Countdown to 2030: The retail moment of truth is now
Retailers are working hard to catch up with rapidly changing consumer expectations, and if they don’t find ways to balance margin while driving growth, the path to success in 2030 is increasingly unclear.
Although many industries are experiencing change, retail is experiencing perhaps the most rapid and radical changes of all. Consumer behavior and technology are creating an environment driven by online transactions and heightened expectations. Many of today’s retailers are still slow to adopt the necessary technology and capabilities to stay on the leading edge of the industry, or for some, even survive, which means retail as an industry is at a crossroads: By 2030, if retailers have not evolved by gaining immediate value while simultaneously transforming their businesses, they’ll be left behind by the competitors who more successfully adapt to the future.
We recently did a content series exploring what the world of supply chain business would be like in 2030. Because retailers are struggling to keep up with the pace of the world of e-commerce, understanding the trajectory of retail business leading up to 2030 is critical.
In the first blog in our Future of Retail 2030 series, we’ll provide an overview of what retailers need to understand and do to drive growth and protect margin in a world of omnichannel delivery.
Consumers’ desire for one-stop shopping
An eMarketer forecast estimated U.S. retail e-commerce sales reached more than $799 billion in 2020, which is a 33.6% increase over 2019. They then estimated in 2021, there would be a growth of 13.7% or almost $909 billion. Although the growth isn’t as dramatic as the year prior, there is still significant year-over-year growth.
This growth is impacted by consumers’ revelation that online shopping provides nearly unlimited product availability coupled with convenience, especially when considering the proliferation of one-stop shops like Amazon. With Amazon’s partnership with Whole Foods, they’re now a major competitor against grocers along with their traditional retail competitors.
Because larger national retailers like Wal-Mart are entering the full one-stop shop game with fresh grocery, apparel, electronics, and home and personal goods, consumers have more incentives to bypass smaller retailers in favor of convenience. According to Statista, Wal-mart is the second largest e-retailer in the United States, even though Amazon outpaced e-commerce net sales nearly three times.
Without considering e-commerce, smaller retailers aren’t delivering a robust, in-person one-stop experience like Target or Wal-mart. In fact, Wal-mart is the largest retailer in the US overall. For retailers that aren’t one-stop shops, or even considering a move to more convenient shopping experiences for consumers determined to streamline their shopping, the future of retail in 2030 may be bleak.
Greater focus on affordability
It shouldn’t come as a surprise after 2020’s devastatingly volatile economy, but consumers are watching personal finances more closely than in the past. According to the EY Future Consumer Index, affordability is a bigger consideration than in the recent past, and trends indicate this behavior is here to stay. The future of retail will require retailers to find more ways to reduce their pricing to sustain demand while maintaining margin.
With a heightened focus on affordability comes an increased openness to private-label products. Waning brand loyalty and, as evidenced in an article by Forbes, more interest in off-brand, private label items can create a tricky balancing act between supply and demand with more players to consider. As 2030 approaches, retailers need to prepare for affordability trumping all previous assumptions about brand loyalty.
Lastly, consumers are hesitating to make big-ticket purchases. Retailers selling large items like automobiles, appliances, and other electronics need to consider how to stay profitable while meeting a decreased demand without over-supplying.
Growing expectation for radical customization
If 2021 feels dominated by omnichannel connections and hyper-personalization, in 2030, these will be the status quo. Some of the most celebrated retailers already bridge the gap between online and in-store experiences.
For instance, Starbucks provides their customers with a well-rounded and deeply connected experience, as described by The Future of Customer Engagement and Experiences. The in-store experience is consistently quick and personalized. They encourage all customers to sign up for their digital rewards program via incentives, like free drinks. Additionally, their mobile app allows tracking of customers’ orders to customize recommendations and discounts. Providing quality experiences across physical and digital channels keeps Starbucks’ position as a market leader secure.
Other successful retailers are able to build a customer’s purchase or browsing history, provide relevant content like product suggestions or discounts, and stay connected to the consumer throughout their daily journeys. Leaders in the future of retail are already having frequent customer interactions on multiple channels.
Rather than waiting for consumers to set demand, retailers will need to create consumer demand. In 2030, retailers must have an integrated omnichannel shopping experience that allows them to plan their supply based on the demand they’re driving by personalizing offers, making product recommendations, and better directing customer interest. That’s how retailers will keep margins where they need them.
Retailers have been slow to adapt to a rapidly evolving environment. The industry is being transformed to fit the consumer rather than the consumer behaving in the ways the retailer demands. Stock, pricing, and availability no longer are things a customer needs to worry about: They simply find a retailer with what they need when they need it. If retailers don’t work to catch up in 2022, they face extinction as 2030 approaches.
In the upcoming blogs in our Future of Retail 2030 series, we’ll look more closely at each of the factors touched upon here. We’ll explain how technology can bridge the gaps between today’s standards and tomorrow’s expectations. Retailers can then prioritize resilience, adaptability, and agility to stay competitive while driving growth and protecting margin.