2016 was an exciting year! Brexit. Trump. Syria. Interest rate increases. Market rallies. Strong job market. Low consumer product material and delivery costs. Consumer mobile maturity. More free data. Increased competition for share of consumer discretionary spend. Channel bleed. Continued growth of online anytime shopping. Shoptalk. Fewer retail mega-mergers and deals.
We said goodbye to Sports Authority, Hancock Fabrics, 100 Macy’s stores, 150+ Aeropostale stores, 150 American Eagle stores, 120 Chicos stores, 200 The Children’s Place stores, 150 Finish Line stores, 50+ Ralph Lauren stores, 250 Men’s Wearhouse/Jos A Bank stores, 400 Office Depot/Office Max stores, 200+ Walgreens stores, and 140+ Kmart/Sears stores.
And we said hello to 1,900 new Dollar General stores and significant increases in square footage for Dollar Tree, Family Dollar, Marshall’s, TJ Maxx, Dick’s Sporting Goods, Ulta, Forever 21, and Tractor Supply. Oh, and Amazon built on Amazon Prime and launched Amazon Prime Now.
2017 will be a strong and evolving year for retail as new national leadership begins to set their agenda, the job market continues to tighten, infrastructure spending increases, traditional mall-based retailers struggle with traffic, mobile is mainstream, and consumers have additional financial margin and spending capacity. Retailers will struggle to maintain traditional channel share with new same-day delivery services and channel bleed in grocery.
Let’s take a look at five (plus one!) retail trends for 2017!
Amazon Prime How. Before you roll your eyes at the fact that I start this year’s retail trends write-up with Amazon, consider this. Amazon accounted for nearly 60% of online sales growth in the US in 2015 and achieved $23B more in sales in 2015 vs. 2014. While the final numbers are not in yet, assume that 2016 will look to be as strong. And consider that Forrester predicts that e-commerce sales will grow to more than $530 billion by 2020, with more than 206 million shoppers spending money online.
Now, consider this also. This week, my wife and I put together a list of things that we were going to run out and pick up at Target, Home Depot and Publix. As Amazon Prime members, we were notified that Amazon Prime Now was available in our area. We went into the app and placed our order. About 90 minutes later, we received a text that our order had been delivered. Sitting outside our garage door was a brown paper bag containing Jiff Peanut Butter, Liquid Plummer drain cleaner, red and black Ping-Pong paddles, Milk-Bone dog treats and a generic red holiday table cloth (I know – weird mix of products – and that’s the point!). Lost sales for Home Depot, Publix, and Target, less gas usage and traffic stress for us, simple billing and tracking (you can track the delivery on the app similar to tracking your Uber arrival!). Fun, convenient, and game-changing. Or should I say dis-intermediating.
Blockchain. If you haven’t invested time to read about blockchain and its implications in retail (or other industries), take a few minutes after reading this article to do some homework. It will be the omnichannel-of-old buzzword of 2017 but for financial transactions and could have major implications in the transaction processes in place between retailers and suppliers.
Let’s start with a quick definition. According to Forbes (Blockchain: Wall Street’s Most Game-Changing Technology Advance Since the Internet): Blockchain is a way to structure data, and the foundation of cryptocurrencies like Bitcoin. This coding breakthrough - which consists of concatenated blocks of transactions - allows competitors to share a digital ledger across a network of computers without need for a central authority. No single party has the power to tamper with the records: the math keeps everyone honest. Forty of the world’s top financial firms are experimenting with the tech.
Some of the most useful elements of a blockchain as outlined by PwC (Blockchain Services) include the following:
- Verify possession of a private key
- Verify that messages came from the right person
- Verify that messages haven’t been changed or tampered with
- Allow fine-grained version control of documents and contracts
Signed blocks of transactions:
- Preserve the sequences of transactions
- Allow fine-grained access control at the level of a transaction
- Create continually updated audit trails
Distributed, shared ledgers:
- Establish a single version of transaction truth
- Reduce or eliminate the need for centralized third parties
- Open the door to the autonomous agents, processes and organizations implied by smart contract technology
What are the implications to retail?:
- Product Track-and-Trace: The blockchain framework allows all members of the value chain - supplier, manufacturer, retailer, consumer - to have visibility into products from source through production to store to consumer. Track food from source to plate. Ensure products were created in environments meeting specific regulations and/or requirements.
- Counterfeit Goods: Consumer goods can be certified with blockchain’s anti-counterfeiting solution (Block Verify) for pharma, luxury and electronics. Counterfeit goods continue to be an issue for both retailers and CPG manufacturers and Block Verify allows for detection and identification of counterfeit items.
- Product Warranties: Many companies today are already using a product called Warranteer to move product warranty information into the cloud via blockchain. This allows the warranty to be easily updated and transferrable. The consumer “owns” the warranty and can manage it, eliminating the need for retailers and CPG companies to get stuck in administrivia.
- Trade Promotion Management: Trade deals between retailers and consumer product suppliers today largely leverage spreadsheets, databases, e-mail exchanges and for some, more sophisticated trade promotion management or “deal” software. The process is cumbersome and largely inefficient, resulting in over- and under-payments, confusion over product deals, promotions, discounts, allowances, etc. And, it’s big money between retailers and CPG suppliers. Expect up-start players in the tech space to develop and launch solutions to clarify (aka transparency) the agreed-to-deals and trading relationships between retailers and CPG suppliers (aka private market exchanges). This will also fuel faster recoveries for retailers for deals executed on specific promoted products.
Businesses that deal with slow, costly or unreliable transactions have good reason to consider distributed ledger technology. Blockchain benefits are reliability, availability, transparency, immutability and irrevocability.
