7 Key Trends Driving The Future of Retail
Over the past few years, several industries have gone under a complete transformation – and the taxi, restaurant, and hospitality industries are no exception. Retail is another vertical that underwent a massive transformation and will continue to change in the years to come.
We saw rapid growth in e-commerce, where brick-and-mortar stores started offering more of their products online. Stores emptied and order methods shifted due to the benefits of online shopping, and the pandemic only accelerated this process further.
Still, we see the reverse where e-tailers such as Warby Parker, Allbirds, Glossier, Casper, Madison Reed, Bonobos, Everlane, Amazon, and many more are now opening physical stores. From pop-up stores to permanent stores, brands are embracing the omnichannel experience. They understand that they need to be where customers are and offer a variety of experiences to answer their diverse needs and ways of shopping.
Several years ago, I was defining the future of a large retailer that was embracing the trend of showrooming to regain the advantage according to those changing times. This trend is back, with stores becoming smaller – like showrooms – carrying a limited inventory quantity with only one size for each item or one of each product offered for customers to see, touch, and try.
Once the customer makes a decision, the product of their choice will be ordered online and shipped to their home. Stores eventually won’t need to have any associates. Robots and technology could take care of the interactions, which alleviates any pressure on the customer and allows them to browse freely and get help only if needed.
We are not fully there yet, but we are getting closer each day as shops become showrooms with more technology integrated to support customers.
1. Experiential Marketing
What caused this reversion to brick-and-mortar even as e-commerce is accelerating? It’s all about experiential marketing.
It is harder to reproduce the atmosphere and feelings an in-person shopping experience gives when it is online. Until VR-commerce becomes mainstream, physical stores remain the best way to showcase the highest level of expertise the brand can offer their customer.
Some brands are finding ways to provide a shopping experience closer to what exists in physical stores. One such example is Galeries Lafayette in Paris, which provides a unique remote personal shopper that enables customers to shop remotely with the support of a personal shopper in the store. In a world becoming more interconnected through the internet, clients abroad will be able to shop with brands and experiences they might not otherwise have access to in person.
Grocery stores and apps also offer convenience by shopping through personal shoppers, with curbside pickup or delivery for their customers. Even with the importance of experiential marketing, other significant trends are leading the future of retail.
2. Direct-to-consumer and Cross-brand
Brands are learning to sell their products directly to consumers online and feel less obligated to go through big-box retailers – buying Nike on the Nike site rather than through Dick’s Sporting Goods, for example.
Additionally, the same products are sold in many different places, diluting the shopper’s faith in receiving an authentic product. Buying directly from the brand’s website gives the consumer the peace of mind that the product they order will be the one they want from that brand.
As a result, the traceability of products is becoming critical. Companies that share the same interests and philosophy will come together and sell in the same stores. Customers might see fewer brands being displayed than the vast number now seen in general stores. The concepts of store-within-a-store and pop-ups are becoming even more relevant given how store square footage is decreasing, and customers are looking for direct access to brands.
This idea of companies collaborating is exactly why we are seeing FedEx entering Walmart, Target, and Apple stores, as well as Sephora at JCPenney and Starbucks at Barnes & Nobles.
3. Social Commerce
One can argue that social commerce is not a new concept. I could not agree more but you cannot argue that social commerce is rapidly accelerating. The dominance of platforms such as TikTok is significantly changing how e-commerce works.
The U.S. is still at the beginning of this new phenomenon. Still, the platform makes everything easy for social commerce to become the primary way of shopping. TikTok amplifies these changes by integrating with other social network platforms, creating partnerships with Shopify, stabilizing influencer-led marketing, and becoming a powerful recommendations engine. In 2021, social commerce will potentially represent $51 billion in the U.S. and is expected to experience growth of over 20% each following year.
4. Livestream Shopping
While some saw the end of QVC and HSN looming, the trend has reversed and been reborn via livestream shopping. Now, anyone can conduct livestream shopping within their business – any seller can get in front of their camera and present products for their online network to purchase in real-time.
The immediacy and entertainment aspect of this type of shopping makes it efficient in terms of conversion rate. Livestream shopping is forecasted to represent $25 billion in the US by 2023.
5. Marketplaces and Consumer-to-Consumer
Social commerce and livestream shopping are influencing the transition for consumer-to-consumer (C2C) commerce. As more marketplaces arise, this will become even more evident. For example, Etsy-like stores are already saturating the online market, but marketplaces are expanding to new industries such as food and beverage.
Customers want to engage and shop with brands that correspond with their lifestyles and values. They are less loyal to brands and more open to trying new ones, too. Many customers want sustainability and prefer local products or hand-made products. All of these variables are the ingredients for the emergence of new brands, and smaller companies are finding marketplaces to be the best distribution channels to get their start in the market, especially consumers selling to consumers. Many people sell their cookies, homemade food, arts and crafts, and any product coming from their personal talents online.
Retail must develop labels to help consumers identify these products against industrial products to trigger a faster development.
6. Customization & Uniqueness
Customers are tired of uniformity. They do not want to conform but differentiate. For example, in one of my previous research, I reported that “58% of Gen Z are willing to pay more for products that are targeted to their individual personalities,” showing they want customization and personalization when purchasing a product. They want unique products in their image.
Brands like Converse understand this perfectly and offer a wide range of customization options for shoes, even down to the most minor details. It makes the experience enjoyable and unique because customers are in control and even having fun. Customers want that control over their shopping experience and data, not to feel that brands are taking advantage of them or they are being “sold.”.
The re-emergence of drop marketing is another manifestation of the need for the uniqueness of products for customers. This technique emerged in the 1980s but is getting more important for the new generations. It consists of creating consumer hype around a product produced as a limited edition or in a limited quantity.
The company will then drop (release) the product in a brick-and-mortar store or at an event on a specific day and time. Only the community will be aware of the drop because they’ve been following the brand’s updates. Once the product sells out, the company won’t create more. Customers like fostering this feeling of exclusivity through a brand commitment from fellow consumers and limited-edition or quantity products.
7. Same-day Delivery
Customers want retail and online shopping to be a seamless experience, where if they want a product, they can then take it home immediately or get it delivered to them quickly. The customer’s level of patience has decreased over time, as well.
Amazon makes this more rapid experience attainable for customers with same-day free delivery for Prime members with a $35 or more purchase, and any purchase under $35 with a low $2.99 same-day delivery option at checkout.
In addition, the development of last-minute delivery drones, robots, and even airborne fulfillment centers are filling the gap between getting out orders from a couple of days to a couple of hours.
This Is The Future of Retail
Industries are changing, and retail is one of them. Small neighborhood stores were challenged by supermarkets and big-box retailers; retailers were challenged by e-commerce; e-commerce is being challenged by Amazon, and now brands are finding ways to challenge Amazon by reinventing themselves and by selling directly to consumers.
Brands are finding ways to challenge Amazon by reinventing themselves – selling directly to consumers, offering a unique shopping experience, and providing customization and exclusivity. The retail evolution has reached a new phase, and significant changes accelerated by the pandemic will further the retail industry’s revolution.
Customers want authenticity, a renewal of the legacy brands, and a shopping experience unique to them, pushing the boundaries of a slow but strong revolution.
Can your brand deliver?