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The Future

of Retail
10 trends of tomorrow

July 2015

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Natalie Berg

Retail Insights Director


natalie.berg@planetretail.net
@natalie_berg

Researched and published by Planet Retail Limited


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PlanetRetail.net
The Future of Retail: 10 trends of tomorrow

Contents

Executive Summary 1
Trend 1: Fewer, but more impactful, stores 2
Trend 2: Working together to stand apart 4
Trend 3: Race for the most convenient store experience 6
Trend 4: Personalisation to reach new heights 8
Trend 5: The end of points-based loyalty cards 10
Trend 6: Power of the peer12
Trend 7: Cracking the final mile 14
Trend 8: Death of pure-play16
Trend 9: Click & collect17
Trend 10: From one-click to no-click19

July 2015

PlanetRetail.net
The Future of Retail: 10 trends of tomorrow

July 2015

PlanetRetail.net
The Future of Retail: 10 trends of tomorrow

Executive Summary

ts no secret that retailing has undergone seismic shifts over the past five years. Weve witnessed the rise of the
disruptors and the downfall of some of retails most established brands. Shopping habits have been permanently
altered empowerment and promiscuity are now firmly entrenched. Customer expectations have risen exponentially
and now a seamless shopping experience - regardless of the proliferation of choice - is a requirement. Today, retailing
is well and truly about survival of the fittest.
So the big question is: what will the next five years bring? In this report, weve identified 10 future trends that all
retailers should be preparing for today. We believe that additional fundamental changes are just around the corner
and retailing in the future will become far more personalised, collaborative and socially-influenced. By 2020, we
predict that shoppers will have to pay for home delivery, traditional points-based loyalty cards will become a thing of
the past, pure-play retail will largely cease to exist and checkout-less stores will become a reality.
A key theme across the 10 future trends is the need for collaboration. Retailers are finally beginning to recognise the
benefits of working together both in bid for differentiation and providing a better service for the customer. We expect
more retailers to join forces by 2020, primarily through instore concessions or collection points for online orders.

July 2015

PlanetRetail.net
The Future of Retail: 10 trends of tomorrow

Trend 1: Fewer, but more impactful, stores

e all know by now that retailing is not as black


and white as online versus instore. Buzzwords
such as omni- and multi-channel have dominated the
industry over the past five years, highlighting the need
for retailers to provide a seamless experience regardless
of channel or device used to make the purchase.
That said, you cant ignore the digital shift, particularly
for retailers in vulnerable categories or those who are
already overspaced. The problem is, of course, most
severe for those retailers whose core category has
shifted online think electronics, entertainment, office.
RadioShack, whose previous claim to fame was that
90% of the US population was within minutes of one
of its stores, is now closing around half of its 4,300
outlets. Barnes & Noble will shut approximately onethird of its stores over the next decade while Staples,
which now generates half of its sales online, will close
12% of its store base by the end of this year. This is
the Amazon effect and we expect it to continue for the
foreseeable future.

However, its not just the growth of online retail that is


leading to store closures. The rise of alternative bricks
and mortar channels is also having an impact think
fast fashion in the US or, to a lesser extent, discount
grocery in the UK. These disruptors are shaking up
their respective sectors, causing many well-established
players to re-evaluate their store portfolios.
Gap plans to shutter one-quarter of its North American
stores over the next few years. Peers such as American
Eagle and Abercrombie & Fitch are also embarking on
significant store closure plans as mid-market fashion is
supplanted by the likes of H&M, Forever 21 and Zara.
Retailers that are overspaced and underperforming are
equally vulnerable. In the US, traditional department
stores such as Sears and JCPenney are particularly
at risk, in part due to the emergence of cheap fast
fashion as discussed above, but there is also an
element of complacency here. These retailers are the
top two most common mall anchor tenants in the US.
Its no coincidence that some analysts are predicting
that half of Americas malls will close by 2030. In
addition to the many challenges facing US mid-market
fashion, Sears and JCPenney simply have too many
stores in the wrong locations.

Established retail brands are embarking on significant store closure programmes

Core category
shift online

New bricks &


mortar competitors

Overspaced &
underperforming

July 2015

PlanetRetail.net
The Future of Retail: 10 trends of tomorrow

As a result, we predict that retailers will continue to reevaluate their store portfolios. Call it fleet optimization;
call it downsizing; call it rightsizing. The fact is that in
the future there will be less traditional physical retail
space on the high street.
However, its not all bad news. The stores that remain
will be more impactful, more connected, more digitallyled. For specialists, physical locations will be a chance
to flaunt their credentials. For example, in toys/
babycare retailing, both Toys R Us and Mothercare
are recognising the opportunity to provide a richer
experience for their shoppers through initiatives such as
play areas, cafs and a greater use of instore technology,
all of which will help to differentiate from their massmarket rivals. Providing specialist advice - and enhanced
customer service in general will become a priority for
bricks and mortar retailers of the future.

