As consumer behaviours change and economic uncertainty rises, the retail sector is entering a new era. Technology has a huge potential role to play in this transformation — but it’s not the only contributing factor. In this article, we’ll explore how the future of retail might look, and identify some of the trends and challenges that are likely to have an impact in the coming years.
The role of technology
Technology has changed how people shop and revolutionised the way businesses manage their operations. Today, retailers around the world rely more than ever on data analysis to forecast sales, optimise stores, coordinate stock control, and manage their workforces. They also use shopper data to better predict the products and services people want, make accurate recommendations, and deliver improved shopper experiences.
For example, by 2021, more than three quarters (77%) of retailers plan to use Artificial Intelligence (AI). Looking ahead, the reliance on AI is set to grow even further, as retailers rely on it for help in everything from smoother translations to smarter inventories that speed up delivery.1
Another area is the Internet of Things (IoT) — including Radio Frequency Identification (RFID), electronic shelf labels (ESLs) and smart shelves — which can help retailers in areas like supply chain management and improving the on-shelf availability of products.
New consumer behaviours
Inventory-led retailing (i.e. companies sourcing products direct from brands and sellers) is coming to an end —replaced by the ever-increasing role of brands and the wider customer experience they’re able to deliver.2
For example, in bricks and mortar stores, consumers now expect features like easy returns, self-checkout, click-and-collect, and mobile-order-ahead. Likewise, online shoppers demand a smooth and hassle-free journey to checkout, and an effortless returns process. In fact, 9 out of 10 customers want a seamless omnichannel experience from retailers3 — suggesting the task of eliminating the barriers between the physical and digitals worlds is vital.4 One way retailers can deliver this is through AI (such as chatbots and automated messages), which can provide rich ‘human-like’ customer service around the clock.5
Many consumers will also be seeking digital payment installment plans to help them purchase the products they need, without getting into debt.
The role of social
Social commerce will continue to change the way consumers find and buy from brands digitally — particularly as content is made more ‘shoppable’ and streamlined checkout journeys become established.
Lastly, with 73% of consumers now favouring conscious/ethical shopping to help reduce the impact on the environment, we may see a steady growth in the ‘recommerce’ market — where previously-used products (such as mobiles and other electronic goods) are offered for resale.6
Bricks and mortar stores vs. ecommerce
In the US alone, 2 in 3 shoppers prefer searching online for the products they need, as opposed to visiting a physical store.7 The sheer number of products available online makes for a more enjoyable and rewarding experience — and being able to complete the transaction in just a few simple clicks makes it infinitely quicker than heading to the local mall or high street.
This raises an important question: will the role of physical stores soon become redundant?
While the rise in online shopping means they are no longer the main channel for distribution, it’s likely that retailers will increasingly use them as ‘media channels’ to help build their brands and form connections with consumers. The ability of physical stores to create memorable retail experiences — that exist across multiple buying channels — should not be underestimated.8 A good example of this are ‘pop-up’ stores, which are often used by brands as testing grounds for new products.9
Bear in mind too, that although some $3 trillion in global retail was transacted in 2019, the vast majority of these purchases were for products that are easy to process online — i.e. electronic gadgets, airline tickets, etc. Looking at the bigger picture, there is still $27 trillion of so-far-untapped transactions for more complex purchases such as property, cars, home furnishings, luxury products, etc.10
Addressing the uncertainties
New consumer behaviours, the rise in technology, and growing economic instability all have roles to play in the future of retail. And, of course, the ongoing COVID-19 crisis is fundamentally altering people’s buying habits and making these already-uncertain times that much harder for retailers to manage. Suddenly, for example, consumers are needing disposable gloves, bread machines, dried grains and rice, and weight training equipment. Whereas products like luggage and suitcases, cameras, men’s and women’s formal wear are no longer the in-demand staples they once were.11
Looking beyond current uncertainties though, the future of retail in general looks bright — with sales estimated to grow $6.5 trillion by 2023.12 To ensure they’re ready to take advantage, it’s vital that retailers keep a close eye on changing trends and are ready to learn, share and adapt best practices in order to keep up with this unprecedented consumer demand.