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Brick-and-Mortar Retail Trends 2017

Shelley E. Kohan
Shelley E. Kohan
Vice President of Retail Consulting

2017 is shaping up to be a year of either transition or turmoil for traditional retailers and brick-and-mortar stores, and seven trends are likely to proof critical for ongoing success – and in some cases, survival.

For years – decades, even – retail’s single constant has been its dynamic, ever-changing nature. As technology has empowered shoppers to take full control of their shopping experiences, the pace of change has increased exponentially, and 2017 is shaping up to continue the trend.

Below, please find my list of retail trends for 2017, from the brick-and-mortar store perspective, and the opportunities existing for brands to broaden and deepen their shopper relationships, heighten sales associate knowledge and engagement, and deliver differentiated, more meaningful and memorable shopping experiences.

Purveyor of Product

In our current techno-engaged environment, there is one thing that remains constant in the world of retail – and has, in fact, been the edict since I studied fashion over 30 years ago – which is “product is king.” Even with the plethora of enabling technologies driving the retail experience forward, the fundamental cornerstone of the industry remains retailers continuing to be the purveyors of products. Based on target markets, the acquisition of product through collaboration, negotiation, cost containment or differentiation will be the key unlocking the door in the future of retail. Quite simply put, technology cannot replace the merchant and finder of product. Enabling technologies will be there to aid and make all of us better merchants, but make no mistake, offering product relevant to the target market is critical to the success of the brand.

Merchant as a purveyor

Ten Thousand Steps – The Shopper Journey

In Malcolm’s Gladwell’s book, Outliers, he states it takes 10,000 hours of “doing” to perfect an action and that can perhaps never be more fully illustrated than by today’s shopper, who has not only perfected the shopping journey over time and iteration, but is now leading the journey ahead of – and showing the way for – retailers. Understanding, measuring and acting upon optimizing the shopper journey is pivotal for physical retail. This journey includes the three factors of values, pitfalls and relationships.

  1. Value – Understanding the value of the store shopping journey through technologies measuring shoppers’ footfall, merchandising and store design effectiveness, employee and shopper interactions, and the value of each shopper (shopper yield) provides retailers with the ability to make data-driven decisions to improve the journey. Measuring shopping journeys provides retailers the ability to benchmark performance and understand specific metrics that drive top line growth by store.
  1. Pitfalls – Today’s digital footprint changes the ways people shop. Amazon’s Alexa (Echo), for example, basically trains customers to shop conveniently, pain-free and effortlessly, and is a gigantic wake up call for physical retail. Removing the pitfalls and pain points of in-store shopping is now a game changing edict that every retailer must prioritize. Examples are, unfortunately, countless, including queues, check-out processes, finding products, knowledgeable staff, etc. Utilizing enabling technologies to solve these pain points is key, and as 2017 rolls in and Gen Z starts earning its own money, be warned they will have less tolerance than millennials for a store’s “pitfalls.”
  1. Relationships – Two-way communication between customers and brands, including retailers, is essential for building loyalty and the trust required for a conversation to transcend from “talk” to “transaction.” Shoppers want to be “brand managers” and help retailers run the business. So, let them. Two-way communication means listening, responding and taking action. This goes beyond a store’s four walls to multiple shopping channels and social media sites. Be vigilant about responding and diligent with action. A deeper level of communication can exist with two-way exchanges of information. Give shoppers more control of the journey through apps, machine learning and social media venues, and collect deeper data insights which provide better opportunities to create the most relevant actions.

Synergistic Smart Store Ecosystems

Large retailers have traditionally embraced new technologies by bringing them “in-house” and developing their own spin on the output. For example, staffing systems introduced in a broad scale 25 years ago were brought in-house where individual IT departments would build their own staffing solutions. This allowed more control and perhaps even reduced costs for retailers. However, today the number of new technologies on the market with tremendous specialization has moved the mindset from in-house to partnering.

IT departments do not have the time, resources and dollars to re-create the array of technologiesEmpowered Smart Store Associate current business decision makers want in the business. Creating synergistic ecosystems and the #SmartStore solves this dilemma. Developing collaborative partnerships with enabling technology companies allows for two major contributions to retail. First, the business can utilize many varying technologies to help improve both experience and performance. Secondly, partnerships allow for the expertise of technology companies to serve as brand partners in the growth of the business.