Customers are rapidly


changing how they shop
today, and these [store
closures] will help get Gap
back to where we know it
deserves to be in the eye
of consumers.
Art Peck
CEO, Gap

In the most extreme cases, retailers like RadioShack will close thousands of stores.

July 2015

PlanetRetail.net
The Future of Retail: 10 trends of tomorrow

Trend 2: Working together to stand apart

ver the next decade, a significant number of retailers


will be left with under-utilised space. As discussed
in the previous trend, in the most extreme cases, stores
will close. For many retailers, though, there will be
opportunities for collaboration, primarily through instore
concessions both as a means of filling otherwise dead
space as well as differentiating from the competition.
This is especially true for European hypermarkets &
superstores which are struggling with the dual challenge
of changing shopping habits discounters, online and
convenience and the growing risk of homogeneity, the
latter explaining why mid-market retailers continue to
suffer while premium and value supermarkets are thriving.
Even Sainsburys, which is far less exposed to the
demise of big-box compared to peers like Tesco, has
admitted that one in four of its stores will have some
under-utilised space within the next five years. In an

attempt to make better use of that underperforming


real estate, the grocer recently opened its first instore
Argos concessions. Although it is still early days, our
view is that this is an excellent strategic partnership Argos benefits from Sainsburys weekly footfall, while
Sainsburys is able to offer a greatly expanded non-food
range while, crucially, creating a point of differentiation
in what is a very crowded and competitive market.
However, choosing the right partner is key. Tesco,
under previous CEO Philip Clarke, undertook major
experimentation, bringing in brands such as Harris +
Hoole coffee shops and Giraffe restaurants. This has not
proved as successful as was hoped, in part due to these
new partners not aligning smoothly with the retailer
brand as well as trying too hard to force new shopping
habits. For example, Harris + Hoole is a premium coffee
brand, whereas Tesco, despite recent struggles with
brand identity, is essentially a mid-market retailer.

Expect more retailers to join forces over the next five years. Pictured: Argos concession in Sainsburys supermarket. Sainsburys

July 2015

PlanetRetail.net
The Future of Retail: 10 trends of tomorrow

Instore concessions provide retailers with a low-risk alternative to test their brand in new markets. The first Sears/Primark location in the US will open by 2016. Primark

Partnering with other retailers can also enhance the


digital appeal of a retailers brand. eBay has recently
teamed up with Australias largest supermarket
chain Woolworths for instore collection. Similarly,
Amazon shoppers in the UK can now collect orders
from convenience stores such as the Co-op, SPAR
and McColls. While we are unlikely to see Amazon
lockers featuring in Walmart stores any time soon, this
represents a fantastic opportunity for smaller, foodfocused grocers who will benefit from the traffic such
collection services can drive.
Partnerships can also allow retailers to test new sectors
or geographies with limited risk to their brands. Primark,
for example, will soon open its doors in the US by
taking space in Sears stores. The addition of this foreign
fast fashion brand with a cult following can only be a
win-win for Sears, which, as mentioned earlier, has had
significant issues with footfall in recent years. Equally,
Primark benefits by being able to test its brand in a new
market without the capital and risk that opening its own
stores would entail.
Differentiation will become more important if retailers
want to survive in todays competitive market. Expect
more retailers to join forces by 2020.

Grocery shoppers in Australia can now collect eBay orders at their local Woolworths supermarket.
lifehacker.com.au

July 2015

PlanetRetail.net
The Future of Retail: 10 trends of tomorrow

Trend 3: Race for the most convenient store experience

he digital war is truly set to overtake the price war.


Retailers are looking to technology to differentiate
and improve the overall instore experience. The latter
is primarily being addressed through enhancements to
instore navigation and mobile payments, although we
are also predicting increased investment in lower-priority
areas such as endless aisles and smart fitting rooms.

Its important to point out that an increasing number


of shoppers (37% globally) use their smartphones to
access a retailers free Wi-Fi. This is encouraging more
retailers to invest in instore mapping technology in a
bid to improve the overall experience for the customer
while also enabling the retailer to gain a deeper
understanding of shopper behaviour.

Smartphones have already transformed the instore


experience, putting the power firmly in the hands of
the shopper. Historically i.e. over the past five years
smartphone usage instore was centred around price
comparisons, searching for promotions or additional
product information, and seeking information about
store opening hours/locations. However, this is
beginning to change as retailers add new functionalities,
addressing two main shopping gripes finding items
and then paying for them.

