12 Retail Trends and Predictions for 2015
Overview
In 2014, we saw more merchants venture into omnichannel retailing and try in-store marketing solutions such as beacons to enrich the shopping experience. Next year, we anticipate stores to double down on these strategies and continue to find ways to bridge the gap between offline and digital channels.
In addition, we expect platforms such as social media and mobile to play bigger roles in people's shopping experiences.
Many retailers leveraged social to engage users and influence their merchandising decisions this year, but in 2015, we’re anticipating companies to go beyond that and use social not just to showcase products, but to actually sell them.
The same goes for mobile. Companies won’t just use the small screen to “get in front” of customers (i.e. through geo-fencing and mobile-enabled sites). In 2015, retailers will step up their efforts by incorporating mobile into other parts of the customer journey, including order fulfillment, payments, and loyalty.
We discuss these trends—among many others—in more detail below. Read through the following predictions and see how you can use them to make decisions in 2015, stay ahead of your competitors, and provide a better shopping experience for your customers.
1.Boomers and millennials
will continue to heavily influence retail.
Retail in 2015 will continue to be driven by the needs and preferences of two prominent generations: baby boomers and millennials.
Most boomers will be in their 60s and 70s next year, and retailers that cater to these consumers would need to adjust to make shopping easier for them. As consulting firm PwC noted, “the Baby Boomer generation will age with increased financial resources and with a greater emphasis on youth and vitality than previous generations. As a result, they not only will tax manufacturers to adapt products to their specific post-retirement needs, but also will require retailers to respond to their evolving needs as they approach the age of 70 in 2015.”
Retail expert Georganne Bender pointed out in VOAnews.com that this can already be seen at some drugstore chains. “They’re re-setting their counters, not putting things too high or too low, [and] they’re putting carpeting in the store,” she told the publication.
On the flip side, Gen Y—a young but equally large—market segment will also be a major influence in retail. Merchants who want to reach millennials will need to invest in mobile, as they are the largest group of smartphone owners (and adoption is still growing).
Speed is also an essential factor when it comes to reaching the Gen Y market. As a generation that grew up in an age where almost anything is just a click away, millennials have a tendency to be impatient. Retailers who want to engage them must invest in more robust order fulfillment systems and fast (but excellent) customer service.
BARBARA THAU BUSINESS REPORTER, FORBES
"By the next decade, the Millennial generation, roughly ages 18 to 34, is expected to displace the baby boomers as the nation’s biggest consumer buying group, generating a projected $1.4 trillion in spending by 2020, according to Accenture research.
They’ve been dubbed everything from Generation Y and the echo boomers to the Recession Generation, as many of them came of age during the biggest economic downturn since the Great Depression.
They have been stereotyped as digital addicts tethered to their social networks, laptops, tablets and smart phones, who prefer shopping online to old fashioned brick-and-mortar stores.
But a survey of 100 Millennials by Advertising Age taken on the streets of New York City, albeit not representative of the group nationwide, revealed some lifestyle and shopping habits that belie the clichés.
Retailers and brand marketers would be wise to take note, as the preferences of this buying group will dominate purchasing decisions for decades to come."
2. Social networks will serve as shopping platforms.
Over the last several years, brands have used social media to market their products, talk to customers, and even make merchandising decisions; but in the coming months, we anticipate merchants to add “selling” to the list of things they can do on social sites.
The recent launches of shopping functionalities in the social realm (i.e. Facebook’s andTwitter’s “buy” buttons and Curalate’s Like2Buy platform for Instagram) tell us that social is going to get a whole lot more shoppable in 2015.
Retailers that have already started participating in the trend include Nordstrom and Target, which are using the Like2Buy platform on Instagram, and Home Depot, (RED), and Burberry, which are testing Twitter’s buy button.
In the screenshots below, you can see how Nordstrom is leveraging Instagram and Like2Buy to sell its products.
A customer who’d like to purchase an item she sees on the retailer’s feed can tap on the Like2Buy link found on Nordstrom’s Instagram profile. Clicking the link will take her to the retailer’s Like2Buy site, which looks similar to its Instagram page. When the shopper taps on an image, she’ll be taken directly to its product page, where she can find more details and proceed to checkout.
