2017 is set to be a year that sees significant, global change across many fields. The world of retail cannot help being affected, with many forces beyond the marketing landscape promising to change the fortunes of businesses of all shapes and sizes. Here’s where we see 2017 going:
1. Internet sales will continue to dominate the marketplace
Predicting that Internet sales will continue to boom is a little like predicting that the sun will rise tomorrow, but that doesn’t make it any less true. The Internet hasn’t just changed the way people shop; it has changed the whole retail landscape, and will continue to do so in 2017.
Even a perfunctory look at any study or set of sales figures from 2016 will show Amazon holding a massive share of the market, and everyone else fighting for second place. While, in the United States, their sheer level of dominance did see a slight dip over the last holiday season, with their market share falling from 37.2% in 2015 to just 36.9% in 2016, they still lead their closest competitors by a significant degree.
With Amazon making more sales by orders of magnitude, their position at the very top of the retail mountain seems very safe indeed. There’s absolutely no reason whatsoever to imagine that Amazon or the Internet’s stronghold on sales will loosen in 2017. Another small dip might happen, but that’s not going to shake the foundations or slow down the Amazon juggernaut even a little.
One thing that will almost certainly happen, though, is that other major retailers will continue to move sales over to the Internet. This does not just mean an increase in non-Amazon sales made online, but also a corresponding decrease in sales made in brick and mortar stores.
Of course, many will point out that Amazon have steadily been opening stores in physical locations, however the company steers away from the traditional store experience. Instead, Amazon continues to test outside-the-box business models, with stores operating hand-in-hand with data collected from users online. As such, of those brands who still invest in a physical presence, you can expect to see a more holistic experience that blends both online and offline.
2. More brick and mortar stores will close their doors
As a sad, but unavoidable, effect of the internet’s continued domination, 2017 will see more and more brick and mortar stores closing down, just as 2016 did. The Guardian reported that almost 26,000 jobs were affected by retail failures in the UK alone, with 22 medium and large British businesses failing in 2016.
These jobs were not only affected by companies that went bankrupt, but by widespread closure of smaller and less profitable branches of struggling businesses. As The Retail Gazette reported, the UK supermarket chain Morrison’s, for example, abruptly closed 90 of its smaller “My Local” branches in 2016, and it is not difficult to imagine other supermarkets doing something similar this year.
The same trends are visible throughout the world, as bricks and mortar stores continue to bleed money. It is simply cheaper to sell literally anything online, which means that online retailers – even the same retailers that run brick and mortar shops – can afford to sell goods at a lower rate, undercutting high street prices.
This drives more and more customers online, and makes it harder and harder for high street locations to keep up with their overheads. Coupled with the unavoidable demands for more staff and other expenses, such as rents and bills, this makes running a physical store a less and less cost-effective proposition.
Unfortunately, there’s no reason to suspect that any of this will change in 2017. Therefore, we can predict that several struggling retailers – such as Claire’s, Sears, and Abercrombie & Fitch in the US – will continue to close locations, while other businesses may simply fold entirely.
3. Technology will continue to change the way we pay
Technology is a major factor in what has happened, and what is happening, throughout the retail world. As Mike Holtzer, the owner of The Retail COO Group, points out:
2017 will be a year of transition as retailers continue to adopt the new technologies that have been launched in recent years. Retail will continue to be difficult, but the retailers that survive and thrive will invest in creating a strong operational structure to build upon. This will include adopting new technology where it is used as an accelerator to grow sales.”
Technology has shaped, and continues to shape, the retail landscape in more ways than just moving sales online. In recent years, we’ve seen the rise of Apple Pay, Android Pay, Samsung Pay and a whole range of other high-tech alternative payment methods across the globe.
With smartphones more popular than ever, it’s unlikely that this trend will decelerate in 2017. In fact, it seems safe to predict that more and more stores will have to adopt these payment methods, if only to keep up with the competition that is already using them.
It doesn’t end with how we actually pay for goods, however. With Amazon outlining a vision of a checkout-line-free grocery experience, achieved through advanced in-aisle barcode scanning techniques, and Sam’s Club already rolling out in-aisle checkout in the US, 2017 will see the marketplace take its first steps away from checkouts and cashiers.
By doing away with cashiers and queues, this technology could significantly change the in-store shopping experience forever. While it will not happen overnight, 2017 will likely see more brands adopt the technology – again, they will need to if they wish to keep up with competitors – and so it will gradually become more widespread.
While this technology will be limited to the developed world, and is already more commonplace in the US and Canada than in Europe, there’s no reason to imagine it won’t become more widespread throughout the developed world before 2017 ends.
As Holtzer suggests, this adoption of accelerating technology will help those businesses that use it to flourish. This will give them a competitive advantage, and may lead to an uptick in sales even in brick and mortar locations. However, this will be bad news for companies who are unable to adopt the new technology, as they will likely lose custom to competitors who can.
