In this post, I’ll discuss what I have found to be the trends in retail. Since I already had to do some research for work, why should I not share it here?
First of all, all businesses want to achieve one or more of the following objectives:
- Cut cost
- Increase revenue
- Improve efficiency
- Boost customer satisfaction
Retailers are not an exception. Trends, plans or strategies revolve around those objectives. From my perspective, there are three primary fronts where most retail actions take place: stores, digital presence and logistics.
Stores as a destination
Retailers are increasingly turning stores into a destination, aiming to make shopping an experience as much enjoyable as possible for shoppers. Nordstrom offers pickups from online shopping, alterations and tailoring, curbside pickup and services. More details on their well-known customer service can be found here and here.
You must have heard about Amazon Go Stores. On your way into the stores, simple scan your phone on a reader and Amazon automatically knows about you through your Amazon account. Grab any item you like and simply walk out of the store without any cashiers or checkouts.
Another example is how Nike is using their app to elevate in-store experience for shoppers. With the Nike app, consumers can scan QR code on products to get more information and have the products brought to the changing rooms or to themselves. The app can be used for payment as well so that consumers no longer have to stand in line.
One final example is Apple. Apple stores, in addition to fancy display of products and glass windows, also feature coding lessons, music labs and kid hours.
There are more examples of how retailers are making in-store shopping as enjoyable as possible for consumers. If shopping becomes more frictionless and customized, consumers are happy and retailers can boost their top line.
Real estate is limited and expensive. Hence, it is important for retailers to maximize revenue per square feet. One trend that I noticed among retailers is that stores get smaller and retailers become more conscious of what they display. Below is a quick look at some retailers’ footprint. The majority’s store size decreased from 2016 to 2018, but revenue per square feet increased
Even though there has been talk of the retail apocalypse, major retailers are opening more stores
One Carson’s store in Illinois had shrunk from 250,000 to 120,000 square feet as the management team went through 100 TBs of data to figure out what people really want to buy. Apparel which was not selling well was reduced by 50% while popular categories such as furniture, large appliances, toy department, bakery, hair salon and art gallery expanded. Instead of restocking once a season, the store receives fresh items daily and changes over all its merchandise every two weeks
I believe that when people talk about the demise of retailers because of technology, they are referring to retailers who fail to embrace technology. Physical stores nowadays are the showcase and extension of the technology that the retailers have in place.
The integration of physical stores and technology happen through your personal phone and digital accounts with retailers. Whether it’s QR code, digital app, mobile shopping, information research or online payment, everything happens through your phone. It is interesting that it’s no longer the case that online enhances offline by driving traffic to stores. Nowadays, data generated inside stores can be used to enhance the online experience. Imagine that retailers can use data such as what you buy or what you are so close to buying, but decide not to, in order to run targeted marketing on you through your mobile app.
As mentioned above, the use of mobile apps can make in-store experience pleasant. Mobile apps can help improve significantly revenue with mobile shopping and payment. With the integration of data generated in-store, theoretically, target marketing should be more efficient.
Below is one slide from the investor presentation of Casey’s Store, regarding its digital strategy
We all want our deliveries to arrive as fast as possible. Amazon is the trailblazer in this with Prime and then Prime Now. Other retailers such as Target or Walmart follow suit with two-day delivery with fewer and fewer restrictions. The challenge to retailers is how to achieve such a feat without breaking their bank on having many fulfillment centers and all other expenses.
First, on-demand Just-In-Time warehousing. The idea is to tap into unused space in a crowded U.S. industrial real-estate market. As buying behavior changes rapidly and demand forecast is more unpredictable, retailers prefer not being locked into long-term leases or rents. For example, per WSJ:
This holiday season, Walmart Inc. used Flexe Inc., a Seattle-based marketplace that connects warehouse operators with businesses in need of storage, to secure about 1.5 million square feet of temporary space to handle the mounting demands of e-commerce fulfillment. Hence, improving the logistics efficiency is of importance to retailers.
Another trend is micro-fulfillment. It’s about leveraging robotics to operate warehouses in confined urban spaces, speed e-commerce fulfillment, and reduce last-mile delivery costs. Micro-fulfillment focuses on leveraging software, AI, and robotics to operate small urban warehouses and fulfill online orders.
In short, technology is rapidly changing retail on different fronts. It is an exciting space and I am both curious and excited about it. I do believe that physical stores, as long as they are run properly and integrate technology, are here to stay.