10 Future Retail Trends & Forecasts for 2022/2023 – A Look Into What’s Next

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Original post: https://financesonline.com/retail-trends

The Covid-19 pandemic rocked the medical industry and its effects were felt throughout all economic sectors. The retail industry, in particular, received a huge blow as brick-and-mortar stores had to close. It also meant that businesses had to step up their online game to continue engaging and attracting customers despite the ongoing pandemic. Their rate of adaptation could be the thing that allows them to overcome the challenges brought about by the lockdown. Whatever the case, technological and social shifts are unearthing several retail trends.

These can shape the way global consumers buy things—or even what they buy. These shifts in retail are less of a seismic shift and more of a gradual change. We’ve compiled a list of the changes that we believe are the keys to a successful retail enterprise in the next decade and now more urgent than ever.

The change of direction of retail in the coming years is, surprisingly, not just because of technology but due to changes in consumer behavior. While analysts used to be so sure that e-commerce is the future, the rapid adoption of broadband technology and the shift in “experience over material” commodities have just made e-commerce another channel to shop in.

It’s a big channel, though. Our retail statistics post reported that global retail ecommerce sales grew by 27.6% in 2020 compared to the previous year, with a total of $4.280 trillion. This doesn’t mean that brick-and-mortar is dead, however.

In a survey published by the University of Arizona, a majority of respondents thought that traditional retailers are part of the social fabric and their demise will be bad for the economy in the long run (ScienceDaily).

However, store closures, of which there were 11,000 in 2020—up from 9,300 in 2019—show how the pandemic has shortened what was supposed to inevitably occur in the long-term (TB&P, 2021).

Having said that, without further ado let’s start with the hottest trends in the retail industry.

1. Shifting customer behaviors

Over 60% of lead US marketing professionals said that their businesses were affected by the pandemic. And yet, 43% of them are not sure whether the changes in consumer behavior will hold after the pandemic (Forbes, 2020). But according to McKinsey, more than 60% of consumers adopted a new behavior plan to stick with even after the pandemic (Fortune, 2020).

This might hold true for people who had to resort to shopping online for groceries and other necessities. A survey showed that there was up to a 40% net increase in intent to continue purchasing goods online even when the pandemic is over (McKinsey, 2021). In the UK, 5.7 million households shopped for their Christmas groceries online. This could be seen in Tesco’s online grocery sales that reached more than $1.38 billion during the 19-week period. Sainsbury as well had a great Christmas and announced a 128% growth in online grocery sales (Econsultancy, 2021).

Moreover, it looks like seniors in the US are becoming savvier shoppers, according to Forbes. Because of the pandemic, they are forced to learn how to shop online and to do consultations over the air. Additionally, demand for smart home devices and assistive technology is anticipated to go up, as seniors are avoiding going to nursing homes. Some are even thinking about spending their savings now. Businesses will do well to target them in their marketing strategies since consumers aged 50 years and older represent 71% of the nation’s wealth.

2. Modified in-store shopping experiences

A consumer survey showed that 61% of consumers rely on physical stores being open for them to purchase the goods they and their families need (NRF, 2021). Thus, businesses need to put in place policies that could make customers safe to shop with them.

And it looks like there are stores that have risen to the occasion. During the holiday shopping season, 70% of holiday consumers said that they felt safe while shopping.

However, this may not be enough. Retailers need to elevate the experiences at their stores starting with technological changes like check-out free and touch-free shopping. This can make shoppers feel safer and accelerate the reduction of physical interaction.

In line with that, spaces have to undergo redesigns to accommodate reduced physical exchanges. That includes the usage of mobile payment systems rather than static POS counters. Another improvement that stores could make would be to improve product displays. By doing so, businesses could focus more on the experiential aspect of customers (ET Retail, 2020).

3. Rise of private labels

A study from CB Insights revealed that private label sales are soaring. Private labels sell three times as much as branded products, which forces CPG manufacturers to rethink their strategy in the coming years.

And this is nowhere more apparent than in Europe, where 40% of grocery items sold are private labels. The United States has some catching up to do, but it’s on track—who hasn’t heard of Trader Joe’s, anyway?

The biggest reason retailers are going in-house in the last few years is because they earn an average of 25% more. Compare this to a typical 1.3% gross profit they get from a typical grocery item and it’s easy to see why private labels have become more mainstream.

As a consequence, the retailer will also have leeway when it comes to pricing their products competitively. And millennials are driving this growth (Frozen & Refrigerated Buyer). Private labels comprise 25% of a typical shopping cart, but a millennial’s would have 32%.

4. Deep retail

Marketers have mined data from users’ smartphone and browser habits for years, but it will come to a head as the third decade of the millennium approaches. And this will happen because of AI. With $156.5 billion revenue in 2020, it is poised to further climb to $300 billion in 2024, a 5-year CAGR of 17.1% (IDC, 2020). The figure could have been higher, but adjustments have to be made because of the lingering effects of the pandemic.

This is not surprising, as studies show that AI adoption can save retailers US$340 billion annually due to a more efficient supply chain (Capgemini).

Retailers use AI for various applications. These include 2D/3D computer vision, natural language processing, AR and VR, sensor technology, and robotics. It’s also a contributor to the development of a C2M (customer to manufacturing) business model, where companies use big data and AI insight to personalize the products for the individual consumer.

In C2M, AI will have a more intimate view of the user and what they need more than the users themselves know. It will be in charge of a secure network that uses analytic tools, behavioral databases, algorithms, and image recognition. It will combine it with technology from an IoT ecosystem to target the user’s consumption habits. Too dystopian? No worries—it will have a ton of regulations to limit the type and amount of data it can harvest. It will likely also need consent from the user.

