If 2017 was the year of the retail apocalypse, then 2018 could be the year of a retail renaissance. The signs are promising. Retailers have come through a time of trial, and many of the ones that have survived have made the necessary adjustments to align with evolving consumer needs and desires. While there will continue to be more retail closures in 2018, it’s unlikely we will see anything near the fallout that 2017 brought.
Going into 2018, consumers are showing signs of renewed interest, with growing consumer confidence, and if the tax cut lives up to its promise, people will see more money in their paychecks in early 2018.
Looking ahead, the Forbes.com retail contributor team offers these predictions for the greatest challenges and opportunities in the retail space next year.
The Big Trend: Tech Transformation
Tech is the talk around our virtual water cooler. Technology transformation holds great promise for retailers, but its implementation is not easy or its success guaranteed. The opportunities our team sees will largely come to retailers that tap the power of technology in small changes rather than radical implementation.
- Shifting Landscape: "Retail success in 2018 will be about how well retailers adapt to the changing market around them and the evolution of their customers’ needs. To stay relevant in the future, evolving well will be the key to success." – Rupa Ganatra, founding partner, Millennial 20/20
- Find Opportunities in AI: "Chatbots, facial recognition technology, image recognition, robotics and more will offer opportunities this year. Retailers have a significant amount of data to power AI and deliver personalized, customized and localized experiences to surprise and delight customers. More data beats better algorithms every time, and retailers continue to generate significant amounts of data both online and offline. Retailers should focus on small wins as opposed to big elephants. Artificial intelligence in retail can be applied in many new ways across the entire product and service cycle, from manufacturing to post-sale customer service interactions. This coming year, we expect to see AI deliver both top-line and bottom-line for retailers across the value-chain." – Deborah Weinswig, managing director, Fung Global Retail & Technology
- Digital Integration: "2017 was the year of digital discovery; 2018 will be the year of technology and more integration of it into mainstream retail. It will be the year where we see retailers create new operating models that are less focused on their store vs. the web and more focused on creating experiences that give customers more control and convenient ways to shop. I think it will be an exciting year where customers will find newness and creativity. The acceptance of omnichannel trade and digital-savvy merchandising is a requirement for success. However, it is not only acceptance of new ideas, but also the need to review old systems and procedures. Store operations and mindsets must change." – Walter Loeb, president, Loeb Associates Inc.
- What’s App? "Many large retailers have only just begun to see the benefits of data and artificial intelligence as they deliver out within different areas of marketing, audience segmentation, delivery routes and customer care, and we will see more adopt it in the year ahead. One of the biggest lessons of 2017 is for retailers to be where their customers want them to be, engage with them where their customers want them to engage them and make the customer experience seamless across all touchpoints and channels. With large European retailers, such as Yoox Net-a-Porter, testing What’s App as a customer service and order confirmation tool in 2017, I predict we will see wider use of this messaging channel for talking to customers and streamlining communications with retail customers at different touchpoints of their journey." – Rupa Ganatra, founding partner, Millennial 20/20
- Word of Caution: "There has been a lot of talk about Artificial Intelligence (AI), machine learning and the Internet of Things (IoT) to support a personalized customer experience. Problem is, they can quickly move from the personal to creepy. Consumers will reject them. However, there are tremendous opportunities that retailers can gain from using them for more basic retail purposes, such as using the IoT to improve inventory visibility and get products into customers’ hands more efficiently and quickly, and using machine learning and AI to improve their forecasting and get the right product to the right place at the right time. At the end of the day, successful retailing is about basic blocking and tackling, and these technologies will move beyond the hype into helping retailers accomplish that blocking and tackling with a 21st-century twist." – Paula Rosenblum, co-founder and managing partner, RSR Research
What to Watch: Retail Is a People Business
In 2018, retailers will realign their businesses with the needs and desires of customers, who are driven today not by a passion to acquire more things but by a deep desire for more experiences. Retailers will work to give them those experiences.
- Steering the Ship: "In the past, it was the retailer who determined what a customer should want to buy and how they should shop. Today, it’s the customer who is defining the shopping experience." – Walter Loeb, president, Loeb Associates Inc.
- Give 'Em New Reasons to Shop: "As consumers are spending a larger percentage of their disposable income online, retailers with physical storefronts will need to flip the incentives to entice shoppers back into the store. In the early days of the internet, retailers incentivized shoppers to spend money online by offering lower prices at their websites. Fast-forward a few years, and consumers now expect lower prices online and have all but abandoned shopping at larger physical storefronts for that reason. Savvy retailers are already starting to offer gifts with purchase and in-store discounts to try to break the new online-only consumer spending pattern. To justify the expense of their brick-and-mortar stores, retailers need to start giving time-starved consumers a reason to travel and shop in-person." – Marcia Layton Turner, founder and executive director, the Association of Ghostwriters
- Small Is the Next Big Story at Retail:"Shoppers will return to Main Street in 2018. This trend is fueled by the desire of the highest-potential and highest-spending customers’ passion for a new shopping experience that they can’t find online, at the mall, in the national chains or in big box stores. Owners of small retail shops often feel overwhelmed by the rapidly changing retail environment, with competition on all sides and most especially from Amazon. But small business retailers have a competitive advantage that none of these bigger, better capitalized and techno-powered retailers have: their personal touch. It is realized not just through the personal service that specialty retailers offer, but by being vital members of the local community. This trend will reshape the retail landscape over the next decade." – Pamela Danziger, president, Unity Marketing
- More Experiences: "We are going to see continued experiential marketing in both brick-and-mortar and online, giving customers a deeper and more differentiated brand experience. Restoration Hardware is deep into experiences with its bistros/wine bars in their new flagships. Restaurant 3 Arts Club in Chicago is the location of 32 marriage proposals. It’s supposedly the seventh-most Instagrammed cafe in the U.S. Experiential marketing will become more relevant with online retailers as well, like Ikea’s use of ASMR (autonomous sensory meridian response)." – Kathleen Kusek, principal, Marketing Services Group LLC
Unconventional Wisdom: Stay the Course
With technology driving retail transformation and retailers using it to put the people they serve at the center of their business models, 2018 will also be a year when retailers shore up their internal systems and refine operations. Logistics and effective execution of systemwide changes will become a priority.
