As American consumers brace for the holiday season, industry prognosticators look to the retail sector as a bellwether. Will the closure of some prominent brick and mortars, especially toy superstores, spike sales of kid-friendly SKUs elsewhere? Will mobile commerce continue its dramatic rise? And will tariffs take a toll on purchases of home goods, apparel and electronics? By the end of the year, we will know.
But beyond the immediate months ahead, there are intriguing initiatives afoot demonstrating the resilience of the retail industry to reconfigure itself for the long game. In fact, these megatrends will dominate future headlines long after we’ve emptied our holiday stockings. Plan to watch these five notions unfold with ripple effects capable of transforming the buying economy:
1. Online marketplaces have become our new department stores
It appears stores within stores are inevitable. The retail world’s survival of the fittest mentality means more small business eTailers as well as traditional retailers in need of diversification are tucking themselves away in megastores online.
The invention of eCommerce as a sales channel was supposed to be the great equalizer, but it turns out that among nearly 800,000 sites, giants such as Amazon, eBay and Walmart are dominating – often with double digit growth. Moreover, marketplaces are taking an increasing share of online retail sales. According to Forrester, 56 percent of the B2C online retail spend came from marketplaces last year.
From global merchants such as JoyBuy.com and Alibaba’s Tmall to eBay and Etsy, marketplaces have become the optimal way for third parties to ride on colossal coattails. J.Crew is one of the latest brands to succumb to their allure, joining Amazon Marketplace. Expect other distressed properties and booming brands alike to join the bandwagon.
Marketplaces are fraught with potential red flags, from fraud to counterfeiting. Policing these purveyors and ensuring they’re not a drag on the brand equity of their respective first parties will prove a cottage industry of its own.
2. Owned product brands become the new darlings
Expect to see more physical stores within stores and brands with distinct properties within existing structures. For instance, Bloomingdales is opening a shop-in-shop concept called WellChemist devoted to clean beauty.
And could domestic store brands become a catalyst for making money overseas? One American grocery store thinks so! While some retail executives have stumbled when developing outposts abroad, some are taking a brand-by-brand approach in assessing the next great export. Kroger’s Simple Truth Organics, one of the grocery store’s private label brands, is now one of the bestselling lines in the category within the U.S. It would be impractical for the grocer to expand internationally on the strength of this product line alone, but the retailer has been able to diversify its revenues by selling Simple Truth Organics on Asian websites such as Alibaba’s Tmall.
3. Retailers are quietly becoming media giants
One of the biggest moneymakers for retail isn’t something you can buy on shelves. Many companies are beginning to develop mini media and advertising empires. These retail-led media networks will help brands pinpoint loyal customers across the internet, mobile devices and in stores across the country with motivating messages. Target’s “Bullseye Marketplace” is a case in point, aggregating websites and apps from NBCUniversal, Spotify, Hearst and others. Albertsons Performance Media leverages content from tech partner Quotient to dial up digital campaigns based on shopper preferences.
4. Physical spaces are all the rage again
The brick is back!
Digitally native vertical brands (DNVBs) ranging from Warby Parker eyeglasses to Casper mattresses are investing in physical locations to increase profitability and frequency of usage.
Amazon Go, the company’s cashierless convenience stores, are in only four locations in Seattle and Chicago so far, but a promise of thousands of physical hubs in the near future opens so many more possibilities for fulfillment. You might buy a sandwich at a Go store today and mobile phones and cars there in the future.
5. Retail experiences come in fresh packages online and off
The sliding scale of simply buying to truly shopping is enhanced by a sense of discovery.
The online world has bottled invention. Instagram is getting into the fray with a catalog app. Saks Fifth Avenue’s Salon Project leverages augmented reality to try on new cosmetics and hairstyles. And Wayfair is using AR to let users place furniture in their homes and then purchase the items that fit. Neiman Marcus and Target have already invested in visual search technologies using machine learning to find and recommend products based on matching attributes such as shape, color and texture, a notion pioneered by Pinterest Lens.
The surprise and delight is taking into account all of a shopper’s senses. Some stores are taking cues from QSR, the domain of new menu items and ingredients plus limited time offers. Macy’s leverages regional chefs to serve tastes triggered by consumer preferences. Urban Outfitters bought a pizza company, and AT&T is integrating coffee lounges.
And the big box has given way to a small one. Curated subscription experiences are quenching the desire for new discoveries, from the babyGap OutfitBox to Hasbro Party Crate.
Stay tuned as the reinvention sets the shelf for great business and marketing opportunities.