The retail industry had a remarkable year in 2016, especially during the holiday season, which saw record-breaking sales. Black Friday and Cyber Monday accounted for $3.34 billion and $3.39 billion, respectively. Cyber Monday 2016 became the biggest day of all time in terms of retail sales; mobile orders alone totaled $1.19 billion, which is the highest ever.
According to a report by the National Retail Federation (NRF), the retail sales for 2017 will likely increase by 3.7-4.2% over 2016 (excluding automobiles, gas stations, and restaurants). These sales include online sales, which are forecast to rise by 8-12%. That said, here are seven things that will likely influence and shape the retail industry in 2017 and the years following.
Online Sales Will Primarily Drive the Industry
The National Retail Federation (NRF) has revealed that online sales will likely triple the year-over-year growth of the overall retail industry in 2017. It also predicted that online and non-store sales would grow by 8-12% in 2017. On the other hand, the sales for brick-and-mortar stores will likely see a very modest growth of around 2.8%.
Warren Buffett recently sold 90% of his Walmart shares because he has doubts about the future of the retailing corporation. In fact, he believes that traditional retailing as a whole has a rather grim future. Berkshire Hathaway – Buffett’s holding company – sold Walmart stock worth $900 million in the last quarter. Buffett’s holdings in Walmart are now valued at less than $100 million.
Despite investing billions in e-commerce, Walmart has been unable to acquire a sizable market share. In 2015, the online sales of Walmart totaled $13.7 billion, while those of Amazon amounted to a whopping $107 billion. As for 2016, Amazon alone reportedly accounted for half of the e-commerce segment’s growth during the holiday season.
Major e-commerce players like Amazon continue to grow because they are able to continually transform themselves with respect to fickle consumers and the rapidly evolving retail space. These players are using big data and analytics solutions to make smart merchandising decisions, improve demand forecasting capabilities, increase operational efficiency, gain valuable social media insights, and more.
Also read: Big Data Analytics for Big Retail Success
Retailers that aren’t investing in data analytics and customer intelligence will have a not-so-bright future. This explains the recent spate of bankruptcies in the retail sector; American Apparel, Limited Stores, and Wet Seal are some of the retailers that have filed for bankruptcy protection.
Matthew Shay – President and CEO at NRF – said that business models need to evolve quickly in the fast-progressing retail space. However, not every company succeeds in keeping pace. Such companies, given the level of volatility and competition, fail to remain competitive.
Mobile Sales Will Continue to Grow
Forrester has predicted that by 2021, consumers will spend $152 billion through mobile phones, accounting for about 24% of net online sales. Also, mobile retail sales will likely grow at a CAGR of 20.4% over the next five years, and mobile phones will directly contribute $1.4 trillion in offline sales.
During Cyber Monday 2016, mobile sales accounted for more than 35% of overall retail sales, which is also the highest in history. So, most retailers have identified mobile as one of the top priorities for 2017.
In the report – The Biggest Prize In Mobile Commerce Is Influencing Offline Sales – Forrester has shed some light on the ways in which retailers can connect with consumers. Based on the mobile and tablet commerce data for 2016-2021 (US), the market research company suggested that improving customer experience via apps or mobile websites will certainly help.
Here are some consumer stats for mobile usage as per a retail survey:
- Doing price comparison – 52%
- Looking up product information – 47%
- Reading product reviews – 44%
- Searching for coupons – 39%
- Finding nearby stores and checking store timings – 32%
- Checking product availability in online stores – 30%
- Finding products in physical stores – 29%
That said, only 47% of consumers prefer apps over mobile sites as per a study. This rather small figure can be attributed to consumers’ apprehensions regarding security, privacy, and data usage. Therefore, retailers will be focusing on making their apps more sophisticated and light. This includes offering personalized shopping experiences, light and seamless user interfaces, location-based services, and enhanced security and encryption features.
Upping the app game is critical because apps reportedly convert three times more consumers than mobile websites. At each stage of the marketing funnel, app users apparently spend more time browsing products and making purchases when compared with mobile website and desktop users.
Criteo has released some stats for apps versus mobile websites:
- Products viewed per user – 4.6x
- Add-to-basket rate – 2.5x
- Checkout rate – 1.2x
- Conversion rate – 3x
There is Still Hope for In-Store Shopping
Though Warren Buffett and many others are skeptical, brick-and-mortar retail will likely survive after all. Or perhaps even do well. With novel concepts like micro-localization and co-creation discussed at the NRF Big Show in January 2017, one can make a strong case for the future of in-store shopping.
Micro-localization is a new data analytics methodology, which enables retailers to target customers at the neighborhood level. This is unlike conventional analytics methods that identify customer trends and patterns for much larger areas or regions. Micro-localization is sophisticated to the extent that it helps in gathering extensive data about an individual shopper.
