The Future of Retail : US Retail Industry Trends, Stats & Forecasts
Being a leader in retail, the US defines major trends and direction for the industry all over the world. Walmart is not only the world’s largest company by revenue, with its 4000 stores it is also one of the world’s biggest employers. In fact, 76 of the largest retailing companies are US based and many of them have operations in other parts of the world as well.
The Ubiquitous Mobile
At present the industry is undergoing a massive overhaul with technology changes taking the center-stage. Advancements in mobile and e-commerce are changing consumer shopping preferences, forcing retailers to make huge investments in their consumer facing processes and also in their supply chain.
“We know that technology will continue to revolutionize retail, and that Target’s future will be built on innovation,”
Target spent $1 billion in 2015 on strengthening its e-commerce capacity.
“Mobile firmly established itself as the dominant shopping trend, for both traffic and sales…Mobile is making up more than 70% of traffic to Walmart.com, and now nearly half of our orders since Thanksgiving have been placed on a mobile device – that’s double compared to last year. Our customers went from previously mostly searching and browsing on mobile to making purchases at a much higher rate.”
Fernando Madeira, President and CEO, Walmart.
There is no dispute on mobile being the key channel for customers across all age groups and geographies. However; according to a Business Insider Report 40% of the top 100 global retailers do not have a dedicated mobile website. This is despite the fact that 71% of shoppers believe that they will get a better deal online than in stores. Also, 53% of all online traffic comes from smartphones, but they drive only 29% of all online sales. The basis for this anomaly can be found in PwC report which says that 70% of all consumers prefer researching for products online and buying them in stores. A report by The Economist Intelligence Unit sheds more light on what prevents consumers from completing their purchase on mobile:
Why don’t you purchase products or services using your mobile device more often?
Top 3 reasons (% respondents)
Source: How mobile is transforming retail Bricks, clicks, tweets and texts across the omnichannel shopping mall, The Economist Intelligence Unit
It can be concluded from the above chart that while there may be a traditional bias towards using desktops for purchases, there are some lingering issues in the mobile strategy adopted by retailers. Many of the retail apps are not ready enough to provide a seamless shopping experience to customers. Moreover, a large number of retailers see mobile as merely a promotional tool and hence their apps carry a minuscule portion of what is being offered in store to ‘real buyers’. Having said that, promotions is a big category in itself and drives a lot of interest from customers. Retailers have the opportunity to make most of their promotions via mobile as 60% of US consumers want to receive real-time promotions and offers on their mobile. To get better deals, they are willing to share data on their likes and preferences and install such apps from retailers.
“As customers’ definition of service continues to evolve, we are focused on being responsive and delivering services and experiences that are important to them…our customers have asked us to make Nordstrom Rewards more flexible. They’ve told us they want to be able to earn points whether they use their Nordstrom card when they shop with us or pay in another way, and today we hope we’ve delivered on their request.“
Erik Nordstrom, Co-President, Nordstrom commented after the company’s decision allowing members to earn benefits regardless of how they choose to pay for purchases across its store, outlet store or digital channels.
The readiness for mobile based promotions has caught marketers’ attention and according to a report 60% of North American retailers plan to have tools for ‘suggested selling based on previous purchases’ in next 3 years. Yet, marketers also need to provide due importance to privacy and cyber-security related issues in their online strategy, as these are big concerns for consumers. The data breach at Target has not been completely forgotten; US consumers rate personal devices more vulnerable (44%) than POS devices at retail stores (23%).
Crafting New Shopping Experiences for Customers
The challenges with mobile are widely known and retailers are addressing these challenges on priority basis. At the same time they are scrambling to create differentiation utilizing wearable technologies, Internet of Things (IOT) solutions and Augmented Reality. They are trying to not only improve shopping experience for their customers, but also create entirely new experiences for them.
For instance, Tesco offers Scan as you Shop option to its customers which basically lets customers scan item bar codes; this makes drastic reduction in waiting time at the checkout counters. Nordstrom is another retailer which has made significant investments in mobility with multiple apps for its customers. The company recently launched TextStyle, which is a unique text based personalized service connecting customers with their favorite salesperson or personal shopper.
“You wake up this morning and there is no hot water. Your water heater is broken. Most people are going to go to Google and try to find a plumber, right? We’re going to be there with you saying, ‘We’ve already picked the plumber in your market, we’ll 100% stand behind that plumber and they will be in your house today to replace your water heater what nobody else can do’. So online lead generation, connecting you to the right service providers, making sure there is good communication back and forth between the customer and Home Depot, we are really shooting that services business with a shot of adrenaline.”
Kevin Hofmann – SVP and President, Online, The Home Depot explaining his company’s focus on building the Do-It-For-Me customer experience.
“We’re using digital innovation and this new store space in a different way which will enable us to deliver a superior shopping experience to our members…the store in Ft. Collins is a great example of how we are focusing on our best categories, stores and members and how the right blend of a physical store with Sears’ digital capabilities can deliver a fresh, innovative and convenient way for our members to shop.”