- Time to Follow Through: "2018 will be the year of execution." –Neil Stern, senior partner, McMillanDoolittle
- Logistics: Not Sexy, But Necessary:"It’s not the sexiest topic in retail, but logistics will be a defining issue in 2018. As shoppers come to expect that all of the best stores are omnichannel, the ability for brands to deliver products quickly and painlessly will separate the strong from the weak. Offering perks like same-day delivery, reliable delivery estimates and easy in-store pickup will continue to create customer loyalty while the stores that mess it up will suffer. Consumers are busy, stressed and discriminating. Nobody wants to revisit a brand that makes shopping feel like work. We’ll see brands and carriers alike innovate in this space in an attempt to keep up, and perhaps some new names in logistics will emerge. Ultimately, this falls into a bigger conversation about what shoppers really want: efficiency." – Rachelle Bergstein, writer and author
- Remodel, Repurpose: "We’ll see more remodels of stores in 2018, due to the impact of omnichannel and buy online/pick up in store (or click and collect). The volume, especially in bigger-box stores, has grown to the point where the front end of the store is totally disrupted. The big question for me is whether they will do it in a smart way and start building the store of the future, or will this be another missed opportunity to transform the store? My hope is for the former; my worry is it will end up being the latter." – Nikki Baird, Managing Partner at Retail Systems Research
- Now Shut Up and Deliver: "We will continue to see an increased separation between winners and losers as more companies head for bankruptcy and radically downsize. Retailers have been putting plans in place to drive in-store pickup, omnichannel growth, e-commerce expansion and the like. In 2018, they had better deliver. Retailers like Walmart and Nordstrom that have been investing heavily in infrastructure will reap the benefits as customer behavior catches up to technology investment." – Neil Stern, Senior Partner at McMillanDoolittle
Bold Predictions: Pot, Politics & Bitcoin
The year ahead will also hold surprises, as several on our team predict. Pot, politics and bitcoin will come to the fore.
- An Evolution: "The big trend I see is that retailers are finally realizing that they must change. I predict that most well-funded retailers and department stores will adjust and survive." – Walter Loeb, president, Loeb Associates Inc.
- Healing Power of Cannabis: "For the beauty and personal care industry, 2018 will be about the rise of cannabis. This will be the year when cannabis loses its stoner reputation — with 29 states and the District of Columbia currently having laws that broadly legalize marijuana in some form, cannabis will become a key skincare ingredient in 2018. The Journal of the American Academy of Dermatology published a report in July of this year that showed that cannabis plant extracts THC and CBD prove to have anti-inflammatory effects and reduce itching in cases like psoriasis, eczema and allergic dermatitis when topically applied — which means you may be seeing weed-centric skincare in your local Sephora soon." – Janna Mandell, contributing writer to The San Francisco Chronicle and The Huffington Post
- Politics Continues to Distract: "The acrimony that you thought could not get worse will do exactly that as the stakes rise and politicians feel threatened. I think politics will take up even more oxygen in 2018, be more distracting and even more caustic. With the release of the Mueller report and the upcoming midterm elections in November, the distraction will become a factor impacting general economic decision making and retail sales." – Richard Kestenbaum, partner, Triangle Capital LLC
- Cryptocurrency Goes Mainstream:"There’s undoubtedly a meteoric rise of cryptocurrency awareness. It’s at the forefront of mainstream discussion and intrigue. In 2018, many retailers (SMB and enterprise) will hop onboard the cryptocurrency trend to diversify payment options — adoption will inevitably increase. Today, we already see retail and e-commerce players allowing bitcoin as a payment option for their customers (Overstock was one of the earliest adopters). Additionally, e-commerce platforms such as Magento and Shopify already have available integrations (i.e., BitPay) for vendors to seamlessly add to their stores. However, the real prediction is the emergence of cryptocurrency-only e-commerce stores. The fierce cryptocurrency and blockchain tribe of loyalists provides an incredible opportunity for rising DTC e-commerce startups to cater to that — it’s relatable and relevant (but obviously, their products need to have an appeal as well). It’ll be fascinating to see that a customer might first consider an e-commerce site simply because of its exclusive payment option, instead of the product(s) it sells — it’s only a matter of time." – Tom Popomaronis, contributing writer to Inc. Magazine
Final Words: New Business Models Will Emerge
While Amazon will continue to dominate retail in 2018, innovative business models will emerge to counter it. The store of the future is going to evolve, both in brick-and-mortar and in virtual models.
- Retail's Death? Greatly Exaggerated:"Some have assumed that Amazon is going to kill the industry — that everything is going to be bought online. It’s not that simple." – Walter Loeb, president, Loeb Associates Inc.
- Be the Change You Want to See in Retail: "In 2018, the emphasis will be on experimenting with new business models, seeing what works, stopping what doesn’t and do more of what does — whether it’s FMCG (fast moving consumer goods) brands building or acquiring more direct-to-consumer capabilities/businesses or high-street retailers launching subscription businesses. Be it personalization of product or personalization of customer experience, this will continue to be a key retail trend in 2018. We know that today’s customers are placing a lot more emphasis and importance on experiences, and this doesn’t look like it will change anytime soon." – Rupa Ganatra, founding partner, Millennial 20/20
Original article from www.forbes.com by Pamela N. Danziger