The retail landscape is changing Fast.
This isn’t news to retailers or their suppliers and vendors. Neither is it news to most shoppers paying attention at the store and in the online aisles.
Yet many of us, including far too many who make a living in the retail ecosystem, underestimate the speed and scale of the change. If we’re being honest with ourselves, we’re simply not prepared for the retail industry of the future.
Which, again, is coming faster than we think. Five years from now, retail will look very different, and many of the predictions confidently being made today will appear misguided in retrospect.
Nevertheless, we can rely on insights from people who know the retail landscape very well. People like Steve Streit, whose venture capital firm SWS Ventures backed technology-enabled retail ecosystem companies like Shipt.
Streit and his fellow retail experts have watched the industry for years and understand where it’s headed. While they don’t have all the answers, their expertise is valuable for those of us whose businesses — and livelihoods — depend on proper positioning. It’s also useful for consumers wondering how to make sense of a fast-evolving retail landscape.
Here’s where they see the retail industry today and where they believe it’s going in the near future.
1. The Lines Between “Brick and Mortar”and “Digital” Are Disappearing Fast
For years, “brick and mortar” retail was all but walled off from digital retail, even as the latter ate into the former’s market share. Then, larger retailers began adopting digital strategies, which we see today in the “omnichannel” postures of major chains like Walmart.
The progression didn’t stop there. Nowadays, most innovative retailers have digital strategies, regardless of size. That includes single-store, highly local retailers that advertise and sell on social media, national brands like Walmart and Costco, and everyone in between. This trend will only continue, to the detriment of smaller retailers that fail to see the importance of digital.
2. The Future Is (Still) Omnichannel
The transition to digital will involve a continued transition to true “location-agnostic” sales. In the near future, it's possible that cashierless brick and mortar stores will replicate the online shopping experience in person. New technologies like augmented reality could provide shoppers with even more information — and confidence — as they decide what to buy (and how). And a continued reduction in sales friction (more on that in a moment) will support more pleasant, expedient transactions everywhere.
3. Consumers Are More Careful About How and Where They’re Spending
With rising housing, insurance, and food costs, it’s no surprise consumers are being more cautious with their dollars. While consumer spending remains strong by historical standards, retailers need to position for it to be increasingly selective. Indeed, this is good advice regardless of where we find ourselves in the business cycle: Careful retailers tend to do better to attract dollars from careful consumers.
4. Impulse Spending Remains a Source of Growth
Consumers are more cautious than before, but not that cautious. Impulse spending is still an important growth area for many retailers, especially in the “lifestyle” ecosystem.
This is where it pays for smaller retailers to invest in a sophisticated digital strategy. With microtargeted ads and an iterative product cycle to meet consumers where they’re at, they can keep pace with better-resourced retailers and capitalize on the incredible power of social media and digital ads to drive impulse spending.
5. “Experience Spending” Is Still a Thing
“Experience spending” has been on the rise for many years, according to an analysis by McKinsey. Unfortunately, because many “experiences” fall outside the traditional definition of retail, this fact often gets overlooked by many retailers. In fact, it’s sometimes seen as a problem, because consumers only have so many dollars to spend.
The better approach might be for retailers to offer more experiences alongside their products. This is an excellent way to add value and separate smaller shops from the more old-fashioned pack.
6. So Is Values-Driven Spending, With a Catch
For good or ill, consumers are also still spending in alignment with their personal values and politics. This is an important trend for niche retailers to tap. Building loyalty within a relatively small “tribe” of like minded customers is often more effective than trying to be something to everyone. The latter is almost guaranteed to turn off some prospective customers.
7. There’s Still Too Much Friction in Sales
Those old enough to remember when it was normal to pay by check at the grocery store know that it has become much easier — and faster — to pay for things in the real world. However, many retail innovators believe there’s still too much friction in the buying process, and that retailers should look for ways to reduce it.
That might mean going cashless, adopting cashierless points of sale, or even enabling RFID checkout (although this technology may not quite be ready for prime time). Regardless of the specific strategy, it demands thought from retailers accustomed to doing things a certain way.
Get Ready for What’s Next in Retail
The retail industry is experiencing a period of unprecedented change.
This is said about many industries these days, but in this case, it’s really true. A convergence of factors, from high-speed mobile internet to low-friction payment methods, have made it so.
What can retailers and their suppliers and vendors do to adjust to the new normal? Those still in business have already done quite a lot, to be sure. But the disruptive period we’re in right now isn’t likely to let up anytime soon. In fact, as these trends hint, we could be in for a period of even deeper change than we’ve seen already.
Experts like Steve Streit know that tomorrow’s retail leaders will be the ones that prepared early and thoroughly for what’s next, and that there’s little time to waste. Act accordingly.