Previously, bricks and mortar retailers could only


analyse information based on what shoppers actually
purchased (POS data). Now, however, by tracking
shopper behaviour via smartphones through Wi-Fi or
BLE (Bluetooth Low Energy), bricks and mortar retailers
have the capability of viewing which products shoppers
are interested in, but do not buy, and potentially making
adjustments to pricing or merchandising as a result. Its
the bricks and mortar equivalent to analysing online
browsing history.
We expect more retailers - particularly the spacious,
SKU-heavy hypermarkets - to invest in instore
navigation capabilities. In addition to the opportunity
to better understand shopping habits, this technology
is incredibly powerful as it enables the retailer to
engage with shoppers just moments before potentially
making a purchase. The Holy Grail, of course, would
be to combine instore navigation with personalised
promotions/loyalty offers and ultimately mobile
payment. For example, if a shopper wants to be directed
to a particular kind of cheese, they might be prompted
with an offer on a bottle of wine that pairs well.
In the not too distant future, we also expect more
shoppers to pay for items via their smartphone. The
highly publicised launch of Apple Pay has certainly
created a buzz around mobile payments, but we believe
it will be some time before shopper usage catches up
with awareness. In fact, our own research shows that
only 20% of shoppers globally have used their mobile
phones as a method of payment. Its important to point
out that this varies greatly by market for example
nearly one-third of Chinese shoppers are comfortable
making mobile payments, but only 10% of shoppers have
done so in the UK, Apple Pays first international market.

Only 10% of UK shoppers have used a mobile


phone as a method of payment. This is expected to
drastically rise over the next five years. Apple

July 2015

PlanetRetail.net
The Future of Retail: 10 trends of tomorrow

In the future, it will become common practice for retailers to engage with shoppers just moments before a purchase. ITM Intermarch

Consumer acceptance will be driven by several factors.


Firstly, concerns over privacy and security must be
addressed in order for mobile payments to be accepted
beyond those early adaptors. That said, the same
concerns existed 65 years ago when credit cards were
first introduced. Secondly, and perhaps somewhat
contradicting the previous concern, convenience
and ease of use are critical to the success of mobile
payments. At the moment, unless perhaps at a festival
or theme park, its not too burdensome to carry a
wallet, plus the rise of contactless payments in markets
like the UK and Hungary had made the checkout
experience even smoother in recent years.
We believe there is certainly a place for mobile payments
but there must be tangible benefits for the shopper. For
example, some retailers have been testing checkoutless stores, allowing shoppers to use their smartphones
to scan and pay for items as they add them to their
basket. Retailers should also be considering rewarding
shoppers, potentially linking to loyalty schemes, as an
incentive to make mobile payments. Its for this reason
that we believe in the long-term success of a more
comprehensive mobile wallet as opposed to mobile
payments as a standalone option.
One way to address both security and convenience
concerns could be through wearable technology.

Although its still very much in nascent stage, emerging


technologies like Apple Watch could be deemed more
secure (as its attached to a shoppers wrist) and easier
to use (a simple swipe of the wrist versus getting phone
out, unlocking PIN, etc.).
From a retailers perspective, there are two incentives
for going down the mobile payments route reduction
of transaction costs of cashless payments and the
opportunity to, as mentioned above, gain a deeper
understanding of shopper behaviour from the data.
Looking ahead, we believe there will be consolidation
in the sector. At the moment, its a race between
established payment industry giants, technology
companies and new start-ups. There is simply too much
choice for shoppers, which can cause confusion and may
ultimately hinder acceptance of mobile payments.
In summary, we believe that the store of the future
will be heavily tech-driven. Those retailers willing to
embrace these technologies can now significantly
improve the instore experience by allowing shoppers
to more quickly navigate aisles and pay for items.
Although such technologies can help retailers to
differentiate today, its important to bear in mind that
this will also lead to greater customer expectations
and in the next five to 10 years such technologies will
simply become the norm.

July 2015

PlanetRetail.net
The Future of Retail: 10 trends of tomorrow

Trend 4: Personalisation to reach new heights

ersonalisation in retail is nothing new. In fact, retail


started out as a very personalised industry (think
rural mom and pop stores or wet markets in Asia).
Seeking greater efficiencies, we then moved towards
mass retailing and are now, thanks in large part to
technology, entering a new phase best described as
mass personalisation.
Historically, bricks and mortar players have struggled
to replicate the level of personalisation that can be
found online. However, recent advances in beacon
technology mean that targeted, real-time offers are now
a reality. Whats more, Planet Retail research shows
that 38% of global shoppers want to opt in to receiving
relevant discounts when instore, compared to the 15%
of shoppers currently doing this. This combination
of shopper enthusiasm and technological capability
means that bricks and mortar retailers can begin taking
personalisation to new heights, driving both customer
loyalty and spend.
This is resulting in a number of retailers around the
world seriously re-evaluating their loyalty schemes. Just
a few years ago, a quarterly mail-out of coupons based
on a shoppers past purchases was deemed to be highly
personalised, innovative and successful. Today, thats
no longer enough and, in the not too distant future, the
ability to receive personalised discounts at the point
of purchase will become simply yet another shopper
expectation. As mentioned previously, engaging with
shoppers when they are most likely to spend constitutes
an opportunity too good to overlook.