If social shopping takes off—and there’s a good chance that it will—users will be able to enjoy a more seamless shopping experience. The clunky transition from one channel to the next (i.e. social to ecommerce) will be eliminated and purchases will be completed much faster.
3. Brands will double down
on Corporate Social Responsibility.
Consumers these days are more drawn to retailers that invest in Corporate Social Responsibility (CSR). A survey by Cone Communications and Echo Researchuncovered that 87 percent of global consumers factor in CSR into their purchase decisions.
In 2015, we expect more merchants to launch ethical and good deed initiatives.
Examples of retailers pulling off CSR quite well include ModCloth, which recently signed an anti-Photoshop pledge, and Warby Parker, which implements a “Give a Pair” initiative to make eye care more accessible to the less-fortunate.
How does CSR improve the shopping experience? Simple. It makes customers feel good knowing that they’re contributing to a worthwhile cause. As Adrianne Weissman, owner of apparel store Evelyn & Arthur told us, “shoppers want to know the money they are spending is not going into one person’s pocket, but is truly making a difference in the community they live in.”
4. Loyalty-wise, the points-for-purchases model will no longer be effective.
Enriching and personalizing the shopping journey will no longer be limited to tailored product recommendations and offers. Forward-thinking retailers will find additional ways to make each customer’s experience unique and memorable. We predict that one of the areas that they’ll focus on is customer loyalty.
When it comes to reward programs, the “points-for-purchases” model just isn’t cutting it anymore. As we mentioned in a previous post, “The practice has become so commonplace that the allure of earning points doesn’t excite consumers the way it used to.”
That’s why in 2015, retailers would have to deliver more imaginative efforts to reward and incentivize shoppers. In addition to giving away generic points, the loyalty programs of the future will reward shoppers for their actions and engagement, rather than just purchases.
Walgreens, for example, now lets its members earn points whenever they engage in healthy activities like walking, weight tracking, and more.
Customized perks will also be a big part of loyalty program success in the coming year. Research cited by eMarketer revealed that “consumers have begun to expect more personalized offers and services—not just blanket discounts—in return for their participation” in rewards programs. Moreover, according to the study, consumers cited relevant discounts and personalized offers as the top benefits of such programs.
5. Retailers will adopt and experiment with technology.
Merchants will adopt and/or experiment with tech innovations and figure out how they can use them to improve the shopping experience. We’ll likely see more of the following in the coming year:
POS TECHNOLOGY
Initiatives to make the cash register extinct will continue to go strong in 2015. Cloud-based point-of-sale systems have proven that they can outperform old-fashioned registers in all aspects (performance, functionality, looks) and an increasing number of retailers will recognize this and make the switch.
Will you be one of the savvy merchants upgrading to a cloud-based POS system next year?Try Vend for free and see how it can help you transform your business in 2015.
BEACONS
Beacons will make their way into even more stores in the coming year. The technology, which provides in-store analytics and marketing solutions for brick-and-mortar retailers, has already generated results for several merchants, which is why we’re confident that beacon adoption will continue to grow in 2015.
WEARABLES
Research by Acquity Group has shown that about seven percent of consumers currently own wearable gadgets such as smart watches, glasses, and fitness monitors. However, this figure is expected to double in 2015. This will likely prod companies to experiment with how they can use wearable technology to market or serve customers.
According to Retail TouchPoints, Barneys New York is “is venturing into the wearable tech world through a collaboration with Opening Ceremony, the Council of Fashion Designers of America and Intel.” Meanwhile, Kenneth Cole reportedly unveiled a Google Glass app in 2014 to market its new cologne.
We probably won’t see every consumer wearing a smart device by next year (not yet, anyway), but this won’t stop forward-thinking retailers from experimenting with the technology.
AUGMENTED REALITY
We’ve already seen plenty of AR-centric efforts in retail. From virtual fitting rooms to interactive window displays, merchants are continuously finding ways to use augmented reality to draw attention and improve experiences. Walgreens, for instance, is testing Google’s Project Tango 3D to create AR-enabled mobile maps and navigation for its customers.
