Retail Trends 2017

Accelerating change

Added to the perfect storm of cost pressures, rising inflation and slowing wage growth could impact consumer confidence and therefore dampen demand.

Retailers will also have to contend with ongoing disruption from the next wave of digital technologies and will need to prioritise investment in the technologies that will really add value for their customers or increase the efficiency of their operations. Retail has been through a period of unprecedented upheaval in the last 10 years, however in 2017 retailers will need to focus on accelerating change in their businesses.

Christmas 2016

2016 proved to be a surprisingly good year for consumers and retailers. Unemployment, interest rates and inflation all remained low, while earnings, confidence and spending continued to rise. These benign conditions created the perfect backdrop for a strong year for retail, culminating in a very merry Christmas!

It all started on Black Friday: not only the biggest ever, but also the best managed as retailers succeeded in managing peak demand by extending the sales period and guaranteeing prices. The depreciation of sterling also made the UK an attractive destination for tourist shoppers, who boosted spending on clothing and luxury in particular.

Retail sales (values excl. fuel) rose by 7.1% in December, with store sales rising by a creditable 4.6% while e-commerce climbed by 21.8% beating our pre-Christmas prediction of 20%. This growth continues to be driven by consumers shopping more on their mobile devices with sales through smartphones up by an estimated 50%.

Troubled times ahead for retail?

As we look forward to 2017 we note a number of headwinds for the retail sector in 2016. Rising costs pressures signal more challenging times ahead for UK retailers. We believe that the following will all impact on profitability in 2017;

  • Increases in business rates
  • Rising staff costs
  • Depreciation of sterling
  • Rising fuel and commodity prices
  • Increases in pension cost

Retail Trends 2017

So what do we think will be big in 2017?

  1. E-commerce – the next big thing
    2017 could see another tipping point in e-commerce, driven by the ambitious growth agenda of the leading pure-players. The growth of online isn’t over and is likely to have a greater impact on traditional players as they continue to scale. It’s only just begun.
  2. Store 4.0 – fulfilment, inspiration & friction free
    The retail store is being re-imagined for the digital consumer. A new balance needs to be struck between transaction and fulfilment. We believe the store experience will increasingly focus on one of two things: inspiration or convenience.
  3. Conversational commerce
    Voice user interfaces (VUI) provide consumers with a more natural and intuitive way of engaging with digital technology. This combined with the growing popularity of connected devices in the home and car will have a profound impact on how we shop. 
  4. The robots have their “AIs” on the jobs
    Robotic technology has long played a role in retail but in recent years we have seen the number and scope of user cases (moving from the back to the front office) increase dramatically fuelled by the incorporation of ever more powerful AI. 
  5. Agile at scale- the new normal for retail
    How can retailers really accelerate change in their businesses? While some may have experimented with agile methodologies at the periphery of their businesses we believe that in 2017, more retailers will implement agile across their business as scale as they try and respond to structural change in the marketplace and improve innovation, responsiveness and the quality of their delivery.

Further reading

Consumer Review: Switch on to the connected home
Are consumers engaging with the Internet of Things (IoT)? Do they fully understand the benefits or are there barriers putting them off buying? And when will be the right time for businesses to invest?

Consumer Review: CX marks the spot: Rethinking the customer experience to win
Consumers now expect a bespoke, fluid experience when shopping. This experience is defining successful business models, but how can businesses predict what consumers want?

Consumer Review: Consumer data under attack
Consumers are becoming distrustful about corporate motives and practices around the collection and use of personal data. How can consumer businesses respond?

Retail Showcase
What are the key forces driving change in the retail sector? Where does the opportunity with the consumer lie? In our Retail Showcase, we share with you our vision of what it takes to win in retail today.

Deloitte Consumer Tracker
Quarterly review of consumer confidence and spending behaviour.

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