4. More sales will be driven directly through social media
One of the other major ways in which technology is set to change the retail landscape is through social media. This is not only through the existing ways in which social media drives trends in the marketplace, and allows brands to improve their profiles, but in a more direct way.
Instead of having to leave the page or site to search and buy the products they see in photos, consumers will be able to easily click on the content, and purchase the products within, during that moment of discovery.”
With some companies already driving sales on social networks, such as Domino’s pizza’s successful sales campaign, and new developments such as Facebook's Marketplace and Instagram’s Shoppable Tags, there is no reason to think this won’t continue throughout 2017. Major brands will continue to keep up with the technology, and – as it becomes possible to shop directly via social media – these sales will come to account for a significant minority of online sales.
5. Improved technology will drive personalised sales and advertising
Part of the success rates enjoyed by Amazon and other online retailers is owed to the growing accuracy with which algorithms are able to learn and predict the shopping patterns of individual shoppers. By studying not only sales, but also searches and clicks, current AI is already able to match products to customers with a staggering success rate.
By recommending products that customers want, algorithms are able to drive sales. This is not the only way in which websites can turn browsers into buyers, however. For example, more and more marketers are now sending emails to customers who leave items in their online carts – this does not have a high conversion rate, as things stand, but does definitely cause some customers to return and complete their purchases.
With brands offering a more and more personalised approach, virtual technology and AI have had to improve in order to keep up. These technologies will continue to be developed throughout 2017, and so the end user experience will continue to change.
In 2017, we predict that we will see more examples of retargeting, as well as increasingly accurate user recommendations. By analysing their customers’ digital footprints, brands will create a virtual shopping experience that feels tailor made for each individual user.
6. Changes in American tax law will make importing goods more expensive
Heading into 2017, one of the largest changes happening on the global scale is Donald Trump becoming the President of the United States. While many of Trump’s proposed policies have been controversial, most of these policies can’t be expected to affect the world of retail in any significant way.
In the United States, however, we can expect proposed tariffs and taxes to be imposed on imported goods. This has the potential to affect a number of major retail companies, as well as smaller companies who import a majority of their goods. Per CNBC, the Republican Party’s proposed border-adjustment tax could lift the taxes on a single sweater from $1.75 to $17. Obviously, the same rate will not apply to all goods – but this is an example of how bad it could be.
With as much as 95% of clothing sold in the United States currently imported, this tax could be a sea change. It may lead to an increase in businesses for US-based clothing manufacturers, although it is more likely to simply raise the price of consumer goods at all levels.
Obviously, this massive increase in the cost of imports will hurt both retailers and customers across the board. In a nutshell, it means that everything made outside the US will become much, much more expensive for everyone inside the US, from the man in the street to the world’s largest corporations.
It is not the world’s largest corporations, however, who will feel the effect most keenly. Although major brands such as Urban Outfitters and Gap will be affected, it is likely that smaller companies who make the majority of their money out of imports will feel the pinch more than most, and many of these may have to significantly change their business model or else close up shop in 2017.
7. The effects of Brexit will be felt, even outside the UK
While Trump takes office in the US, the UK careens towards a “hard Brexit” – leaving the European single market, as well as the European Union. This plan of action has already caused the pound to lose a significant amount of value; for the first time in history, a single euro is now worth more than a single pound.
In retail terms, these changes are just the beginning. In the UK, Brexit has already caused a rise in the cost of living for consumers, and this trend will continue into and throughout 2017. This, in turn, will cause retail sales – particularly of non-essential goods – to drop.
Like a domino, this will cause a loss of profits to brands trading in the UK. This may lead to closures, which in turn will lead to increased unemployment rates, which will further lower spending throughout the nation.
With Britain pulling out of the EU, 2017 may also see the pound devalued even further. For international retail business, this will mean that there is less money to be made from sales in the UK, and this will affect international businesses. Exporting to the UK may become unprofitable for many European businesses.
8. Major brands will take more control of their customer experience
Dating back to the scandal that arose around Abercrombie & Fitch burning clothes rather than donating or discounting them in 2013, it has been obvious that many of the world’s leading brands are focused on controlling the experience and environment in which their goods are sold and used.
This has led to brands pulling their goods out of department stores in order to take a higher level of control over their brand. In 2017, this trend seems set to continue. Leading handbag brand Coach have already started pulling their products from wholesalers, while Michael Kors announced in 2016 that it will “sit out” of department stores’ sales.
These brands are just part of a general trend away from department stores and towards more dedicated, brand-specific shopping and sales experience. While many of these experiences are online, some of them are also happening in the brick and mortar sphere.
In the US, brands such as Adidas, Nike and Under Armour are moving away from driving sales through existing retailers towards a more direct model. These brands are opening dedicated retail stores, allowing them to exercise greater control over both the customer experience, and the ways in which their products are presented.
This may well be the sole exception to the trend away from brick and mortar stores that we have seen in recent years, and will likely continue to see in 2017. With image-focused brands moving into direct competition with high street retailers, we may see department stores and other businesses focused on selling brand name products start to suffer more than they already are.
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