Expect such experiments to continue in 2015.
3D PRINTING
We also anticipate 3D printing to slowly make its way into the retail world. Some merchants, including online jewelry store Brilliance.com, have already found a use for the technology. Brilliance is using 3D mock-ups to help customers try on different rings so they can determine the right size, shape, carat, and diamond arrangement for their hands.
6. Data will be more accessible and powerful
Next year, we expect the number of SMBs using big data and analytics to grow. Retailers will realize that they need to rely on data in order to get to know their customers and provide customized shopping experiences.
Fortunately, there are plenty of solutions that make data analytics accessible and affordable for small and medium retailers.
Swarm for instance, gives brick-and-mortar stores the ability to analyze foot traffic so they can make better decisions and tailor customer interactions. There’s also Collect, which gives merchants insights into the spending habits of their top customers, allowing them to send personalized rewards and offers.
Vendors will continue to develop and refine their solutions so they can provide the most accurate and insightful data in the fastest and most convenient ways possible.
DAN BERTHIAUME SENIOR EDITOR, CHAIN STORE AGE
"The biggest upcoming trend for Big Data is that the major Big Data analytics vendors are offering or soon will offer analysis of granular segments of Big Data in near or actual real time. Retailers can make their own decisions on which vendor to use, but there are a few key capabilities they should take advantage of in 2015.
One is that Big Data can reveal precisely when specific customer groups are most likely to shop and exactly what they are looking for in terms of product, service, price, etc. Retailers can thus make highly targeted adjustments to staffing, product placement, marketing displays and even prices throughout the day.
In addition, granular analysis of individual SKU performance metrics can allow retailers to adjust merchandise assortments and promotions on the fly, improving inventory throughput while avoiding the need for costly end-of-season markdowns.
Most excitingly, granular, real-time Big Data analysis can take retailers closer to providing true “one-to-one” personalization, where the customer has a completely tailored experience that seamlessly travels with them across all touch points, in real time. No retailer has fully achieved this personalization goal to date, and it will likely be some time before any retailer does, but drilling deep into Big Data in a timely fashion is an encouraging step forward.
7. Companies will find better ways to manage risk and protect customers.
The past couple of years have brought us far too many horror stories of data breaches in retail.
As Chain Store Age cites, “The 2014 Identity Fraud Study reported an increase of more than 500,000 fraud victims to 13.1 million people in 2013, the second highest number since the study began.” Moreover, it’s been found that the average cost of a breach per organization in 2014 is $3.5 million—an increase of 15 percent from the year before.
But it’s not just about the numbers. In this day and age, consumers aren’t just looking for unique and convenient shopping experiences—they also want their purchasing journeys to be safe and secure.
That’s why in 2015, we anticipate risk mitigation and data security to be among retailers’ top priorities.
There are a number of ways retailers can better manage risk in the coming year. One is to instill awareness and training across the entire organization to ensure that everyone knows the importance of risk mitigation. Retailers can also be more selective of their vendors that handle their data and processes.
We also expect merchants and solutions providers to come up with better ways to protect customer data.
Retailers and financial institutions in Australia, for example, have recently made the PIN as the primary form of card payment authorization because it has proven to be more secure than signatures. PINs keep customers safe from fraud in the event that they lose their cards. Unlike signatures, which can be forged, PIN codes cannot be easily cracked.
Another interesting security initiative can be seen in Apple Pay, which assigns a unique Device Account Number to each phone. The Device Account Number, along with a transaction-specific security code is used to process each purchase, so credit or debit card numbers are never transmitted with the payment, nor are they shared with merchants.
Expect to see more of these initiatives in the coming year.
JOE SKORUPA EDITOR IN CHIEF AND RETAIL TECHNOLOGY BLOGGER, RIS NEWS
"Two huge trends that will be hot in 2015 are security, due to the many data breaches that have reached epic proportions, and payment solutions, notably the EMV mandate that goes into effect on October 15. Retailers will be devoting many dollars and resources to these major retail trends.
However, it is important to realize that the bulk of spending and IT project work will continue to focus on omnichannel transformation, which is largely synonymous with systems integration and seamless customer experiences.