Co-creation has everything to do with customer engagement. It involves the participation of customers at various levels of the shopping process, whether it is choosing a certain product or making transactions. Many retailers have begun to come up with novel ideas to get customers to participate in the process of improving products and services or even operations.
DEWALT, a manufacturer of power tools, has an award-winning community of at least 10,000 end-users. The company, through this community, gathers customer feedback about products and even marketing efforts. It also accepts invention submissions from both experts and loyal customers to create new product lines.
Another brilliant example is DHL’s co-creation effort to improve their supply chain operation. In Singapore and Germany, the logistics giant organizes hands-on workshops with its customers. These workshops, which have reportedly witnessed more than 6,000 engagements, have led to the invention of the Parcelcopter – a test drone for delivery services.
The Parcelcopter can apparently make a delivery in eight minutes, while traditional delivery takes half an hour or so. Aside from a significant decline in churn rate, this co-creation effort resulted in DHL’s customer satisfaction scores and delivery performance rising to more than 80% and 97%, respectively.
Physical retailers, with co-creation efforts, can thus improve customer loyalty significantly by creating memorable experiences. And this brings us to the marketing gimmick that seems to be catching on in the retail space.
Virtual Reality-Driven Marketing Will Become a Thing
The use of virtual reality (VR) to improve customer experience and engagement has been going on for a while now. A recent example is John Lewis – a department store chain based in the UK – which used VR during the holiday season, especially for its Christmas campaigns in 2016. Even auto manufacturers like Volvo and Lexus have begun to use VR headsets to offer test-ride experiences for yet-to-launch models. According to a recent Oracle study, 74% of the participating retailers confirmed that they are planning to implement VR (or have already) by 2020.
For more examples of technologies that will likely shape the future of the retail industry, read the article – Big Data Analytics and Retail – What Does the Future Have in Store?
Social Shopping Will Gain Traction
Facebook is currently conducting tests on the ad format – Facebook Shoppable Feed ads – which would allow consumers to browse and explore products from retailers without navigating away from Facebook. These ads usually have two pages – one containing images or a video of the product and the other suggesting more (or related) products. Both these pages can be viewed directly on Facebook.
When customers click on a particular product, they would be directed to a new page – a landing page or a catalog. Though such ad formats are still in beta stage, Instagram and YouTube are apparently making efforts toward their development.
Sooner rather than later, we can expect such social ads to become commonplace. The popularity of social media channels combined with the convenience factor of these ads would help retailers improve their conversion rates.
Personalization Efforts with Chatbots Will Increase
Chatbots are gaining significant traction as they have the potential to transform the way businesses interact with customers. Jay Emmet, the general manager at OpenMarket, said chatbots could improve engagement and benefit businesses and customers in terms of convenience, time, and expenses.
OpenMarket conducted a survey about chatbots and messaging; the study involved 1,500 mobile users in the US and the UK. For the retail vertical, 67% of the people surveyed said it would be “very useful” to be able to respond (conversationally) to their preferred companies via SMS.
Chatbots incorporate artificial intelligence and machine learning algorithms to simulate human conversations. Here are some of the specific retail areas where chatbots help:
- Offer navigation and support inside stores
- Suggest product recommendations
- Automate processes in the digital journey
- Share updates about brands and services
- Provide information about discount and coupons
- Manage orders
Needless to say, chatbots gather a lot of customer data. Businesses, with the help of retail analytics, can use this data to personalize shopping experiences.
BRIDGEi2i Customer Experience Case Study:
A leading US-based Fortune 50 technology company, which designs, manufactures, and markets mobile communication and media devices, was looking to improve customer experience on their support website.
BRIDGEi2i helped the client:
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Read the complete customer experience case study to know more.
Same-Day Delivery Will Become More Widespread
How many times have you decided against making an online purchase when the estimated delivery date was too far away to your liking? I am willing to bet that this has happened to you more often than not. Many retailers are therefore investing in autonomous systems, given this customer trend.
Gartner has predicted that the global market for drones will be valued at $6 billion in 2017 and will likely hit $11.2 billion in 2020. Though drone tech is facing a few challenges around material handling and turnaround time, companies like UPS, Daimler, and Amazon are making every effort toward development and widespread commercialization. For instance, Daimler has partnered with the software startup Matternet to combine the concepts of autonomous vehicles and autonomous delivery tech. They are working on developing electric vans equipped with drones for making deliveries.
More retailers will probably follow suit and invest heavily in sophisticated logistics tech over the next few years. Given that consumers nowadays seek instant gratification, such investments would certainly boost retail sales.
The volatile retail market is primarily driven by consumers and advanced tech. If retailers are to survive and thrive, they need to do two things:
- Become early adopters of emerging technologies and practices
- Embrace an ‘analytics first’ mindset, which essentially means putting a metrics-driven decision-making system in place to leverage customer and organizational data with analytics solutions
On that note, read the white paper – Building an Analytics First Organization.