The retail sector will continue to face headwinds in 2020. The National Retail Federation (NRF), with the help of its members and researchers from Bain Capital, TrendWatching, Code Commerce and New York University, recently outlined several predictions for retailers in 2020.
NRF expects ambiguity over the next 12 months as the 2020 presidential election will dominate the airways and could put a damper on consumer sentiment. Consumers are the lifeblood for the economy, and by standard metrics, the state of the consumer is solid heading into 2020, according to Wells Fargo chief economist Jay Bryson. But, he said, there are some outlying risks to the growth.
“Not only would another increase in tariffs weigh further on investment spending, but higher prices for consumer goods would erode growth in real income that could exert headwinds on growth in consumer spending,” Bryson said.
Retail experts also expect greater attention focused on continued growth in the sharing economy and its disruption to traditional models. They expect heightened speculation about a recession, raised eyebrows about the likelihood of more autonomous-driving cars, and more context about 5G cellular technology.
Consumers continue to have a big appetite for resale and recommence, which NRF said will be voracious in 2020. The rising resale market is the new disruptor in the sector, and it’s poised to double in size over the next five years. In 2019, the secondhand apparel market was worth an estimated $24 billion, according to retail analysts firm Global Data. They expect the resale market could reach $41 billion by 2022. The used-fashion industry could climb to $64 billion in the U.S. by 2028, which is a major disruption to an already beleaguered retail segment.
The trade group said frugal consumers, led by value-conscious Millennials, will continue to fuel the resale segment. Younger and older generations are also getting into the resale mindset with the ease of selling items on eBay, Etsy or Facebook Marketplace and popular apps like Poshmark, ThredUp and Mercari.
“Consumer attitudes toward ownership have evolved from stockpiling fashion to a more circular motion, with the desire for greater sustainability at the forefront. We look for more retailers to dabble in rentals, targeting a piece of Rent the Runway’s sweet success to win favor with shoppers who will forever be seduced by what’s new and now, but are refusing to compromise their environmental ethos,” NRF noted in the report.
The trade group said retailer success in 2020 is grounded in offering an incredible retail experience. That entails how retailers tell a story, how shoppers experience it and the emotional connection left behind. That will allow vigilant businesses to raise the bar.
“The retail industry has been talking about experiences for decades — remember ‘The Experience Economy,’ written by Joseph Pine and James Gilmore in 1999,” the report stated. “Today it’s imperative, regardless of whether a company is selling apparel, personal care products or tires. Customers can buy just about anything online, so it’s important to snag their attention with storytelling and hands-on interaction and your ‘audience’ will remember the experience,” the report stated.
NRF said the concept of experiential retailing is speeding toward a mainstream business practice. The newest crop of retail businesses were early adopters.
“Now, shopping malls are embracing the idea, infusing entertainment options into the mix and beckoning mall-goers with the promise of environments that will transform periodically — not just at the holidays,” the report said.
Experts predict there will be some challenges with experiential retail, noting the importance of regularly refreshing the experiences.
While experience matters to consumers, the trade group said retailers who refuse to change will be the most vulnerable. The experts said the key to success is to create an experience that makes shoppers want to return again and again. They say while leveraging technology is wise, it is not a substitute for human capital, which is vital to experiential retail.
The lines between channels, products, technology companies and social media entities are no longer clearly delineated. Retailers have been branching far beyond familiar “channels.” They’re continuing to try their hand at hospitality, health services and rentals.
Over the past six months, Walmart, Kroger, Macy’s and e.l.f. Cosmetics launched campaigns on social media platform TikTok, garnering impressive levels of consumer engagement along with millions of views, according to NRF.
Under the heading of strange bedfellows, the report states: “Le Tote, a relative newcomer in subscriptions, inked a deal to acquire legacy department store Lord & Taylor in August. Sam’s Club recently acquired the technology assets and some of the advertising team from Triad who work on their accounts, opting to bring the segment under Sam’s Club management. And Target Corp. announced in October it was teaming up with the owner of the Toys “R” Us brand to relaunch the company’s e-commerce site.
“Don’t even try to keep score. It’s futile. It’s also brilliant. Driving this blurring of lines is retailers’ realization that the newest evolution of retail is about providing a holistic experience for consumers. Always looking for ways to create a competitive advantage, retailers are opening their minds to innovative ways of servicing and supporting the customer journey,” the report said.
Personalization has been a buzzword in retail for the past few years, but few companies have achieved the level that consumers have come to expect.
NRF said Netflix, YouTube and Spotify have been leaders in personalization by developing artificial intelligence recommendation engines to suggest new content to people based on what they’re already listening to or watching and what people with similar interests are enjoying.
“Most retailers are still struggling to get there,” the trade group said. “Researchers applaud Stitch Fix and Rent the Runway for their personalization prowess. Nordstrom leads the personalization push from a customer service platform, and Sephora topped Sailthru’s Retail Personalization Index for the third year in a row. Sephora’s score of 79 out of a possible 100 comes in part because the beauty retailer’s mobile app, in-app messaging and links to its loyalty program are top-notch.
“Artificial intelligence and machine learning should be making it much easier for retailers to personalize their efforts in ways that go beyond email. Still, every indication suggests that most companies are still swimming in so much data that figuring out how to tap this repository in a way that engages shoppers, not enrages them, remains a challenge,” NRF researchers said in the report.
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