The three big steps that retailers will be working on, either in sequence or in parallel, are: 1. Integration or de-channeling of core retail IT systems; 2. Corporate realignment with omnichannel goals that deliver a seamless experience to the shopper; and 3. Personalization across channels, which is actually omnichannel retailing in action and execution.
The opportunity cost of not being omnichannel today, according to recent research in the RIS/EKN Customer Engagement Tech Trends Study, is 10% in lost revenue. For a multi-million dollar retailer this is hundreds of thousands of dollars. For a billion dollar retailer it is $100 million. For every retailer it is a lot of money, and for this reason omnichannel tech projects will be a top priority in 2015."
8. More retailers will take control of their value chain and improve order fulfillment.
In their book, The New Rules of Retail, Robin Lewis and Michael Dart brought up an excellent point about modern retail success. According to them, if retailers truly want to provide compelling shopper experiences, they would have to take more control of how their products are manufactured, marketed, and distributed.
As the authors put it, the most successful retailers will be the ones that have “complete control of their value chain, from creation all the way to consumption.”
Notable retailers that have proven this strategy include Apple, Ralph Lauren, and Trade Joe’s. Despite having higher prices, these retailers managed to achieve customer loyalty and profitability thanks to their efforts to have complete value chain control—a strategy that results in excellent products and customer experiences.
Retailers will realize this in 2015, which is why we’ll likely see an increase in value chain initiatives, single product retail, and private label merchandise.
Additionally, more retailers will get creative with how they fulfill orders and distribute products. Speed and convenience will become more important than ever, so merchants will come up with better and faster ways to get products into the hands of their customers.
This will pave the way for more robust order fulfillment practices (such as same-day delivery and click-and-collect), on-the-go retail (including pop-ups and food trucks), self-service centers (such as Amazon Lockers), and other non-traditional strategies.
9. More ecommerce sites will set up shop offline.
In 2014, we saw a number of ecommerce-first businesses expand into the offline realm. Former online pure-play Birchbox, for example, opened its first physical shop in Soho last July, while companies like Bonobos and Warby Parker doubled down on brick-and-mortar by opening even more physical stores in 2014.
We anticipate this trend to continue in 2015. Why? For one thing, the majority of overall retail sales are still taking place offline, and ecommerce sites have realized that they need to set up physical shops if they want to gain significant market share. Additionally, the need to provide seamless online to in-store experiences continues to grow, and successfully pulling this off requires both a digital and physical presence.
Ecommerce sites setting up shop offline is, on one hand, good news for the brick-and-mortar realm because it validates the need for physical retail. However, this also means that Main Street is going to get a whole lot more competitive, and traditional brick-and-mortar retailers must step up their game in order to win.
To do this, we predict that merchants will further enrich the in-store experience by offering services on top of “stuff.” Take for example, Birchbox’s Soho location. In addition to playing video tutorials to keep shoppers informed and inspired, the retailer also offers hair, makeup and nail services in its store.
Similarly, Urban Outfitters recently opened a New York branch that has an on-site salon and coffee shop, in a move to turn the location into a destination, rather than just a store.
10. Retailers that localize their product mix and store formats will win.
Localization will be more important than ever. Merchants that customize their stores and merchandise according the needs of their local communities will find great success in 2015.
Take for instance, O’Reilly Auto Parts, a retailer that tailors its merchandise mix from store to store. As Retail Info Systems News reported, “Each O’Reilly store is also a local store, carrying the tools, equipment and accessories that match the specific auto aftermarket needs of the store’s customer base as well as the vehicles they own.”
It’s important to note however, that neighborhood-specific merchandise is only one part of a good local strategy. In addition to inventory, retailers will also need to tailor each of their store formats based on their respective communities and locations.
Consider what retailers such as Starbucks, Target, and Chipotle are doing. In order to tap into dense, urban markets, these chains have started to deviate from their usual store formats to establish smaller, “express” stores in specific locations.
Target opened its first express branch in Minnesota this year, while Starbucks and Chipotle both announced plans to build smaller format stores.
We predict more stores will follow suit and tailor experiences, merchandise, and even store formats to the neighborhoods they belong to. The ones that do (or that continue to do so) will win big in 2015.