5. Voice search and personal assistants

The discussion of AI naturally dovetails with voice search and personal assistants. In the US alone, adult ownership of smart speakers and smart homes has reached 55.6% in 2020 (Voicebot.ai, 2020). And while Amazon’s 75% market share is still dominant with its Alexa interface, the coming ubiquity of voice search-enabled personal assistants like it will be a mainstay in the future.

Even the figures today are eye-opening. Voice search now comprises 20% of Google searches, which should incentivize retailers in making their websites searchable through voice. In 2020, it is estimated that up to 30% of searches no longer used a screen and possibly used other technologies. Andrew Ng, the chief scientist at Baidu, even pegs this number at 50% (Perficient).

And there’s a reason for that—humans can speak an average of 150 words per minute while typing only 40.

Leading Business Intelligence Software

1. SAP BusinessObjects Lumira is an application that empowers business users to generate reports ad hoc by themselves. With this, companies can say goodbye to complicated spreadsheets.
2. Tableau is a popular system that makes it easier for organizations to understand their data with interactive visualizations. It has online, on-premise, and server-based deployments for you to integrate data in every aspect of your business.
3. SAP Crystal Reports accelerates the generation of reports, as it integrates with databases for faster data processing. Aside from that, it helps users discover new relationships between data.
4. Microsoft Power BI is a solution that was originally intended to be a plugin for the Microsoft suite of products. It has since evolved into a full-featured business intelligence software.
5. Hotjar is a cloud-based application that enables you to understand your audience better by tracking their activities on your website. On top of that, it helps gather and analyze customer feedback.

6. Instashopping

Retailers should leverage social media’s 2.65 billion users for their social media toolkits and strategy. This is why social media giants are now testing ways to load payment information into the platform itself. Instagram is one of the first to do this, though it’s still experimental.

In the coming years, social networks will now not only be places to discuss and keep up to date with your friends but for retailers to keep in touch with their user base. In fact, 60% of Instagram’s users (or 600 million of their total 1 billion users every month) already use the platform to find and purchase products. Adding a native payment system will expedite this process.

7. Omnichannel reality

It’s 2019 and the term “omnichannel” is still bandied around in retail circles. This is simply because it’s the future of the retail industry. As already mentioned, consumers no longer distinguish between online and offline shopping. They may start shopping in one and checkout in either. A Harvard Business Review report disclosed that 73% of shoppers used multiple channels to discover and buy products.

In the last few years, retailers have capitalized on this phenomenon by offering agile solutions for both online and physical retail. 2019 and beyond will demand more, however, as the rapidly maturing technologies of AR and VR can be used to augment the shopping experience in a given store.

For example, AR can be used to preview items before actually buying them. This makes AR especially useful for furniture and clothing. 60% and 55% of retailers (ThinkMobiles), respectively, incorporate the technology into their purchasing process.

Consumers demand the same experience and information they need whatever channel they use. Retailers shouldn’t differentiate between online and offline—their customers won’t.

8. The “Experience Economy”

The traditional retail model of buying a product is so 20th century. Today, consumers want not only the product but also the act of the purchase itself. And while studies show that remodeling your store can benefit your bottom line, to survive in 2021 and beyond you need to look further into giving your customers a more engrossing experience.

“Brands as a culture” had become more tangible in 2019. Big retailers like Ikea and Nike are all experimenting with small-format or concept stores. These stores offer a limited stock of items but provide pertinent services or curated content. Millennials (again) are the driving force behind these changes, but they’re only the spearhead of evolving consumer behavior across all contemporary generations. All in all, experience-related expenses have grown 6.3% in the period of 2014 to 2016. Material purchases grew only 1.6% in the same period (McKinsey).

9. By your powers combined

Sustainability is not optional anymore, as far as consumers are concerned. A study from Unilever highlights the changing stance of consumers in this aspect. 21% of consumers now report that they would prefer brands with an active environmental responsibility campaign. The retail trends report predicts that this about-face in terms of customer predilection represents US$1.1 billion worth of untapped potential for packaging and sustainable practices.

Consumers also detect facile environmental initiatives that are mere ad hoc campaigns. This is why most companies are now using sustainable and ethical practices more closely aligned with their organization’s values. This allows them to commit to these campaigns more productively and for the long-term. Even government institutions (Forbes), at least on the state level in the United States, are jumping on the green bandwagon by banning single-use plastics.

10. Time is money

Most retailers know that time is the biggest currency they have, so they use tools like fleet management software to automate their back-end and other administrative processes. What they’re just starting to realize is that consumers are also time-sensitive. on

For example, an Alix Partners study found that consumers are becoming more impatient with delivery times—from about 6 days in 2012 to just 4 days in 2018. Amazon Prime members are even more demanding—they want their items delivered in less than 4 days (AlixPartners)!

What this means is that with the plethora of online retailers to choose from, customers abandon their (loaded) carts if the retailer doesn’t offer the shipping options they want. 1 in 4 retailers would rather pay slightly more than pay extra for shipping and 88% will pay more for same-day (PwC) or one-day delivery, after all. Differentiating your business from the crowd means going the extra mile to make your shipping fast, efficient, and free.

Prepare for what’s ahead in the retail industry

Retail is a volatile industry and the rapid and widespread adoption of technology just makes it more so. Also, as the market becomes populated by a younger demographic, companies are finding it hard to abandon traditional modes of thinking. The “retail apocalypse” that has seen over 8,000 store closures is proof that businesses quickly need to adapt to a change in consumer behavior to survive.

As a retail professional, knowing what’s in store for the industry gives you a leg up on your competition. It will also give you the insight to innovate in unforeseen gaps in the market that any industry shake-ups tend to do.

The line between digitally native retailers and brick-and-mortar stalwarts is becoming blurred. This is why using top business intelligence software in concert with an understanding of where the market is headed is an advantage.

 

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