Personalisation

July 2015

Mass

And what better way to personalise a loyalty scheme


than to allow shoppers to select the items they want to
save money on themselves? Waitroses new Pick Your
Own scheme has really raised the bar here, allowing
loyalty cardholders to save 20% on their 10 favourite
items (which shoppers can select from a list of 1,000).
This not only empowers the customer to choose the
most relevant discounts for them, but simplicity of
the scheme also helps to build trust and improve the
Waitrose value proposition.
Meanwhile, expect technologies such as augmented
reality and 3D printing/scanning to create richer, more
personalised customer experiences. Sephora, Carrefour
and LOral are all utilising augmented reality both
instore and online to allow shoppers to test health &
beauty products while online jeweller Brilliance.com
has had great success using 3D printers to custom-fit
engagement rings and other products.
We also believe there is an opportunity for retailers
to drive engagement with customers through a
personalised digital experience. Asos, for example, has
been very successful with its Asos Stylists initiative,
allowing shoppers to engage with professional stylists
via Twitter for tailored fashion advice. Tesco, meanwhile,
recently launched virtual beauty consultations via
Google+ Hangouts, where shoppers can receive tailored
advice from independent bloggers and beauty experts.
We believe there is a huge opportunity, particularly
in the beauty and fashion categories, to engage with
shoppers on this level in a bid to build trust and
awareness. That said, this will be most effective for
specialist retailers with a highly targeted shopper base.

Mass Personalisation

PlanetRetail.net
The Future of Retail: 10 trends of tomorrow

The next phase of loyalty will require retailers to offer even deeper levels of personalisation. Waitroses Pick Your Own has raised the bar in this area. Waitrose

15%

of global shoppers receive


and immediately redeem
real-time promotions.

38%

would like to receive


and immediately redeem
real-time promotions.

In the not too distant future, the ability to receive personalised discounts
while instore will become yet another shopper expectation. Apple

Source: Planet Retails Global Quarterly


Shopper Tracker, Shopology:
Base size 22,500. Period covered
February to April 2015.

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PlanetRetail.net
The Future of Retail: 10 trends of tomorrow

Trend 5: The end of points-based loyalty cards

ets start with an important disclaimer: the notion of


rewarding your most loyal, most profitable customers
will never go away. In fact, as discussed in the previous
trend, we maintain that huge opportunity exists to drive
loyalty via deeper levels of personalisation - both instore
and digitally. However, when it comes to traditional, pointsbased loyalty schemes, we believe that the end is nigh.
Take the UK grocery sector for example. Shoppers today
are promiscuous - they shop around for the best deals.
They often visit more than one supermarket on the
same day and, increasingly, this involves a trip to the
discounters. So, the idea of being loyal to a particular
grocer is a thing of the past. Shoppers no longer view
themselves as an Asda customer or a Tesco customer.
They are buying little, often, and across a multitude of
supermarket brands. Cue the death of the weekly shop
and, ergo, supermarket loyalty.

This coincides with a broader shift towards a more


honest, simplified approach to pricing. The discount
model of everyday low price is resonating strongly with
customers. Shoppers dont want to bring a calculator
into stores to work out if they are getting a good deal.
Its no surprise then that Tesco, Morrisons, Sainsburys
and others are all scrambling to axe the many
BOGOFs and %-off deals that historically have been
commonplace in their stores.
Points-based loyalty cards add another layer of
complexity and many consumers have wised up to
the fact that you often have to shop at a particular
supermarket for a good couple of years before receiving
any kind of meaningful reward. Today, shoppers want
instant value (i.e. they dont want to work for it) and, as
previously stated, they want relevant, real-time offers
(goodbye blanket discounts).

The shoppers of tomorrow will look to be rewarded for more than just transactions. The future of loyalty can be best summed up in three words: personalisation, digitisation and
gamification. Walgreens

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PlanetRetail.net
The Future of Retail: 10 trends of tomorrow

So what does all this mean for the future of loyalty


schemes? We believe this can be best described in three
words personalisation, digitisation and gamification.
We have already touched on Waitroses innovative new
scheme that puts the customer in charge of their own
loyalty rewards. We feel others will look to replicate
this level of personalisation, not necessarily in terms of
choosing which specific items should be on promotion,
but certainly in terms of making the overall offer more
relevant for shoppers.
This could come in the form of tailored digital coupons
delivered to a shoppers smartphone instore. Ahold
US, for example, found that adoption rate of its digital
loyalty scheme doubled once it added personalised
couponing. The retailer now offers 8-10 tailored offers
per shopping trip based on past purchases, last barcode
scan and the shoppers instore location. Digitising
loyalty schemes also help towards creating general
acceptance towards mobile payments.
As retailers move away from pure points-based rewards,
we believe there is an opportunity to delight loyalty
members with value-added services and unexpected
conveniences. Avoiding queues for example. French
retailers like Carrefour and Fnac give loyalty cardholders
access to exclusive checkouts, while Starbucks is rolling
out its mobile pre-ordering and payment system for
loyalty scheme members across the US this year.
Additional perks such as free coffee instore (Waitrose)
can also drive loyalty without the traditional focus on
money-off vouchers.
Meanwhile, a growing number of retailers are looking
to reward shoppers based on behaviour rather than
purchases. Walgreens Balance Rewards programme is a
fantastic example of such gamification. Here, shoppers
earn points for participating in healthy activities such as
jogging, checking blood pressure or quitting smoking.
Meanwhile, later this year, Taco Bell is expected to launch
its first customer loyalty programme using the concept of
gamification. Were thinking of our experience as more
of a game and less your traditional punch card, said
Tressie Lieberman, Senior Director of Digital Platforms
& Social Engagement. Such gamification of loyalty can
create an emotional connection and influence desired
behaviours, such as additional visits, more transactions
and increased basket size.