For ecosystems to be synergistic, technology partners need to fit into the brand culture, understand the strategic importance of initiatives, make implementation processes painless and effectively deliver the data and insights that drive store performance. Technology companies who have open systems are ideal, as these companies can either provide a comprehensive view across all partnering stakeholders in the ecosystem or provide data into a current business intelligence tool. Ideally, information exchange is mutually beneficial, so both brand and technology gurus can develop iterative insights and actions. Smart store ecosystems will include cross-functional involvement across the enterprise, particularly marketing, operations and merchandising.

Shared Intelligence

The sharing economy will continue to change the retail landscape in a multitude of ways, including how shoppers buy, how much they buy and when they buy – or not buy. Collaborative consumption continues to grow as companies like Airbnb, Zipcar and others help consumers own less and yet still have access. Collaborative consumption models have even expanded beyond physical products and into the digital world, as Netflix has somehow emerged as verb on its way to becoming a national hobby.

Retailers and brands can work together to share intelligence about their areas of expertise to better deliver experiences relevant to today’s shoppers. For example, real estate developers, as experts at space development, can partner with retailers, as experts at purveying and selling products, to develop unique spaces to draw in shoppers and facilitate purchasing. Or, vloggers and bloggers, experts at influencing their viewers and readers, will partner with brands, experts at product development, to enhance communications and expand target markets. Lastly, Silicon Valley technology companies, experts at software development, will partner with traditional retailers, experts of trade, to develop artificial intelligence and virtual reality solutions to heighten engagement within the shopper experience.

Portfolio Strengthening

No crystal ball is needed to forecast the necessity for many physical retailers to close locations that are underperforming and unprofitable. I know firsthand from having to close stores for two major retailers that it’s always a difficult decision, particularly when taking into consideration associate and customer perspectives. However, decisions to keep unprofitable locations is not in the long-term best interest of company stakeholders.

Vacant Stores

In today’s retail climate, there is less tolerance to keep unprofitable locations in the portfolio, and I anticipate this trend will continue over the next few years. In most cases, retailers will take dollars from these locations to fund growth in the digital channels and innovation in remaining locations. Additionally, funds will be redirected to globalization and supply chain efficiency improvements. Investments will most likely be made in the categories of beauty, IoT and wearables. By the end of the year, retailers who have the courage to make these tough decisions will become more profitable.

“Bonus” Tips for digital retail also applicable to the physical retail

Mobile Purchasing

Holiday 2016 surprised many when mobile purchasing increased 59 percent year-over-year, showing a widespread confidence and acceptance of this tool by consumers. 2017 will be the year mobile purchasing takes off in a major way across all retail formats. Retailers can take advantage of this trend by connecting digital wallets within their existing formats. This can be accomplished through third parties like Apple Pay or through in-house development of payment apps. Either way, making payments easier – and essentially seamless – for consumers will drive top line growth for retailers, and is especially true for retailers who have converged digital and physical channels.

The Internet of Things (IoT)

The surge of IoT in the retail space has been deftly spurred by Alexa and Google Home, both finding their way into the homes of millions. In fact, voice-activated Alexa is expected to be in 40 million homes by 2020. As I mentioned above, these products are essentially training consumers to shop more conveniently and efficiently. This raises the bar for brick-and-mortar – and, quite frankly, online stores too – and is a call to action for physical stores to remove pain points in the shopper journey. The tolerance for shopper pitfalls and pain points is diminishing, and we will see this decline even more steeply as millennials and Gen Z become the largest buying forces. Digital natives are expecting painless shopping at every level, and Amazon delivers this in a significant way with Echo.

Transition or Turmoil?

2017 and 2018 will be transitional years for traditional retailers. With strategies developed around emphases on the convergence of digital and physical channels, laser-like focus on shopper journeys through the eyes of the empowered shopper, and the business need for relevant collaborations of shared intelligence, the next couple of years will demand vision and agility from industry leaders. “Nimble” has not been a previous descriptor of traditional retail, but without this mindset in 2017, it will be a struggle. The next few months will demonstrate shifts in leadership and structure as boards and management synergize on forward innovations and strategies to fuel growth in a relatively slow growth industry.

Join the #retail, #inspiringretail and #SmartStore conversations on Twitter @retailshelley & @RetailNext, as well as at www.facebook.com/retailnext.

 

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