For the past couple of years, U.S. retail has been dominated by doom-and-gloom headlines of store closures and a retail apocalypse. Heading into 2019, we see reason for optimism, and not just for retail as a whole, but for physical stores in particular. Across sectors, we expect further investment in store refurbishments and new openings. Retail will also invest more in new technologies to enhance logistics, store operations and customer interactions.
By the end of 2019, we expect improved flagships, better-invested store networks and more data-driven, offline ventures by e-commerce players. We also anticipate artificial intelligence (AI) to be embedded across retail, improving communications and enhancing the customer experience. AI will also drive smarter decisions on inventories and pricing.
This is what we at Coresight Research expect for brick-and-mortar retailers in the year ahead.
U.S. physical retail will undergo a revival, with major names investing in their store networks. This will mean major retailers, such as Walmart and Target, freshening up portfolios with refurbished environments and new in-store technology. But we also expect a new generation of flagships that offer “spectacular retail.” This trend has already started: Restoration Hardware and Nike recently opened new flagships in New York City. Restoration Hardware chief executive officer Gary Friedman said he expects the flagship to turn over $100 million in sales once sales densities reach maturity. Meanwhile, Tiffany & Co. announced this past August that it will spend at least $250 million to renovate its flagship on New York’s Fifth Avenue. The project, which aims to create “a dramatic new experience” for customers, is expected to run from February 2019 till late 2021. In 2019, we expect other retailers to follow suit, embarking in revitalized in-store experiences, perhaps announcing more spectacular flagships.
More Digitally Driven, Online-to-Offline Retail
“New Retail” is Alibaba Group’s concept for integrating online and offline retail, and logistics across a single value chain, powered by data and technology. In 2019, we expect to see Western retailers adopt this model with variations of online-to-offline migration and cross-channel integration—an “Alibaba-fication” of online retailing. We expect Amazon to deploy more data-driven offline formats. In recent months, we’ve seen Amazon open more pop-up stores, more checkout-free AmazonGo convenience stores and a new banner called 4-star, which sells nongrocery products rated four or more stars by customers. In the summer of 2018, Amazon brought in a new element of “real-world” experiences on Prime Day. And, we’ve heard reports that Amazon is testing AmazonGo’s “just walk out” technology for larger store formats. We expect the unexpected from Amazon, but one thing we are certain of is that the retailer will have more physical stores.
Even More Artificial Intelligence in Retail
AI is rapidly emerging as the preeminent new technology in retail. And in our proprietary CORE framework, we identify four major areas of opportunity for retailers to use AI: communication (which includes personalization); optimization of pricing; rationalization of inventory; and experiential retail.
While the use cases for, and benefits to retailers of, technologies such as augmented reality and virtual reality are still being established, AI is already cementing its position as the leading technology to enable change in retailing.
This will help retailers make better decisions on inventory and pricing, and it changes how they communicate to, and personalize offerings for, customers. In 2019, we expect even more retailers to deploy AI across even more areas of their businesses.
Deborah Weinswig is the chief executive officer and founder of Coresight Research, a firm delivering data-driven insights to retail businesses.