Card-based loyalty schemes


will wither, to be replaced by
much richer multi datasetdriven systems that include all
the searching and social data
of our customers rather than
just the SKU number of what
they last bought.

Sir Ian Cheshire


Former CEO, Kingfisher

July 2015

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The Future of Retail: 10 trends of tomorrow

Trend 6: Power of the peer

he race is on to monetise social media. Its no longer


just about influencing purchases; increasingly its
about enabling them. Despite the huge amount of
experimentation taking place - and the temptation for
retailers to explore yet another customer touchpoint we are predicting social selling to remain quite niche for
the foreseeable future. Real-time buying will be limited
to very specific customer groups.
That said, this emerging sales channel cannot be
ignored, especially as major social media platforms
begin adding an increasing variety of transactional
functionalities. In the past 12 months, buy buttons have
been implemented by Facebook, Twitter, Pinterest and
Instagram. Meanwhile, Google has just begun adding
click-to-buy links beneath selected YouTube videos.
Amazon is also spearheading this trend via a partnership
with Twitter that enables shoppers to add products to
their baskets by tweeting a special hashtag. Twitter users
linking their accounts to an Amazon account can add items
to a shopping basket by responding to any tweet with an
Amazon product link bearing the hashtag #AmazonCart in
the US/India or #AmazonBasket in the UK.

Our own research shows that image-heavy, consumerdriven content sites are most likely to succeed in social
shopping. For example, 43% of shoppers are encouraged
to make a purchase after seeing something on Pinterest,
while 36% said participating in a Google+ Hangout
would encourage them to make a purchase. This
compares to only 25% saying theyd make a purchase
based on seeing a product on Facebook, and 26% saying
theyd be likely to buy a product as a result of a tweet
from a retailer or brand.
Just as one-click buying revolutionised e-commerce by
removing a single step from the sales funnel, we believe
that enabling purchases through social media has the
potential to take things one step further. Enabling
anytime/anywhere shopping could mean shoppers
not ever wanting to go through a sales funnel,
removing any friction on the path to purchase. It is not
unreasonable, therefore, to think that checking out with
Buy Now or a hashtag then letting customers confirm
payment via e-mail, text message or even a thumbprint
will become the norm in the not too distant future.

In the past 12 months, buy buttons have been implemented by Facebook, Twitter, Pinterest and Instagram. Forbes

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Expect more retailers to utilise alternative methods of communication, such as Facebook Messenger, to engage with their customers. Wired.com

There are of course obvious downsides to social


shopping, namely in respect of data security, risk of cart
abandonment and a lack of capacity for shopper due
diligence (i.e. researching/reading product reviews). As an
influencer, however, there is no doubt that social media
will continue to play a dominant role in the future. Planet
Retail research shows that 40% of shoppers around the
globe use social media to make key purchasing decisions
about both product and retailer. In markets like India and
Brazil, the figure is even greater, with more than twothirds of shoppers using social media in this way.
As such, we believe more retailers, particularly those
without a bricks and mortar presence, should be
looking to integrate social content into their websites.
A fantastic example of this is Made Unboxed, a social
showroom launched by online-only furniture retailer
Made.com. By allowing users to upload personal photos
of Made.com furniture, shoppers gain inspiration
and can also visualise how the products might look in
their own homes. It also adds credibility to the brand

and builds trust among shoppers who may have been


otherwise deterred from buying such a big-ticket/
difficult-to-return item from an online-only retailer.
Social selling may remain niche, but we believe more
retailers should be looking to contextualise their
products through consumer-generated content online.
We also expect more retailers to capitalise on social
media as a customer service tool (beyond the standard
retailer Twitter account/helpline). Earlier this year,
Facebook began allowing businesses to utilise its
Messenger app as a means of communicating with
individual shoppers. US retailers Everlane and Zulily were
the first to take advantage of the change by sending
receipts and delivery updates to customers. In the future,
as social media platforms continue to add payment
capabilities, shoppers may also be able to place online
orders through Messenger, but in the interim we believe
more retailers will look to take advantage of the app as
a means of direct communication with todays anytime/
anywhere shoppers.
July 2015

