2018 retail, wholesale and distribution industry trends outlook

Recalibrating retail business strategies

Brick-and-mortar formats and the need for human employees will not disappear amid the wave of digital shopping experiences.

For many retailers, the workforce will serve an increasingly important dual in-store and online role. However, retailers should realize that in order to realize profitable growth in today’s highly competitive blended environment—where digital has the potential not only to influence, but also to capture market share—they would do well to contemplate a renewed strategy.

As a result of today’s retail trends, companies should consider recalibrating business levers, such as:

• Customer behavior analysis
• Value proposition recalibration
• Operational model redesign

Rosy economic outlook

The economy is likely to continue to grow at a moderate 2.0-2.5 percent rate in 2018. A key source of strength is consumers, who have benefitted from a strong labor market and rising incomes—and who are the linchpin to the strong near- and long-term retail industry outlook.

Unemployment is low, real disposable personal income is rising, consumers are benefitting from low inflation, and households are enjoying growing wealth due to rising house prices and a strong stock market…these factors put more money in the pockets of consumers that retailers will compete to capture.

​Deconstruction leads to reconstruction

Many business headlines continue to declare reports of a “retail apocalypse,” “retail meltdown,” and numerous store closures.³

But the business reality shaping the retail industry outlook is quite different. Consumer spending is increasing and shifting among a range of formats and channels for differing reasons—an indication that the retail sector is evolving again. While not everything old is new again, it’s evident that people continue to seek out both familiar and differentiated experiences on their path to purchase.

Pragmatic adoption of advanced technologies presents retailers with ample opportunities to innovate across their value chains. Consider these retail trends:

• Inventive business partnerships have the potential to generate additional revenue streams while providing an ever-changing experience where the consumer feels in control of their journey
• Internet of Things (IoT) connectivity could empower consumers to check store inventory online while in transit and reserve products for purchase or pickup
• Digital demand and supply networks might shorten timeframes and reduce costs for at home or in-store deliveries
• Augmented⁴, virtual⁵, and mixed reality⁶ may help retailers further create an endless aisle and offer more enhanced options for providing experiential engagement, in-store or at home⁷

Building customer affinity, online and in-store

Today’s retail industry outlook reflects that consumer shopping preferences and behaviors are not static; they change according to age, income, seasonality, and other demographic or retail trends.

For example, in 2017, during back-to-school shopping season—from June through August—in-store formats were preferred, while during holiday season, online captured a larger share of consumer spend across all consumer segments.⁸

Reasons that consumers express for shopping either online or in-store also differ by age, income, and education level. Among those preferring to shop in-store, the ability to interact with a product, the absence of shipping costs, and the opportunity to find inspiration top the list of factors driving this preference.

Where to invest? Strategy and operational excellence

The retail industry outlook projects that emerging technologies—social commerce, facial recognition for ecommerce point of sale, virtual reality, IoT—promise to transform the customer retail experience like never before.

Optimizing operations is paramount in this environment. Dramatic revamping of demand and supply chain strategies is a key lever to pull—especially when adjustments are required to support new business models or innovation initiatives.

Rather than merely optimizing value chains to drive out incremental costs, retailers should adopt advanced technologies to retain market share—so that inventory needs are available precisely when and where required.

Consumers have been conditioned to expect fast, convenient, and effortless consumption. Speed, price, location, and quality are key. So, as a retailer, what will your response be?

References:

¹ “NRF adjusts for forecast for 2017 retail sales following government data revision.” ©2017, September 6. NRF press release.

² Shoppers electing to pay via smartphone most often said that they planned to use a retailer’s dedicated app, a third-party payment app, or go directly to a retailer’s website. 2017 Holiday Survey: Retail in transition, ©2017 Deloitte Insights.

³ “Retail Apocalypse? The Sky Isn't Falling”, ©2017 Forbes, Greg Maloney. More than 5,300 stores are expected to close by the end of 2017.

⁴ Augmented reality is often described as a live, direct or indirect view of a physical, real-world environment whose elements are augmented (or supplemented) by computer-generated sensory input such as sound, video, graphics or GPS data.

⁵ Generally acknowledged as an immersive multimedia or computer-simulated reality, replicates an environment that simulates a physical presence in places in the real world or an imagined world, allowing the user to interact in that world.

⁶ Considered to be a hybrid of AR/VR in which the real and virtual worlds merge to produce new environments and visualizations where physical and digital objects co-exist and interact in real time.

⁷ Further definitions of AR/VR/MR found in “The Inevitable: Understanding the 12 Technological Forces That Will Shape Our Future” ©2016 Kevin Kelley, published by VIKING and imprint of Penguin Random House, Inc.

⁸ 2017 holiday survey: Retail in transition, Rod Sides, ©2017 Deloitte Insights.