will further enhance customer-retailer relationships through personalization of products and needs

12. AS ALWAYS, TIME IS MONEY, MONEY IS TIME

Customers are increasingly impatient. Reports show that the future will bring about the extremes in purchasingalthough millenials are the least loyal consumers, they will spend more if they enjoyed the shopping experience.

25% of Millennials would change brands based on shopping experience, and 40% are less loyal than they were last year. Yet, 17% would spend more for the same product for a seamless shopping experience.

This will perhaps lead to larger, yet fewer purchases, and a fickle customer base. Customers wish for a quick shopping experience as well as a quick delivery process. Customers’ now expect deliveries to take 4 days, compared to 6 days in 2012.

88% of customers would pay more for same-day delivery in 2019, and the proportion is rising. In conclusion, timely service will increasingly impact retailers’ bottom lines.

13. SUBSCRIPTION BOXES WILL BECOME LEGITIMATE AND WIDESPREAD

“Subscription e-commerce,” such as Dollar Shave club and Blue Apron, grew by more than 100% from 2013 to 2018, and totaled sales of $2.6 billion in 2016, blowing past the $57 million in 2011.

As consumers are more and more comfortable with subscription services (especially due to Netflix and the like), the public will grow into subscriptions for physical goods.26 Baybridge Digital modeling based on Forbes data 27 estimates conservative growth of 47.6% from 2018 to 2025, or a CAGR of 5.72%. 

This growth will be driven by the mentioned personalization services and big data.

14. PRIVATE LABELS CONTINUE THEIR CONTROL OF MARKET CAP

Private labels, a retailer’s exclusive product meant to compete with brand names, will continue to shed its lowquality, low-price image in the 2020’s.

It is important to note that private labels have already grown this past decade; additional growth will be driven by customer loyalty, lower prices, and supply chain efficiencies. 

From 2019 to 2023, private labels are estimated to grow by $20.4 billion, at a CAGR of 3%.

15. SOCIAL MEDIA AND RETAIL WILL FURTHER COMBINE

Baybridge Digital modelling projects around 4.2 billion social media users by 2030, representing a CAGR of 3.6% from 2020.

This growth represents an enormous pool of potential customers, easily attainable as Instagram, Facebook, Snapchat, and others implement purchasing platforms in their social media, all the while collecting troves of data on their users. 

60% of Instagram users already use the app to shop, and this number is only growing.

Social media permits retailers to actually interact with customers outside of their store or website, and will provide another area in which to derive data as well as implement it. 

16. THE 2020’S: A CHANGE FROM THE OMNICHANNEL TO THE UBIQUITY MODEL

Although the omnichannel experience has already been trending for a while, it continues to be a broad theme for the future of retail. Due to the convergence of e-commerce and brick-and-mortar shopping, omnichannel retailing is key for those who seem to be falling behind the curve.

Omnichannel retailing is becoming increasingly important because it includes more and more avenues, including internet, social media, AR, VR, video, and physical interactions, to name some. A Harvard Business Review report demonstrates that omnichannel shoppers are more loyal, spend more, and spend more time in stores than traditional customer.

Others even go beyond the omnichannel definition, and have announced a new era; Atos views 2020 as the emergence of “ubiquitous retail.”  Not only will there be many channels, but these channels will interact and influence each other.

17. THE EXPERIENCE ECONOMY IS ALREADY HERE, AND WILL NOW REACH RETAIL

We are living in an experience economy; personal spending on experiences, such as theaters, concerts, movies, food, and hotels are growing at a 6.3% clip, compared to just 1.6% for goods.

Although “retailtainment” used to be just a concept, it is now a real term and retail strategy for the future. It is designed to combine experience which gratify the customer with sales, by taking advantage of the omnichannel model, as well as new technologies to integrate shopping with group interactions, shows, and even games.

As analytics and technology catches up to human creativity, retailers will be able to seamlessly join the shopping experience to the customer’s life.

18. THE RISE OF SUSTAINABILITY

Compared to Baby Boomers, who sit at just 35%, half of Millenials and Gen-Xers want to share values with the brands they buy from. As the younger generations become more conscious about the planet, look to retailers to adjust and adopt green practices. 

Companies are understanding that not only do their marketing strategies have to present sustainable values, but the products themselves need to be made with the Earth in mind. For example, H&M is planning to make all packaging recyclable by 2025, and all packaging to be made of recycled materials by 2030. 

Look to the rest of the retail world to follow

19. AUGMENTED REALITY IS FINALLY HERE

Augmented reality, the interaction between the user’s environment and digital perception, will continue to integrate with retail. Potential uses include real-time and personalized advertisement, 3D viewing of products in any location, and virtual dressing rooms.

Augmented Reality spending reached $1.16 billion in 2018 and will climb to $7.95 billion in 2023, at a CAGR of 47.1%.

Gartner plans on 100 million customers to shop with AR by 2020.

In 2020, look to investments by Apple, the jump to 5G, and Microsoft’s collaborations to profoundly impact AR’s use.

20. TARGETED ADVERTISEMENTS WILL BE EVEN MORE PERSONALIZED

Targeted ads now take into account keywords, time of day, and location. Personalization will lead to hundreds of cues, such as lifestyle and behavior, being taken into account.

The ubiquity of AI will lead to personalization of 87% of digital ads by the end of 2020.

The largest increases in programmatic ad spending will be on TV, search, and social media. By 2021, this will represent $81 billion in spending. 

SOURCES

As this decade ends and the new one begins, it is important to adjust aim when our team discovers new information and trends. Baybridge’s goal, to satisfy our clients and maximize their outlook draws the firm toour unique, interdisciplinary approach, which positions BayBridgeDigital to notice and take advantage of these trends earlier than others. This article has been produced by BayBridgeDigital’s Retail Lab analysts and Ariel E. Attias from Dartmouth College (Computer Science), New Hampshire.

ABOUT BAYBRIDGEDIGITAL

BayBridgeDigital is a game changing software company headquartered in NYC. We are building a suite of digital applications on the Salesforce platform. Our mission is to create a world where retailers are loved by customers and employees. We connect brands technology and people to create new growth and business value faster. BayBridgeDigital is a leading provider of retail-specific cloud and mobile software, driving digital transformation for the world’s largest companies. BayBridgeDigital is an “industry cloud” pure-player specialized on Salesforce, the world’s #1 CRM provider

Contact :

success@baybridgedigital.com    

+33 9 72 65 25 59

www.baybridgedigital.com