7 trends in retail to watch in 2016
To be competitive in today’s retail environment, it takes more than offering desirable products at competitive prices. Retail businesses, including middle market companies, should also provide an engaging and enduring shopping experience to its customers, one that’s dedicated to developing relationships beyond the traditional point of sale. In addition, successful retailers must stay ahead of a highly competitive market by leveraging technology, exploring international and e-commerce sales avenues, being mindful of growing margins and looking for ways to differentiate brand in a noisy shopping space full of new products and experiences, and discerning consumers.
Check out the following categories to monitor this year in retail and the related trends and issues that will continue to shape this industry.
The U.S. economy is expected to continue to grow at a modest pace in 2016, with household consumption growing at roughly 3 percent. Oil prices are expected to continue to drop and employment levels are expected to continue to grow. Yet inflation in health care and rising rents will likely offset some of these expected gains in disposable income.
For retailers, changing buying habits, particularly of millennial consumers, adds another complexity to the equation. Consumer spending that historically flowed through traditional retail outlets for traditional consumer products is now being shared with the travel, leisure and hospitality sectors. This trend is not limited to the millennial generation, who clearly value experience more than material goods. It is also true of empty-nesters and retiring baby boomers, who are downsizing, moving into urban locations and traveling more than the generation before them. This fundamental shift in spending will cause retailers to do business very differently in the future. They will need to differentiate themselves in order to maintain their share of domestic spending. They will also need to look to emerging markets for growth, as any domestic growth will have to come from increased market share, rather than growth in the overall U.S. economy.
Listen to what our industry insiders are saying about economic implications in retail for 2016.
Consumers want to develop lasting relationships with the places they shop. They want access to products on their terms. Smart retailers understand the need to build systems and programs to connect with and understand their customers. This allows retailers to learn from historical interactions, be relevant on an individual basis, create stickiness in the market and establish repeat customers.
Consumers are no longer brand or channel loyal. Successful retailers must rely on new methods to secure customers, both domestically and internationally. While most retailers have spent decades developing and adjusting their in-store strategies, digital strategy has only come into the forefront in recent years. When omnichannel practices were fully realized in retail, the channels were thought of as competing, rather than complementary approaches. Savvy retailers win in the highly competitive environment by focusing on the customer experience regardless of where, when and how customer engagement occurs. Additionally, rather than trying to make all channels equal, retailers should work to understand the value of each channel for what it is and leverage the channel for the value it can bring to the experience.
Watch this short video to learn more about the importance of the whole customer experience and why retailers’ omnichannel practices might need to change.
Historically, discussions around brand differentiation centered around branded products. Today the branding discussion is extended to retailers across all sectors of the industry, from grocery stores to apparel retailers to department stores.
Today’s consumers need a reason to be loyal. They have been taught to shop for value and price, and they have the technology at their fingertips to execute that behavior. Retailers need to find ways to differentiate the shopping experience to build loyalty, so they don’t need to continually compete on price. Brand differentiation can be created in many ways. It can be done through in-store experiences using personalized knowledgeable services or online through easy-to-navigate websites, with stress-free in-store pickup or free delivery. Retailers who listen and understand their customers and embrace the notion that the customer is at the center of their sales strategy, regardless of channel, will be in the best position to build loyalty. In the end, the basic premise of retailing has not dramatically changed in 100 years; it is still about having the right product, in the right place, for the right price, at the right time. Those who can successfully implement strategies to solve that equation will be successful and build brand loyalty.
Retailers must learn to use technology to their advantage. This means developing ways to sort through the vast amounts of data to identify trends, understand customer needs and wants, both today and into the future, and to create robust sales and marketing strategies based on facts. In addition to big data, retailers also must ensure that technology is an enabler for efficient operations related to sourcing and managing inventory, payments, security and more.
Learn more by listening to these webcast recordings: Big data: Unlocking your competitive advantage and Emerging technology trends to empower your company, watching the video The future of retail: The cloud, the Internet of Things and Dynamics AX, and reading our white paper: 2016 retail outlook: A view into trends and technologies shaping consumer culture.
The Great Recession taught Americans how to do more with less, creating consumers who are heavily focused on value. Consumers expect discounts and bargains to induce them to buy. Additionally, today’s technology enables the savvy shopper to browse, either in-store or online, and to then shop for the best price. This places enormous pressure on retailers. To compete effectively in this environment, retailers need to optimize their operations. This includes inventory planning based on data analytics, minimizing transportation and other operating costs across the organization and looking for alternatives to engage consumers in nontraditional ways to gain their business, including loyalty programs and through charity and other socially consciousness efforts that align with customers’ values.
International markets have represented the potential for increased sales opportunities to a new customer base. Whether expansion through e-commerce or making the investment to open physical store locations in international markets, retailers must build a strong strategy before they begin. There are numerous operational, financial, cultural, economic and policy issues to consider in new markets. Expansion can represent a great opportunity, but it is not without risk. Ill-prepared organizations can experience significant losses of both time and money.