11. Mobile will continue to grow in all directions.
Mobile will show no signs of slowing down next year and we anticipate smartphones and tablets to play bigger roles in the shopping journey. Expect to see more of the following:
LOYALTY APPS
Next year, more retailers will introduce mobile loyalty programs. Shoppers will no longer have to clutter up their wallets with physical cards. Instead, they can track and redeem their rewards using their smartphones through apps such as Collect.
MOBILE SERVICES
Convenient services such as mobile ordering will be more prevalent. Larger merchants, including BJ’s Restaurant and Chipotle are already implementing this, but thanks to solutions like Mobi2Go, SMBs can also get in on the mobile fun.
Bird On a Wire, an Auckland-based free-range rotisserie chicken joint, for instance, uses the solution to offer online and mobile ordering, and it’s worked out quite well for them. Owner Ben Grant told the Mobi2Go team that the service streamlined his business. “Mobi2Go mitigates big lines in the shop, integrates directly with our POS system Vend, and is an additional revenue stream for us. It works really well,” he shared.
MOBILE PAYMENT SOLUTIONS
The number of consumers adopting mobile wallets will increase in 2015, thanks to solutions offered by Google, Softcard, Apple, and most recently, CurrentC. Expect less card-swiping or cash-handling and more phone-scanning next year.
Merchants who want to keep up with mobile payments but are confused as to which method to adopt can look into Poynt, a smart terminal that supports multiple payment technologies including NFC, Bluetooth, QR codes, EMV, and magnetic stripe cards. So whether a customer wants to pay using Apple Pay, Google Wallet, the CurrentC app, or beacon technology, the retailer will have no problems ringing them up.
12. Stores with omnichannel strategies will continue to thrive.
As expected, retailers embracing multiple channels to serve customers will be some of the most successful ones in 2015.
Omnichannel retailing has begun to pay off for a lot of companies. Consider Macy’s, which just started marketing its mobile and online-to-offline services more aggressively after the success of its initial omnichannel tests.
According to MediaPost, the retailer has found that click-and-collect not only serves as a convenient option for customers, but it also increases spending. Macy’s told the publication: We love this kind of sale, because [the customer has] already made her decision, she knows where to go in the store, and when she gets there, she almost always buys something else — spending about 125% of her intended order.
In addition to click-and-collect, Macy’s will continue to invest in omnichannel through more robust order fulfillment strategies (all Macy’s locations can now ship directly to someone’s home) and better mobile experiences (customers can now manage their points and offers via mobile.)
MIYA KNIGHTS SENIOR RESEARCH ANALYST, INTERNATIONAL DATA CORPORATION (IDC)
"Consumers don’t distinguish between channels. They are channel blind, therefore they expect the same service, products, offers, and pricing online as they do in-store and on mobile. This is why merchants need to make sure that their retail propositions are consistent across all channels.
Retailers will continue to build omnichannel presences to meet this customer demand. But I say that with a caveat: they are also going to continue to struggle with the integration of their IT systems. There are still going to be challenges around integrating assets, processes, supply chain merchandising, and other areas.
In terms of back-end processes, retailers should be looking at the end-to-end process of sourcing and buying product, and getting it to customers in the most cost-efficient way, all while figuring out a way to make this all work in an omnichannel setting.
As far as the customer-facing side of retail business is concerned, we’re going to see the continued influence of digital on the consumer experience. We are predicting the continued growth of e-commerce and mobile commerce particularly in relation to store sales, so retailers are really going to have to optimize these areas (if they’re not already doing so), and further integrate any digital touch points that might be used in-store."
Bottom Line: It’s all about the customer experience.
This post contains some pretty bold and diverse predictions, but if we really think about it, every single one of them boils down to one thing: improving the customer experience.
Keep this in mind whenever you’re pondering which direction to take your business. Always ask yourself if your efforts are truly making shopping faster, safer, and more enjoyable for your customers. Stick with that strategy, and you’ll be just fine in the future.
And if you’re looking for insights about these trends, be sure to check out our in-depth article on the Vend Retail Blog and LinkedIn.