Leena Munjal, SVP, Customer Experience and Integrated Retail, Sears Holdings on the opening of the company’s hi-tech store which includes a humongous 122-inch interactive digital display that helps customers visualize how new appliances would appear in a full-scale kitchen with customization options on their tablets
Crafting amazing customer experiences is delicate task and requires considerable experience in understanding consumer behavior. This is where Big Data analytics may prove to be beneficial. At the same time IOT and Cognitive Technologies may also offer answer to challenges in sales and management in modern retail.
|NRF-FitForCommerce Omni-Channel Retail Index: 2015 Holiday Findings|
|86% of retailers in the index provide a shared shopping cart from mobile to desktop|
|28% offer BOPIS|
|70% allow customers to buy online and return in store|
|46% have in-store signage about omni-channel service|
|48% have online-offline compatible loyalty programs|
The Evolving World of Omni-Channel Retail
Retailers are bullish on omni-channel strategies as omni-channel is seen as the Holy Grail for engaging smartphone addicted consumers.
“Omni-channel can have a compounding impact on growth. EY experience and even retail annual reports demonstrate that customers who shop online and in-store spend twice as much as those who only shop in-store.”
Still, there isn’t any simple formula to make a retail chain successful on multiple fronts; even Walmart has failed to crack the code. While omni-channel has been proposed as a strategy which could help retailers compete with online giants like Amazon; its successful implementation poses tough challenges in terms of supply chain and inventory management. An EY survey on omni-channel strategy in 2015 also reported these issues:
- Big Data Challenge: 74% of the retailers reported that they do not have IT systems and capabilities that enable seamless visibility and fulfillment to end consumers.
- Fulfillment Challenge: 40% retailers reported no mechanism to fulfill out-of-stocks
BOPIS is the Way Forward
Source: Blackhawk Engagement Solutions
Retailers are eagerly adopting BOPIS as a main avenue for implementing their omni-channel strategy.
- In 2015, BOPIS contributed 30.2% to Sam’s Club and 22.6% to Kmart’s online sales
- In 2015 holiday season Walmart saw maximum users opting for BOPIS followed by Best Buy, Target, Kmart and Macy’s
- 69% of shoppers who used BOPIS in Christmas holiday season last year purchased additional items while picking up in store
As discussed earlier, fulfillment is a major challenge against retailers. Often customers are able to see a product available in stocks at the time of online booking, but find it otherwise when they arrive at store for pickup. At other times, they have to wait in long queues as the store staff has to attend regular customers and the BOPIS customers at the same time. Nonetheless, the trend is here to stay and there is no way around. To make BOPIS seamless, retailers need better data and inventory management solutions and may have to invest in upgrading their existing software. Further, the store staff has to be equipped with mobile solutions for assisting customers promptly.
The Future of Retail
In the recent times, retail has declined despite the rise in consumer spending. Although, consumer confidence has taken a dip to 92.6 from 94.7 in April, the consumer spending which accounts for two-thirds of US economic activity registered a 1% rise in April 2016, the largest month-on-month gain since August 2009. Still, the US Retail Sales YoY is forecasted to stay unchanged at 3% in May 2016 and reach 3.9% by May 2017.
The recent spike and sales projections are in line with McKinsey’s observations on the state of US retail where it says “slower growth rate is likely to extend well beyond the five-year time horizon, becoming the “new normal”. Within a tepid overall market, however, there will be several pockets of strong growth.” McKinsey also made following projections about the consumer profiles:
- Millennials (population between ages 13 and 30) which constitute 15% of the US consumers, will account for close to 33% of total spending by 2022
- However, baby boomers will drive major categories such as food (92%), housewares (73%), and apparel (56%)
Meanwhile, retailers are blaming changes in consumer spending patterns for their dismal performance – it has been reported that Americans aren’t buying clothes and are instead spending on real-estate, home furnishings, cars and boats. It will not be too wishful to assume that the spending spree would halt and consumer demand for retail items and apparels would peak up again. Perhaps, retailers will utilize this brief lull to boost their infrastructure for tackling the challenges of future.
The technology landscape is changing rapidly and will decide the fate of retailers. It remains to be seen if CIOs in retail organizations would go beyond their comfort zone to harness the benefits of technology; Gartner predicts that “By 2018, CIOs of at least two of the world’s largest multichannel retailers will be sued for data breaches.” Eventually, the future of retail would be defined by leaders who do a better management of their security as well as marketing and operations while maximizing the benefits of technology for their retail businesses.
Credencys Solutions Inc is a leading software solutions and managed services provider which has helped numerous businesses in retail leverage Mobile, Cloud, Big Data, Internet of Things and Cognitive Technologies for their business growth. Check out our resources and portfolio to know more about our solutions.