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The Future of Retail: 10 trends of tomorrow

Trend 7: Cracking the final mile

nline shopping has come a long way over the


past five years. Websites have been upgraded
and mobile-enabled; there are more payment options
than ever before, and click & collect has become a
mainstream option for shoppers. But the one area - and
the most important that has caused mounting anxiety
for retailers is the rising cost of home delivery.
We believe there is a growing disconnect between
shopper expectations and retailer capabilities. The
competitive state of the sector has resulted in a
proliferation of retail delivery services with delivery lead
times getting shorter and shorter. Whereas next-day
delivery was once considered impressive, today its all
about same-day or even one-hour delivery, a service
that Amazon in particular has been rolling out
under the Prime Now brand in both the US
and UK. Meanwhile, Sunday deliveries have
been introduced in selected markets
and click & collect continues to rise
I think that those who
in popularity, giving shoppers more
choice and flexibility in fulfilment than
still do want to get the
ever before.

delivery at home, they


are going to have to
pay a little more as we
go forward.
Andy Street
MD, John Lewis

As a result, shoppers now expect


delivery to be fast, reliable and
crucially free. This is unsustainable
in our view, and we are beginning to
see the first signs of cracks in the system.
A number of retailers, including Amazon
and Walmart Canada are quietly raising the
minimum spend required to be eligible for
free home delivery.

This is especially important for online-only retailers like


Amazon whose shipping costs as a percentage of sales
have increased every year for the past five years. Raising
the minimum online spend is an easier message to
convey to shoppers compared to charging for a previously
free service.
However, there are a number of retailers still going in
the opposite direction in a desperate attempt to win
the shipping wars. Earlier this year, for example, Target
in the US halved the size of online orders eligible for
free shipping from USD50 to USD25. We suspect this
will be reversed in the not too distant future. Not only
is it unhealthy for the retailers bottom line, but for the
industry as a whole.
Looking to the future, we expect more retailers to
begin charging for services such as home delivery and
for low-value click & collect orders. In fact, in mid-2015,
Tesco announced plans to introduce a GBP4 surcharge
on top of normal delivery fees for online orders
under GBP40.
Meanwhile, John Lewis will soon introduce a GBP2
charge for click & collect orders under GBP30. We
believe this is entirely justifiable and could become the
norm within the next several years (the exception being
those retailers that fulfil click & collect orders from store
stock, such as Argos or Halfords).

The competitive state of the sector has resulted in a proliferation of retail delivery services with lead times getting shorter and shorter. Amazon

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However, we believe that charging for low-value orders


will either encourage customers to increase their
spend online so as to be eligible for free delivery or
divert those small purchases back to the store. The
only foreseeable challenge here, for click & collect in
particular, is that retailers are raising expectations for
those shoppers that are happy to pay the fee for small
orders: they will expect a superior service, particularly
in terms of waiting time/queue management.
Cracking the final mile is still very much seen as the
Holy Grail of modern retailing. Retailers must continue
investing in alternative fulfilment options in a bid to
wean shoppers off cheap and speedy home delivery.
We anticipate further innovation in the areas of third
party (e.g. Google Express, Shutl) and crowdsourced
(Kanga, deliv) delivery, as well as greater ownership of
the final mile. For example, the use of drones, retailers
running their own delivery truck fleets, or even
building smaller distribution centres closer to urban
areas in order to win the same-day war. It should come
as no surprise that Amazon is embarking on all three of
these initiatives.

Whether retailers
decide to charge
for click & collect or
not, the customer
experience has to
come front and centre.
Tim Robinson
CEO, Doddle

#1
barrier to shopping online is
cost of delivery.
Source: Planet Retails Global Quarterly Shopper Tracker, Shopology:
Base size 22,500. Period covered February to April 2015.

In the future, we expect more retailers to begin charging for lowvalue click & collect orders.

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Trend 8: Death of pure-play

ith technology rapidly breaking down the barriers


between online and offline, pure-play retailers are
beginning to look rather vulnerable. Gone are the days
when these operators could boast lower overhead costs and consequently lower prices - due to foregoing physical
space requirements. Today, an absence of bricks and
mortar space is fast becoming a competitive disadvantage
since, as explored in the previous trend, rising shipping
costs pose a greater risk to online-only retailers.
Its for this reason that worlds best-known pure-play
retailer is frantically ramping up its physical
presence. Collection lockers and pop-up
stores are the most obvious examples
of Amazon establishing a real-world
footprint. In markets like the UK and
India, it is working with local click &
collect networks and manifesting
e-commerce
at Tube/rail stations.

