Key 2020 Trends for Retail

Written by

Sergio Caredda

Posted on

January 8, 2020

The Middle-Class is Disappearing

This probably more of a long-term trend, but it is starting to expose itself pretty hard and has the potential of changing the face of Retail across many industries. Apparel is particularly hit: a Deloitte research already found out that in 1987, the average consumer allocated 5.9% of their spending to apparel, but by 2017 that number had decreased to 3.1%.

A big culprit for this is the fact that the gap between the low-income majority of the population, and the really rich is widening across the globe. Luxury market segments are still growing faster than the average retail (even if there have been signs of slowdown especially due to the trade wars between China and the US). But if we cut that very upper part of the market, the rest of the retail is shrinking together with the Middle-Class that was its main customer.

This is a political issue much more than a business one for sure, but it is also true that to a certain extent many retailers have been contributing to this. We have already discussed Retail Wages and the fact that these have been lowering over time. With the additional effort put on controlling cost, automating and pursuing efficiency, many companies have contributed to cut on their own customer base. Luckily some baby steps are being put forward: the fact that large corporations are beginning to interrogate themselves on their purpose seems to be an important milestone. But nevertheless, retailers will be hit hard the moment that an economic or financial crisis will hit, especially in countries like the US where a lot of indicators (like the average private debt) are skyrocketing.

Retail is evolving

The concept of “pure” retail is coming to an end. With the entrance on the market of many digital natives, direct to consumer brands, we seemed to have achieved a cluster of different selling styles. But the recent focus on brick and mortar and other channels, even by some of the retail unicorns, shows that retail is becoming a true “melting pot” of channels. Those that spoke of a retail apocalypse simply had understood what the key trend is: the winners in this battle will be those that are going to be faster in demolishing internal silos, to deliver truly valuable experiences to their customers.

Inclusivity is everything

It’s time for brands to be authentic in messaging and in action. More and more, consumers are using their dollars (or pounds) to support brands that reflect their values, and many leading retailers are taking note. This is for sure about selling to women of different body shapes and sizes, marketing to LGBT+ consumers, creating beauty and haircare products for non-white customers. Although important, the trend is not limited to this though.

In a challenging environment, brands that compete for a share of the consumer’s wallet, need to understand that a lot will happen by establishing inclusive relationships. Sharing a Purpose is the first step, standing for something is important. The number of CEOs that have expressed strong opinions on environmental facts, for example, is growing in parallel with the consumer concerns over global warming. But also technological innovation is more and more becoming the subject of this approach. People want to reveal their personal data only to brands they trust, based on a relationship where each consumer feels part of something broader.

Successful retailers need to embrace these tenets in their storytelling; it’s not just about marketing, it’s about reflecting that storytelling across the business.

Decisions become (finally) Data-Driven

Data seems to be the major trend recognized by all major sources: analytics and data processing capabilities are being constantly improved, with the idea of driving Data-Driven decision making for most process steps in the Retail Value Chain. Microsofthas published a Playbook focused on this. It focuses on data being used to better understand shopper expectations, with personalization expected at every stage of the journey. In-store staff is still key and relevant, with confirmation that current customers still Want Knowledgeable Staff On-Hand For Service And Support. Which is why the empowerment of frontline employees are key.

Fig.1: Intelligent Retail Model. Source: Microsoft

This model looks at a true revision of traditional Retail, where Digital Transformationplays a key role: not just technology but culture change as well.

Recommerce Grows.

According to Susan Reda, editor of NRF’s STORES Magazine, resale — or re-commerce — businesses are going to be big in 2020. While many consumers initially resisted the idea of luxury resale clothes and accessories, companies like Rent the Runway helped change this mindset and pave the way for a new kind of retail business. Resale has grown 21 times faster than other apparel in 2019, and this trend seems to be consolidating with many traditional brands experimenting with rentals, refurbished goods or resales.

“We now have a consumer that isn’t about packing the closet full of stuff, but is trying to understand what is most meaningful to purchase, what is going to last a little bit longer, and how to sort of jettison what was already there,” Reda says. “We all have those things that we purchased and, too often, it’s hanging in there with a tag on it because you thought you were going to lose weight, or you thought it was going to look better, and it just didn’t work.”

The Store changes its purpose

Physical stores are changing their purpose, and this both for digital-native brands, as well as for more traditional retailers. This can be tracked on one side in the massive numbers of closures, especially by traditional multi-brand retailers. Just in the US, the figure is well above 9000 closures in 2019. In parallel, DTC brands are opening new stores in an effort to lower customer acquisition.

“Showrooming” is becoming, de facto, a new key trend, with the store that becomes smaller thanks to holistic omnichannel thinking. More services are provided in physical locations to cater for better Consumer Experience, and where possible retail space is now being used and optimized also for other activities (think delivery from stores). Traditional retailers are finding an unexpected advantage over the sake of Amazons, as Buy On-Line, Pick Up In-Store services has a lower last-mile cost, and can also have a more positive environmental impact.

Overinventory is there to stay

A big impact in 2020 Retail Trends, especially in Apparel, with the many bankruptcies that have happened over the last few years, the difficulties some brands have had and a way to slow evolution fo supply chains, the result is that many companies and brands have too much inventory. With more retailers planning closures as they review their footprint, the question related to secondary markets and distress is big: how will this influence the apparel industry?

The danger is clear, especially if joined to the possibility of a somewhat weaker economy in 2020, the risk is to bite in the revenues of otherwise healthy brands. Especially dangerous in a moment where, for the first time, also Outlets Centres have suffered a slowdown.

The Circular Economy Expands

We have already mentioned the development of resale or recommerce which is impacting especially apparel. But overall Retail is being impacted by a growing trend: Circular Economy. The lines between rental, resale and traditional retailers continue to blur, and many brands are experimenting.

This also links with Corporate and Social Responsibility, as many retail industries, especially apparel and fashion, have to fight on the big issue that is coming from waste.

People are the key drivers of value creation.

With so many talks in recent years focused on technology, a lot of the trends we have seen appeal more to the human side than just to the technology one. This is particularly relevant as understanding and managing Consumer Experience becomes more and more a value differentiator. But this is also reflected in how Employees are treated and supported in their interaction with the customer. This aspect, which implies a re-humanisation of many functions in companies starting from HR, will impact a lot the entire retail chain.

A successful and lasting relationship with the customer comes through a person to person interaction. This is the truth. That’s why so many digital native retailers are opening stores. Giving a more meaningful sense of working in retail is also needed. But also a revision of what it means doing retail.

The first step is to get back to the basics of delivering on the customer’s wants and needs, building trust, and demonstrating that our appreciation of the individual shopper goes beyond the sum and substance of her transactions.
Richard Shapiro, 2020 Retail Trends

Some retailers have for this reason started to work on upskilling their workers, as the real driver of the personal relationship is developing a connoisseur service. With a key advantage especially for the people less prone to self-serve.

Conclusion: 2020 Retail Trends

This was the list of the key 2020 Retail Trends coming from my browsing of the internet. There’s probably more sitting around, and many will probably take more time to develop than just the year 2020. For sure, there’s a lot more to be taken into consideration, from the overall geopolitical situation to the financial and economic stability.

All these trends don’t simply affect businesses in their traditional way of working but are all going to deepen the necessity for transformation efforts by all companies.

And you? Are you ready for what’s coming?

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