Retail Trends 2018

A transformative time for retail

The consumer is in the driver’s seat, enabled by technology to remain constantly connected and more empowered than ever before to drive changes in shopping behaviour in both the physical store and digital retail landscape. 2018 is turning out to be an eventful year in UK retail; headlines have described a sector in turmoil but is retail really in trouble, or is it transforming?

A tough year for retail

2018 is proving to be a challenging year and the pressure is mounting on retailers.

Consumer confidence has risen but growth in spending has slowed. Inflation has fallen as predicted, but so has wage growth, meaning that there has been no easing of pressure on consumers.

In the first 3 months of 2018, winter storms brought disruption to the UK retail market. Snow and freezing temperatures hit footfall in shopping locations and disrupted supply chains leading to empty shelves and closed stores.

The weather improved in the second quarter, which combined with a World Cup and a Royal Wedding brought a much needed boost to UK retail. Supermarkets benefited from increased sales of food and drink as consumers fired up their BBQs and celebrated the arrival of summer.

The retail sales have proved to be robust, confounding many commentators’ predictions of doom and gloom, as sales rose in the first half of 2018 driven by the strong performance of the food and drink sector and the continued growth of e-commerce.

Online now accounts for almost 20% of retail sales, growing at ten times the rate of store sales in the first half of 2018. Discounters are taking their share in grocery and non-food, however they are not immune to the troubles on the high street with the pound shop sector looking increasingly overstretched.

We’ve also seen more signs of structural change in UK retail as store closures, administrations and CVAs increased this year - the first half of 2018 saw 4,400 net closures across the UK high street, up from 103 in 2017. This represents an acceleration in the rate of store closures with almost as many in the first half of 2018 as in the whole of 2017. 

The high street is far from dead, it is evolving

Nonetheless, we believe we’re witnessing an evolution of the UK high street, rather than its demise. Whilst there has been much media coverage on store closures and job losses in retail, it is important to recognise that these stores are not closing simply because of trading this year. Years of rising costs, technological disruption and changing consumer behaviour has led to a tipping point that has forced the UK high street to undergo considerable structural change.

Success stories can be found in every sector and the future outlook is promising with evidence of reinvention and investment. Retail will survive and it will be a stronger sector as a result of this evolution. There will be fewer shops in the future but this does not mean the store is dead, it just means that the role of the store is changing. There are numerous examples of innovation happening within the store: grocers trialling cashless supermarkets, fashion vendors experimenting with concessions and retailers investing in customer experience.

Looking ahead, retail businesses will need to keep a close eye on the consumer. Our Consumer Tracker sees an underlying resilience in consumer confidence which bodes well. However, August’s interest rate rise, combined with a falling pound, may impact consumers’ ability to spend in the second half of 2018. Retailers may have to consider absorbing costs in the short-term to avoid instore price rises outstripping average wage growth. We expect to see retailers continue to make bold strategic decisions in an attempt to keep customers on side and maximise profitability. 

Retail in 2018 – three themes and your To Do list:

Reimagine the store - The store has a great future but it will be different to its past.

  1. Be more than a store – Retailers need to ensure that their stores remain relevant and consumers want to keep coming back to them. Experience is more important than ever, and stores need to be more than just places to transact.
  2. Put digital in your physical – Retailers are realising that the biggest impact that digital can have on their business is instore. Some of the most innovative and compelling stores make digital a core part of the physical experience.
  3. Sell online instore – Online retailers are turning to stores to help them grow their businesses and help service their customers. But these are very different stores, ones that look to replicate the online experience in the offline world.
Reimagine the store

Experiment with experience - The best way to innovate your business is to experiment.

  1. Shop in magical reality – Augmented Reality (AR) and Virtual Reality (VR) are set to transform the retail experience both online and offline, often connecting the two with more immersive experiences.
  2. Get personal with AI – Artificial intelligence (AI) allows retailers to personalise the shopping and products experience and to do so at scale, utilising large amounts of data.
  3. Design for the eye – Visual search is changing the way that consumers shop for products, with more and more consumer journeys starting with an image or a photograph.
Experiment with experience

Transform your business - Your customers, competition and culture are always changing.

  1. Try, try, try before you buy – We are increasingly seeing payment postponed, first through the checkout-less store and now through checkout-less online. In the competition for the millennial customer, we will see the growth of try before you buy services.
  2. Answer the direct question – Everyone wants to be a retailer. New technologies and platforms are already enabling brands to go direct to consumers. Brands are targeting individual consumers with offers and experiences and retailers need to respond by intensifying their focus on their consumers.
  3. Discover the value in your values – Brand authenticity and sustainability are becoming increasingly important in retail. Consumers want to associate themselves with brands that have a sense of purpose and represent their views, beliefs and values. 
Transform your business

Further reading

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

Global Powers of Retailing 2018
This year's report focuses on the theme of “Transformative change, reinvigorated commerce”, looking at the latest retail trends and the future of retailing through the lens of young consumers.

Deloitte Consumer Review: Digital Predictions 2018
Six technology trends that have implications for consumers and the businesses that serve them.

New tech on the block: Planning for blockchain in the Retail and Consumer Packaged Goods industries
Exploring the potential for blockchain technology to underpin a transformation in the retail and consumer packaged goods value chain.

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