Being a pure
player is less unique than
it was. There is more
competition. Increasingly,
consumers wont think about
online and offline - they will
just think about retail.
Sir Terry Leahy
former CEO, Tesco

However, perhaps the most


significant example of Amazon
establishing a bricks and
mortar presence is the recent
launch of Amazon@Purdue, the
companys first-ever permanent,
staffed pick-up and drop-off
location, located on a US college
campus. Even the worlds most
disruptive retailer has recognised that
pure-play is no longer enough.

The million-dollar question remains - will Amazon


ever open physical stores? We doubt they could
successfully replicate their core USPs of range, price
and convenience in a physical setting, yet its clear that
Amazon and other pure-plays need to leverage existing
physical space so as to provide more choice for todays
modern shopper.
Pure-play retailers such as Birchbox in the US or Zalando
in Germany have moved into the physical realm with
experience-driven flagships and pop-up shops. This has
been all about driving brand awareness, engaging with
shoppers in a physical setting, creating a wow factor
and - most of all -showcasing the product. However,
looking to the future, the need for physical locations will
be less about showrooming and more about providing
shoppers with additional fulfilment choices.
Although Amazon is the most well-known case study,
its worth highlighting that this is a trend impacting
retailers worldwide. In Hong Kong, Taobao shoppers
can collect online orders from 7-Eleven convenience
stores. As mentioned, similar schemes are run by eBay
and Argos in the UK and Woolworths in Australia as
well as FamilyMart and Walmart-owned online retailer
Yihaodian in China. Expect to see greater collaboration
between traditional pure-plays and bricks and
mortar retailers, particularly those in the small-box/
convenience sector where the benefits are generally
mutually exclusive.

Even the worlds most disruptive retailer is recognising that pure play is no longer enough.

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Trend 9: Click & collect

s previously mentioned, fulfilment is now very


much a key retail battleground. Click & collect is a
key component as it enables todays anytime/anywhere
shoppers to marry the benefits of online shopping price, assortment - with the convenience of collecting
items on their own terms.
Planet Retail research shows that half of global shoppers
are now influenced by a retailers ability to offer
convenient collection points for online purchases. Click &
collect is no longer a nice-to-have, its now a prerequisite.
As such, retailers that have long resisted IKEA, for
example - are now placing click & collect at the heart of
their strategies. The benefits are clear. From a shoppers
perspective, it eliminates the risk of missed delivery and
ensures stock availability. From a retailers viewpoint, it
is a more cost-effective option than home delivery and
generally results in additional shopper spend.
So what does the future hold for click & collect? One
only needs to look to the UK, the worlds click & collect
hotbed, for inspiration.
The need for collaboration is very much a recurring
theme throughout our 10 Future Trends, and click
& collect is no exception. Today in the UK, schemes
such as CollectPlus are well established and shoppers
are accustomed to collecting their online orders at
alternative locations.
The real shift we are now seeing is that retailers are
beginning to perceive the benefits of working together
to improve the overall customer experience. The eBay/
Argos effect, as touched upon in the previous trend,
is slowly beginning to trickle down across sectors. For
example, Asos shoppers can now collect online fashion
orders at selected Boots pharmacies, once again
highlighting the need for pure-play operators to have
a physical presence. Similarly, Halfords and selected
pharmacy chains are participating in the new DPD
Pickup scheme, which allows shoppers to collect online
orders at other retailers stores.
The key is to collaborate with a non-competing chain
that shares an overlap in customer demographics,
thus allowing the retailer to benefit from increased
footfall and shopper satisfaction without the risk of
sales cannibalisation. Its for this reason that we are
expecting more retailers competing in different sectors
- e.g. fashion and beauty - to join forces in the name of
providing superior customer service.

Even retailers that have long resisted are now recognising that click & collect is now a requirement, not
a differentiator. (Pictured: IKEAs first city store in Hamburg).

50%

of global shoppers are


influenced by a retailers
ability to offer convenient
collection points for
online purchases.
Source: Planet Retails Global Quarterly Shopper Tracker, Shopology:
Base size 22,500. Period covered February to April 2015.

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We also anticipate continued investment in alternative


third party pick-up locations. Westfields CollectPlus
lounge, Asdas collection pods (the UKs first 24/7
grocery click & collect point) and services such as
Doddle are all fantastic examples of how retailers should
be prioritising the customer experience. In the future,
we believe opportunities exist to get even closer to the
consumer with collection points being made available
on high streets, schools, leisure centres and other
community buildings.
That said, attempts to target on-the-go shoppers, and
commuters in particular, have thus far met with limited
success. There are enormous logistical and security
issues to overcome and, in some instances, we simply
dont believe that genuine demand for such services
exists. For example, Tesco and Sainsburys recently
discontinued a partnership with Transport for London
that allowed shoppers to collect grocery orders at the
end of their London Underground commute. In our view,
this was never going to succeed for two reasons (1)
Online grocery orders that are limited to what shoppers
can physically carry home defeats the purpose, and (2)
The prevalence of convenience stores would constrain
and negate demand for a click & collect service.