Mobile/Click-and-Collect. If you are not familiar with click-and-collect, it is basically defined as buying online (click) and picking up in store (collect). Multiple retailers are experimenting with a new service model that facilitates speed of product receipt vs. having to go in-store. Kohl’s now enables customers to buy via mobile and pick up in-store, while others, like Sam’s Club are using mobile to send notifications whenever an order is ready for in-store pickup. Nordstrom offers curbside pick-up at some stores. Expect more testing of this model.
Bigger picture, there is an opportunity for a delivery aggregator or “service” that will pick up items and deliver them to your home for a small fee, as part of a subscription, or as part of a retailer delivery consortium. Expect trial-and-failure in this space in 2017. Uber has done it. Amazon Prime Now is doing it. In the “service” economy, someone will figure out an Uber-like, cross-retailer, product delivery model.
Analytics, Real-Time. In the late 90’s, as CRM “leaders” like Siebel, Epiphany, Kana and others were thriving, the term “real-time” made its debut as related to personalization. “Personalize the user experience in real-time using insights and actions made by an individual online, on the phone or via e-mail.” Real-time is again pervasive in the retailer data and analytics vernacular as related to ad-serving, promotions, product placement and suggestive selling (amongst many others).
Analytics as a discipline and career focus continues to be hot and many talented, skilled and interested individuals are entering the workforce fresh out of data management-analytics-engineering-oriented undergraduate and master’s programs.
I covered this last year, but in 2017 this will be an even more important focus for retailers. New and varied types of business data are becoming available and quickly accessible (e.g., omni, digital, store, beacon, social, vendor, etc.); storage technology costs are largely decreasing; new and flexible (and even business-centric) analytic tools are evolving quickly (e.g., Tableau, Qlik, Microsoft); greater, more secure cloud resources are rapidly proliferating (e.g., Amazon Red Shift, Microsoft Azure); and the value of data-driven decisions is becoming a mindset with c-level decision-makers as “old-school” retail thinking is quickly becoming irrelevant in the world of digital and fast-moving consumer sentiment shifts (see trends in store closings!).
One additional area of focus for retailers will be on spend analytics. Direct and indirect spend will be increasingly viewed as potential “upside” financial opportunity as payment terms are re-evaluated, product line item costs are assessed, working capital programs are initiated, indirect spend buckets are analyzed and supplier performance management metrics become more accurate and timely.
Mobile Payment. Raise your hand if you are annoyed at having to insert your “chip” card, wait, wait, wait, wait, wait, wait, wait, wait, and wait…then sign to check-out…then wait for your paper receipt. At the end of 2016, industry analysts predict that there will be more than 400 million mobile payment users worldwide. TechCrunch estimates that 70 percent of all mobile users in the United States will make a mobile payment in 2017 (The Evolution of the Mobile Payment), mobile payments in general next year are expected to total $60 billion, and if you take Business Insider’s word for it, by 2020 mobile payments will account for $503 billion in sales. On average this payment trend saves 50 percent of the time used for conventional card payments. Sign me up!
In 2017, retailers will continue to adopt cloud-based POS systems. These systems allow merchants to easily accept a variety of payment methods (cash, credit card and contactless payments) and also allow small business owners to track sales, inventory, and employee performance. In addition, these solutions enable direct-to-consumer marketing.
From a mobile payment perspective, both Apple and Samsung have developed applications for their phones. Three out of four contactless payments in the U.S. are now using Apple Pay - more than Android and Samsung Pay. In 2016 Canada, U.K., China, Singapore, Switzerland, France and Hong Kong adopted the use of Apple Pay - and Apple plans to integrate Apple Pay into web browsers as well.
Bonus Point: Go Rogue. For a number of years, I have been involved in consumer products and retail industry events - from both the consumer products/retail “customer” side as well as the analytics “vendor” side. And if you attend these events, you have probably noticed like me that many of them have gotten stale - same speakers, same format, same rows, same buzzwords, same booths, same speed-dating vendor discussions, same corny walk-in music, same hotels/resorts, fewer attendees due to OPEX budget cuts, business attenders disappearing after day one leaving vendors to look at one another, nobody attending the last day, more vendors vs. business decision-makers, etc. And for many consulting and technology firms, the “event” investment has received increased scrutiny to ensure investment matches opportunity and leads.
Are events dead? No. Not by a long shot. It’s time to go rogue.
If you look at the buzz, talk, discussion and energy around Shoptalk in 2016, it is obvious that industry events can be successful and effective if they are thought of creatively and with both vendors/sponsors as well as business leaders in mind (aka a rebellion against mainstream, traditional events!).
Creating environments for industry or solution leaders to connect is a winning proposition with new creative thinking vs. cold-ballroom-rows-grilled chicken-TEDTalk-keynote-breakout-booth-vendor-branded-neck-nametags-patio-cocktail-hour mediocrity. In addition to Shoptalk, the [email protected] events (bringing together academia, top-level retail and CPG leadership, and a focused set of vendors in intriguing/engaging locations) and RIS/CGT’s Retail and Consumer Goods Analytics Summit (RCAS) (right topic, right time, and right-industries) are examples of new thinking around value-based environment creation.
Many of you reading this article work for technology or consulting organizations and you have probably seen the same. You are most likely re-prioritizing your 2017 budgets accordingly. Whether it’s a regional customer dinner or large global conference, senior business and technology leaders have options to attend events every week and most days of the week. You must offer content, connections, and experiences that assist in solving a problem for the business.
“Rebellions are built on hope.” (Rogue One). Go Rogue in 2017!
Justin Honaman is VP/GM, global commercial analytics at PRGX, Inc.