Consumers have more choice than ever before about where to shop and what to buy. And that is a growing challenge for retailers.
So argues a report from FGRT (formerly Fung Global Retail & Technology) called “18 Retail Trends for ’18.”
The report sees more rapid change ahead for retailers, as consumers who want to shop on their own terms switch more of their spending from conventional retail stores to new and alternative formats and channels.
“Today, everybody is unique and difference is celebrated, whereas homogeneity was valued more highly in the past,” writes FGRT managing director Deborah Weinswig. “We see this cultural shift as the principal threat to long-standing generalist retailers that built scale by occupying the middle ground. We see no letup in the splintering of consumer spending in 2018, as specialist retailers offering ever-more choice will continue to peel dollars away from midmarket behemoths.”
Internet-only retailers will capture an additional $45 billion in sales in the U.S. this year, Weinswig predicts, and such niche businesses as apparel rental, beauty subscriptions, meal-kit services and apparel resale will capture another $1.9 billion in consumer spending. That represents an additional $47 billion that will be stripped away from traditional U.S. retailers this year compared with 2017.
“At the same time, we see two types of generalist retailers winning shoppers and growing sales in 2018,” Weinswig writes. “Those with a convincing low-price specialization — think Walmart and Target — and major e-commerce platforms, notably Amazon, which generates shopper loyalty through convenience and innovation and locks in that loyalty with Prime membership, despite being an archgeneralist retailer.”
Technology will continue to remake the shopping experience, the report argues, and one way that traditional retailers can fight back against more specialized upstarts is by adopting technology early. Retailers can use artificial intelligence (AI), for instance, to offer individual consumers tailored interactions, including shopping recommendations, as well as personalized mobile-commerce portals and promotions.
“Such personalization can drive growth at specialized retailers by enabling them to create deeper connections with their customers,” Weinswig writes. “But it will be imperative for hard-hit generalist retailers, including U.S. department stores, which can deploy AI to surface highly relevant products and services from what may be an unwieldy inventory.”
As its title suggests, the FGRT report identifies 18 trends for 2018, which it describes as the ways the industry will respond to five consumer demands:
• I want to shop on my terms.
• Make my life better.
• Give me a better experience.
• Let’s collaborate.
• Make it faster.
Responding to consumers who want to shop on their own terms, for example, will drive a number of trends besides the splintering of consumer spending. The report predicts that consumers will start buying their groceries from high-tech, unstaffed stores like BingoBox, which operates 200 unstaffed convenience stores in China and plans to expand its network throughout Asia and ultimately into Europe, and Amazon Go, the cashierless store whose launch is on the horizon. At the same time, the report expects blockchain technology to provide a vehicle for more consumer packaged goods suppliers to sell their products directly to consumers via online marketplaces, their own websites and new intermediary platforms.
The report also sees more collaboration ahead for retailers, who will have to work with brands, services and even other retailers in order to compete.