New mores, politics and technology are accelerating the pace of change in the world of retailing.
The most dramatic, ongoing development is the convergence of physical and digital retailing, forcing stores to cater to customers “whenever, wherever and however” they want to shop, and to provide faster deliveries, easier online navigation, knowledgeable and accessible sales associates, and BOPIS, the buy online, pick up in store service. “This trend is driving traditional brick-and-mortar retailers such as Walmart, Target and Best Buy to enhance their online functionality and offerings, while also pushing e-commerce retailers from Bonobos to Amazon to open brick-and-mortar stores,” said Charudatta Ganpule, head of the retail research desk at Tata Consultancy, a global IT consulting firm.
Oliver Chen, Cowen & Co.’s managing director and senior equity research analyst covering retail and luxury goods, underscores the “bifurcation” of the retail industry, whereby the strong get stronger and the weak get weaker. He cites Target as one of the big winners going forward.
After a run of major bankruptcies and liquidations last year — Payless, Barneys New York, Dressbarn, Destination Maternity, Sugarfina, Avenue, Charming Charlie, Gymboree, FTD, Z Gallerie, Diesel, Charlotte Russe and Shopko, among them — the so-called retail “apocalypse” appears over. While big bankruptcies won’t be as prevalent, store closings will continue in what amounts to a healthy, needed culling. The U.S. remains seriously over-stored, there’s too much merchandise — a lot of it redundant — and the consumer demand for material goods is declining, while merchants emphasizing food and beverage, entertainment, travel services, exercise, health and social causes will gain in relevance.
“Major retailers are transitioning from their original business model into nontraditional, typically smaller store formats that are varied to match the shifts in what, when and where consumers want to shop,” Ganpule reported. She’s referring to pop-ups, mobile retail trucks and flash web sites, which are ubiquitous during the holiday season. Also, retailers are creating scaled-down versions of their typical large formats, to fit into tighter urban areas and adapt to the shift to more online shopping.
You don’t have to look further than the fourth quarter for clear signs of retail metamorphosis. Christmas promotions started earlier than ever, as far back as right after Halloween, and ended later, and deliveries got faster, cheaper and more reliable, enabling shoppers to avoid the crunch at the checkout.
There’s also a shift in the gifting. “The evolution of the shopping season continues from buying gifts from a gift list, to buying gift cards and giving digital cash through Venmo. Christmas Day becomes the new Black Friday,” said Marian Salzman, senior vice president of global communications, Philip Morris International. Or as Mary Ellen Coyne, chief executive officer of J.McLaughlin, said, “We don’t see people running to pick up faux fur hats or gloves. There’s a general sense that the customer is really looking for more interesting gifts, whether it’s home, technology or an experience. They are tired of giving typical presents.”
Below, a list of 10 top trends in retail to watch for in 2020.
1: Uncertainty reigns: Although consumers are financially healthy — unemployment is at record lows, wages are rising and the stock market surged — worries linger over a possible recession, trade wars and the presidential election. It all could dampen the mood to spend. But some of the concern is offset by what proved to be a good holiday season marked by record levels of shopping during the peak Thanksgiving, Black Friday, Cyber Monday and Super Saturday periods. That’s fueled some optimism for 2020.
2: Convenience: Retailers will be doubling down on BOPIS, self checkouts, faster deliveries and improving web site navigation. Walmart and Kroger are testing self-driving vehicles with third-party vehicle providers for deliveries to consumers’ homes, and subscription services are on the rise, eliminating trips to the mall or shopping online.
3: Renting apparel: It’s getting bigger, potentially representing 10 percent of the broader apparel market in the medium term, according to Jefferies Research. Urban Outfitters, Bloomingdale’s, Lord & Taylor, Nordstrom and Vince are among the many retailers and brands getting into rentals, encouraged by consumer interest in sustainability, less interest in owning clothes, perceived value and retailers improving logistics and deliveries. Cowen’s Chen calls it “more thoughtful consumption behaviors where less can be more.” The key is figuring out how to make a rental business profitable. The costs of delivering and cleaning clothes are high.
4: Social responsibility: Retailers adopting socially responsible, charitable and environment-benefiting programs and practices such as avoiding plastics, utilizing regenerative and non-polluting materials, cleaner forms of energy, recycling, banning fur and insuring that products originate in factories with humane work conditions, will have a leg up.
5: Transformation of square footage: It’s about monetizing the retail real estate that’s been undervalued and could be potentially more productive through alternative uses. Expect more redevelopments of malls and department stores. Macy’s Inc. will disclose further details on building a tower atop the Herald Square flagship in Manhattan. Retailers and malls will up the hospitality quotient and convert space for food and beverage formats, hangouts, barber shops, spas, cooking demos, book signings and pet events to draw traffic and elevate areas lacking productivity.
6: Off-price: The strong get stronger as consumers continue to flock to T.J. Maxx. Home Goods and Ross Stores. Macy’s Backstage off-price departments are mushrooming inside Macy’s stores and improvements at Saks Off 5th and Nordstrom Rack are happening. The “treasure hunt” and the high of getting a good bargain keep bringing customers in.
7: Partnerships and collaborations: Products from Disney’s “Frozen 2” and “Star Wars” movies lifted holiday sales at a spectrum of stores, from Saks Fifth Avenue to J.C. Penney to Nickelodeon. Nordstrom’s arrangements to sell such brands as Topshop and Everlane create an air of exclusivity and appeal to new audiences; Kohl’s has been expanding the number of its stores accepting Amazon orders and returns, bringing additional traffic to its doors, and J.C. Penney Co. Inc. and Macy’s last year announced collaborations with ThredUp.
8: Internet increases: Results from last holiday suggest no slowdown in sales gains, though some believe the Internet will cap out at about 30 percent of U.S. merchandise sales and that the rate of increases on the Internet is slowing. In the third quarter of 2019, U.S. e-commerce sales represented 11.2 percent of total sales, according to the Department of Commerce.
9: Personalization: Through artificial intelligence — the biggest trend in retail technology — thoughtful messaging that reflects awareness of customers wants and needs, arming sales associates with data on shoppers and merchandise availability, and stepped up personal shopping programs, retailers build stronger bonds. Customization is part of bond-building through monogramming or detailing jeans, sportswear and jackets per customer specifications. It’s been a hit at Muji, the Japanese retailer expanding in the U.S, and Nike’s flagship store on Fifth Avenue in Manhattan, which sells customized sneakers.
10: Serving the underserved: Retailers fill voids in their merchandising and marketing by catering more to special sizes, minorities, lower-income and LGBTQ communities. Many retailers have been criticized for lacking inclusiveness and for not opening stores in inner-city neighborhoods across the country, whereas the selection is greater in higher-income communities.