2018 retail trends will focus more on customer experience, automation

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Major shakeups in the retail industry, bankruptcies and closings, and a surprising number of once-flourishing shopping malls turning into deserted wastelands dominated the news in 2017 – but it’s not all bad news for 2018. Retail experts are seeing exciting new trends, new store openings, and a heightened level of both customer experience and technological innovations coming in 2018. What will be the biggest factors shaking up the retail industry in 2018? Following are five of the most important predictions for retail in the coming year.

Slow and steady pace of retail automation

Consumer automation tools are making waves, with major grocery outlets rolling out pilots of new programs that dramatically change how consumers shop and pay for their purchases. Most recently, Kroger announced its “Scan, Bag, Go” app, a cashierless plan which allows shoppers to scan items as they are placed in the cart, either through a handheld scanner or through their smartphone. Shoppers then use the self-checkout kiosk, where the shopper simply scans their smartphone to receive the final total and make payment. A future version of the app may even allow shoppers to make payments directly through the app, bypassing the kiosk altogether, much like the Amazon Go experience which does not require checkout at all.

“You’re going to see more of it, but it will be in the pilot stage and in small scale,” says Michael Witty, Director, Retail/CPG Digital Practice at ISG. “As they are rolling it out, there are still a couple questions to be asked – how does it scale across the entire chain of stores, and how are they going to be able to maintain and program the devices?” Witty also notes that while there is a large group of consumers who are more accepting of this type of technology, “There is still a large group of folks, especially in grocery, who are fearful of technology.”

Striking a balance – automation, up to a point

Late last year, two former Googlers launched a startup called Bodega, with the idea of creating a completely automated and unmanned store to compete against small, neighborhood bodegas which are prevalent in larger cities. Consumers in target cities bristled against the idea almost immediately, giving us a glimpse into just how protective consumers are of the human touch that is still evident in those traditional corner stores.

The fact is, we love automation – but only up to an extent, and retailers will recognize that serving the customer requires a balance between technology and personalization. The mean spectre of a fully automated store, manned by robots, putting tens of thousands of grocery store workers out of their jobs is mostly myth. While the technology may be available to make it happen, retailers still must pay attention to what consumers expect. According to Witty, “When people go into a store, there is a level of expectation that there is going to be a personalized service, and there is going to be someone to talk to. The majority of purchases still happen through personal interaction in a store at one level or another.”

Retail openings and startups balance high-profile closings

Retail closings and bankruptcies made the headlines throughout 2017, creating an impression of desperation – but all is not as it seems, and the closings that made the news are only half of the story. 2018 will continue to see high-profile closings, bankruptcies and empty shopping malls, but we will also see a spate of new retail openings and launches to balance them out.

“The difference is that the retailers which are seeing success specialize in a certain demographic,” said Witty. “These are very much discount-oriented and off-sale oriented, like TJ Maxx and Marshalls, which are talking about lots of store openings; as well as dollar stores. These standalone discount stores are seeing a lot more store openings, whereas the ones that are closing are mall-based stores.

The big factor behind the closings is not that people are shopping less necessarily – it is that they are growing increasingly bored with cookie-cutter retailers which have little differentiation. “The feel is the same wherever you go,” said Witty. “If you go back and look at what happened twenty years ago, there was a huge buildup of retail, and lots of malls built in suburbia and lots of strip malls in rural areas. There was an oversaturation in the market given today’s demographics and where today’s spendable income is. There is two kind of pressures, overcapacity in cookie-cutter malls and less foot traffic, and closings of those stores which can’t differentiate themselves and provide a real experience or the customers – they are caught in the shutdowns.”

Big data delivers a better customer experience

The customer experience is more important than ever as retailers struggle to differentiate themselves in an increasingly challenging market. But how retailers implement that customer experience is shifting from a purely person-to-person approach, to something much more automated – but when done right, those automation tools supplement and enhance the human approach, delivering a vastly superior, and much more personal, customer experience.

An increasing reliance on things like analytics on the back end, and virtual reality on the customer-facing end has also been largely misunderstood, with resistance driven by a fear of technology. “Customer analytics is at the foundation of allowing a retailer to understand who their buyer is,” said Witty. “The amount of data that is out there, and the retailers’ ability to really use that data, is the key to creating the right kind of marketing, the right kind of appeal to customers. And they are getting much smarter at that.”

Blockchain makes retailers more efficient

It’s a technology that most consumers don’t understand, but they won’t have to. While most people associate blockchain with cryptocurrencies and Bitcoin, its greater potential is in back-end applications that improve retail operations. What consumers will see as a result, will be that the supply chain improvements delivered by blockchain-based applications will, according to Witty, “Make it a lot easier for documenting the chain of custody, so consumers will be able to verify how that product was harvested, how it was made, what it was made with, how it was transported. It is coming through for those who are green and eco-conscious. There is a large opportunity for retailers to promote that they are able to validate that they are socially conscious, that they can guarantee their products and how they are advertising it through a chain of custody. That’s a big opportunity for retailers beyond the classic financial application.”

Reports of the demise of retail have been greatly exaggerated – and 2018 will see the beginning of some of the greatest innovations, which will deliver a more personalized and customized customer experience. We will continue to see bankruptcies and closings, and yes, more shopping malls will close. But what that really indicates is that shopping patterns are shifting, younger shoppers are no longer interested in cookie-cutter stores, and that those retailers who recognize what the future holds will be the ones to flourish in the coming years.

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