Looking Ahead To The 2020s: The Challenges For Retail In A New Decade
In the last decade, retailers have taken many steps to ensure a better retail experience for their customers and remain profitable by cutting down on costs of production. Still, many retail stores have shut down. Other retailers were forced to take drastic decisions in order to survive. What will the 2020s hold for the retail industry? Read on to find out.
As we enter a new decade, I took out my crystal ball to see where we are heading in the retail trade. Sure – people will shop for their daily needs, but will retailers be ready to fulfill their demands for fashion, value, and especially for speed? Where will we shop? How will we shop, and what can we expect retailers to do to make us customers keep coming back?
1. New stores formats will expand. While a couple of decades ago we all thought that by now we would travel in hermetically sealed bubble cars and shop in specially constructed stores, that dream has gone away. Instead, we are now expecting that the Amazon Go store will multiply. It is a store whose sensors can tell when people have picked up merchandise, and it will let customers check out without waiting for any cash register to add up their purchases. Since sensors have tracked the customer’s purchases, the store knows exactly what to charge each customer. Two new companies have popped up – Grabango and Zippin – that have copied the Amazon idea (OK, OK – they have modified it and their apps are quite different, but it shows that this new concept is taking hold). For stores that sell select items, this type of store format may be easy to open and have a much lower labor cost.
2. More stores will close. 2019 was the greatest year for store closings to date. According to Sourcing Journal, 11,250 stores closed in 2019, another 5,864 stores closed in 2018, and more than 5,000 stores closed in 2017. There are still several companies burdened with very high debt, and I feel that they must negotiate to reduce that debt in order to survive. That will likely lead to more closures unless these retailers adjust the way they do business. However, I believe that leading vendors want to keep stores open since they need the doors for customers to come in and shop.
3. DTC (direct-to-consumer) stores are stepping in. There is more DTC trade than ever before. It has been spearheaded by Nike and New Balance brands, and I believe that this trend will continue as more manufacturers choose to deal directly with customers. It is a trend which will force traditional stores to have more exclusive brands and private labels to retain customer loyalty.
4. Online sales will continue to grow. The internet continues to be a source of growth. Apps are becoming more user-friendly and often recall merchandise that customers contemplate to buy. Such gentle reminders may well lead to purchases. There is also more personalization as each site which allows a more personalized shopping experience to customers. I expect to see stores that did not have e-commerce will follow Starbucks’ lead and now open convenient service in stores for online orders. Customers will not have to wait in line to wait for their special brew.
5. Micro-fulfillment centers. Modern Retail points out that grocery stores have a need for stand-alone centers to fulfill digital orders. This concept may be good for department stores as well, as some select items could be shipped from these specialized fulfillment centers. That could quicken the fulfillment speed and separate out difficult orders for careful handling. I have found that the needs of grocery stores often foreshadow the operating issues other retailers will also ultimately need to address. Grocery stores have to operate with very low margins and are often forerunners who are forced to find sound money-saving solutions in order to survive.
6. Healthcare will be a top priority. In August 2018 Best Buy acquired GreatCall, a leading connected health service provider. It was in recognition that health care is an important consumer business since the population is getting older. More than ever, there is greater need to provide health care services that make it as easy and convenient as possible to manage care for senior citizens. Not only is Best Buy ramping up services to do remote monitoring, but Walmart has new stand-alone health care clinics, and Target has revamped its health care with the aid of its CVS partnership. When we look at the many walk-in health clinics that have popped up in major cities, we can see the need for greater care options – especially for seniors. Department stores typically appeal to an older population and should reflect on how to work with these consumer trends. They should align themselves with local hospitals as an added service incentive that could promote stronger customer shopping and loyalty.
7. Inventory will be under tight control. The outlook for 2020 sales varies with every retailer I speak with. However, they all agree on one thing: inventories will be under tight control since they can always get more merchandise if the demand justifies it. Some luxury retailers are talking about adding some more popular-priced merchandise while some popular-priced retailers talk about trading up. It will be about generating more sales from their customers with the least amount of inventory exposure.
It will be a year where quick action is in order and where new ideas will create more business.