It may not work for grocery, which is inherently


more complex due to the perishable nature of the
category, but we see significant opportunities to target
commuters with a click & collect service for non-food
items. In the UK, retailers like John Lewis and Argos
have launched dedicated click & collect stores at rail
stations (St Pancras and Cannon Street, respectively).
Boots has offered the service in airport and rail station
stores for some time while Marks & Spencer has
just announced plans to roll out click & collect at its
franchised travel retail locations. Meanwhile, fulfilment
specialist Doddle is pioneering the click & commute
trend by building out an independent network of parcel
shops across UK rail stations.
In summary, we believe that click & collect has a very
healthy future instore. Retailers must remember that it is
no longer a differentiator; shopper expectations continue
to rise, putting even greater pressure on companies to
provide a best-in-class service. Retailers must follow their
own golden rule by putting the customer first. This may
mean collaborating with some unconventional partners
to improve speed and quality of service while providing
additional choice for customers.

Retail has changed and


shoppers are in the
driving seat like never
before. They want to
shop anytime, anywhere,
on any device
Tanya Lawler
Vice President, eBay

The next phase for click & collect will centre on collaboration. Asos shoppers can now collect online
orders at select Boots stores.

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Trend 10: From one-click to no-click

n todays age of instant gratification, consumers expect


to be able to shop anytime and anywhere. As such,
ensuring a frictionless path to purchase should be top-ofmind for retailers. The reality is, however, that too many
retailers are still plagued by abandoned shopping carts:
more than two-thirds of online shopping baskets are
abandoned prior to checkout.*
For those retailers who rely on high frequency/repeat
purchases there is an opportunity to overcome these
challenges while getting even closer to the shopper. And
what better way to do so than to embed your service
directly in the shoppers home?
Just as Amazon pioneered one-click buying, we believe
there is an opportunity for retailers to take this one step
further via at-home replenishment. This is all about
quickly restocking cupboards for those routine, largely
non-emotive purchases think toilet paper, nappies,
canned goods. The ability to add products to virtual
shopping lists by scanning products or, indeed, using
voice recognition, is still very much in the embryonic
stages. However, as an extension of the broader smart
homes trend, we believe this is a sizeable opportunity for
grocery retailers in particular.
Once again, we have to highlight Amazons trailblazing
efforts in this area. The retailers at-home replenishment
efforts include Dash - a handheld, Wi-Fi connected device
that allows shoppers to scan products and build virtual
shopping lists; Dash button plastic, branded buttons
that shoppers place around their kitchens for physical
one-click re-ordering; Flow an image recognition tool
designed to help shoppers replenish cupboards by simply
pointing their mobile phone at the desired item; Echo
a connected speaker that allows shoppers to build
shopping lists through voice recognition.
* Source baymard.com/lists/cart-abandonment-rate

Following on from Amazons efforts, so far this year weve


seen Carrefour Belgium launch its Connected Kitchen
initiative while Waitrose became the first UK grocer
to launch home scanning with Hiku - a device that is
marketed as the smartest fridge magnet ever and is also
being tested by Auchan in France.
But will the shoppers of the future willingly plaster their
kitchens and bathrooms with one-click ordering buttons
bearing brands logos? Unlikely, in our view. Amazon Dash
currently features 18 buttons available across a number
of product categories including laundry detergent,
toilet paper, nappies, wipes, juice etc. Now there may
be a convenience element, but given that each button
represents one individual SKU we cant see shoppers
using more than just a handful of buttons.
Also, as Amazon is presumably targeting busy families
with these buttons, we cant help but wonder how
tempting theyll be to press - particularly for inquisitive
young children. Only one item will be added regardless
of how many times the Dash button is pressed; yet that
raises another issue - what happens when you genuinely
want to order multiple items?
While we do not believe in the long-term success of
such physical ordering buttons, we are most certainly
predicting a race to own at-home replenishment - both
in the form of product scanning and voice recognition.
This is a fantastic way to lock in loyalty while adding value
to customers and, crucially, without price concerns
being central to the conversation.
The grocery shoppers of the future are, however, unlikely
to have more than one of these devices in their kitchen
so we expect to see competition heat up in this area. This
will present the greatest opportunity for those grocers
with a strong digital presence and the ability to pricematch competitors.

We are most predicting a race to own at-home replenishment. Pictured: Carrefours Connected Kitchen launched in Belgium this year. Carrefour Belgique

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The Future of Retail: 10 trends of tomorrow

netRetail's
a
l
P

Fut

s
d
n
e
r
T
e
r
u
1.

Fewer, but more impactful, stores

2.

Working together to stand apart

3.

Race for the most convenient store experience

4.

Personalisation to reach new heights

5.

The end of points-based loyalty cards

6.

Power of the peer

7.

Cracking the final mile

8.

Death of pure-play

9.

Click & collect

10. From one-click to no-click

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July 2015

21

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