2017 will be a fantastic year for retailers to experiment by trying out new ideas. There’s only one thing they can’t risk—standing still. What’s in store for retail over the coming years? Ulf Tillander, Global Industry Director of Retail at IFS, highlights three trends that will drive the industry in 2017 and beyond.
Store as big event: retailtainment, concept stores, omni-channel
Question: When is a store not a store? Answer: In 2017. This will be the year of retailtainment, concept stores and omni-channel. All seek to make the in-store experience unforgettable for customers, making shopping more immersive, interactive, exciting and personal.
Retailtainment shopping is like a day out at an adventure park. Take National Geographic and iP2Entertainment’s new global chain of indoor, interactive retail centers. The first one will open in 2017 in Shenyang, China, on a 4,000 m2 site that’s part of the Shenyang K11 Art Mall — a massive “Museum Retail” concept. In the US, retailtainment is booming too. As in Europe, in-store dining has led the way. Retail experience chains like Indoor Climbing, Punch Bowl Social (offering food, indoor games, sports and club experiences all under one roof), iFLY indoor skydiving and Topgolf are all doing big business.
Concept stores will see high growth in 2017, offering a deeper shopping experience built around select product areas or lifestyles, and mixing goods, design and social channels into an unforgettable retail experience. Concept store, Story, in New York (tagline “reinventing retail”) describes itself as “point of view of a magazine, changes like a gallery, sells things like a store.” Every month it reinvents itself around a new theme (“Disrupt”, “Have Fun!”, “Feel Good!”) and hosts regular collaborations, recently including Pepsi and General Electric.
In 2017, midsize mainstream retailers will grow their concept retailing too. Stadium, for example, Nordic’s largest sports chain (and an IFS customer), has concept stores such as Stadium Ski, located in Swedish winter resort Åre, and Stadium Outlet focused on products at affordable prices. Now, Stadium is launching Stadium Pulse for more exclusive, trendier products. All tie into Stadium Online, letting customers buy online 24/7, getting goods delivered direct to their door or available for pick-up at a local Stadium store. Stadium uses IFS’s back end Assortment Sourcing and Replenishment solution (ASR), amongst others, to do this. If it snows, ASR sends out alerts for new stock literally overnight. The next day the shelves are piled high with sledges and concept store, Stadium Ski, has new items on display.
Examples like Stadium show that omni-channel capability is a natural partner for concept stores. Buzzing with energy and highly customized, for most millennial shoppers, ‘omni-channel’ is just another word for modern shopping. For retailers, it is time to wake up and smell the decaffeinated skinny macchiato with caramel drizzle. In 2017, omni-channel will get faster, more diverse and even more urgent.
The perennial question for retailers about omni-channel is “how?” The Stadium example shows that omni-channel isn’t about reinventing the wheel, but joining the dots. No matter how innovative or sexy a front-end app may be, a back-end operation’s ability to support it makes the difference. Omni-channel success is as much about the supply chain as smart screens. Savvy retailers know that omni-channel depends on end-to-end goods-visibility and being able to plan and forecast supply, demand and inventory. In a 2016 RSR survey, “Retailers’ Omni-Channel Blind Spot,” 56% of top retailers said they saw high value in implementing in-store technology to make real-time, cross-channel inventory visible to employees.
Speed and innovation—if you can dream it, shoppers will try it
In 2017, speed and innovation will be of the essence. Digital transformation will sweep through every aspect of retail. From stores to apps to warehouses, high-power digital experimentation will be the name of the game. If retailers can dream it and ship it, shoppers will try it. A 2017 IDC FutureScape Worldwide Retail 2017 Predictions (Nov 2016)* report paints a vivid picture of panoramic, down-to-the-bone digital transformation. It predicts that:
By 2017: Intelligent assistants become a must-have app in 2017 and support shoppers’ “jobs to be done” in context-aware omni-channel conversations by 2018.
By 2018: 30% of major retailers will adopt an omni-channel digital B2B2C commerce platform, improving customer experience, process efficiency and inventory management.
By 2019: Robotics and internet of things (IoT) technologies will increase in-store, in-warehouse and in-distribution center productivity by 1.5x for early adopting retailers and by 3x for later adopters. Artificial intelligence (AI) will change how 25% of merchants, marketers, planners and operators work, improving productivity by 30% and KPIs by 10-20%.”
And, if all this sounds unrealistic, think again. While IDC predicts augmented reality (AR) taking off in 2019, virtual reality (VR) is already with us. Swedish retail research group HUI’s Christmas Gift of the Year Award for 2016 went to VR Headsets. To win the award, the product has to have proven itself to have high-volume sales potential, generated buzz throughout the year and represent current technology trends. Retailers need to start experimenting now, if not yesterday
So again, if retailers can dream it, shoppers will try it. But delivery is crucial. An open architecture backbone that can integrate with any device is essential to delivery. It anchors customer experience into the wider operation — a solid base for hothousing innovation. One great example of simple but highly actionable innovation that drives sales here and now is Starbucks. Their strategic reward app creates an omni-channel experience which drives traffic in-store and online. Customers get a free reward card they can use whenever they make a purchase. But, the card is reloadable across all channels in real-time. Customers in line can check their card on their phones, reload it and by the time the barista gets to them, new credit will be available.
Growing open sustainability will grow sales
It can take more than 20,000 liters of water to produce 1 kg of cotton, the amount used for a single t-shirt and pair of jeans. It can take up to 8,000 different chemicals to turn raw materials into clothes. And as sales cycles increase, disposal and recycling represent a major environmental challenge. So, in 2017 sustainability will become an even hotter issue for many shoppers. A 2015 Nielsen report found that 72% of shoppers ages 15–20 (Generation Z) are willing to pay more for products with a positive environmental impact—up from 55% in 2014.
And, a 2016 Business of Fashion (BoF) article reports fast-fashion retailers like H&M and Zara are eager to grow their sustainable range, as more than 14% of consumers look for longer-lasting, more natural fabrics. Much of this 14% are millennials, a key target group for fashion chains. Data shows them increasingly willing to choose smaller, niche retailers that stress sustainability. Maxine Bedat, CEO of sustainable clothing site Zady, summed up the challenge: “150 billion new articles of clothing are produced globally every single year. The challenge is to produce clothing… that people want to wear more than seven times.”
Demonstrating transparent sustainability to younger customers can seriously drive sales. US teen clothes retailer, American Eagle Outfitters, makes jeans and t-shirts, consuming large amounts of cotton. Rather than reinventing the wheel, American Eagle Outfitters decided to join the dots —joining the Better Cotton Initiative (BCI) and the Sustainable Apparel Coalition (SAC) to boost supply chain responsibility and get crucial input on managing their water and chemical use. BCI’s Daren Abney advised retailers: “Figure out what’s relevant for your brand… take it one step at a time. Ask yourself what change is going to be most impactful for your business?”
In 2017, committing to change, innovation and more sustainability will be key for growth. As long as retailers do that, they are sure to stay ahead. When Marks & Spencer CEO Steve Rowe recently announced the chain’s closing of over 100 stores worldwide, it was no accident that he explicitly mentioned multi-channel shopping and sustainability: “These decisions are vital to building a future Marks & Spencer that is simpler, more relevant, multi-channel and focused on delivering sustainable returns.”
The message is clear: Sticking to what you know really isn’t an option. Marks & Spencer may yet make it, but not through business as usual. Start playing. Now. Your customers will thank you for it.
*IDC FUTURESCAPE: WORLDWIDE RETAIL 2017 PREDICTIONS
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