Retail is a notoriously unpredictable industry—even the greatest advancements in technology and social trends are no match for fickle consumer behavior. That doesn’t mean retailers should avoid looking ahead and creating plans for moving forward. Katalyst spoke with experts to get their insights on what might be in store for retailers in 2020—whether that store is physical or digital.
Meet Your New Employee: AI
When Jeopardy! legends Ken Jennings and Brad Rutter competed against IBM’s Watson computer in 2011; they lost decisively. For Jennings’s final wager, he followed up his correct response with a bold message of concession: “I for one welcome our new computer overlords.” (Jennings got the last laugh when he triumphed in this year’s Greatest of All Time tournament.)
Trivia is not the only area where AI is outpacing humans. “To put it bluntly, the machines are taking over,” says a representative for German software company aifora. “AI applications can more accurately and more efficiently forecast consumer demand than any human can.”
That explains a 270% increase in companies utilizing AI technology between 2015 and 2019. Retailers are turning to AI to predict trends, manage inventory, provide customer service, and improve supply chain functionality. A recent study estimates that the market for AI in retail will reach over $23 billion by 2026, a tenfold increase over 2018 figures.
As always, the human component is still essential. “No matter what you are selling, we are all in the relationship business,” says Paige Arnof-Fenn, founder and CEO of global marketing and branding firm Mavens & Moguls. “People ultimately buy [from] brands they know, like, and trust. Machine learning, AI, and robots may be more efficient, but they can never replace human connection and relationships.”
Create an Experience
There are no signs that e-commerce growth is slowing down, but traditional brick and mortar retailers are still a major player—especially if they’re open to becoming less conventional.
“Retailers have realized that the store is their greatest asset and, as a result, has started to rethink what a shopping experience might look like in the future,” says Carlos Castelán, Managing Director of retail consulting firm The Navio Group. This has led to the rise of experiential retail, where companies promote their physical locations as a destination, rather than merely an inventory source. Take the new American Dream Mall in East Rutherford, NJ, which prioritizes entertainment over retail, offering roller coasters, ice skating, and even indoor skiing.
“By refreshing stores and viewing shopping through the lens of retail and services or entertainment, companies can unlock new possibilities to deepen their relationships with customers,” says Castelán.
Go Public with Private Label
Private label products—items manufactured exclusively for one brand or chain—are nothing new. But retailers in all industries and levels of luxury are increasingly turning to them to build loyalty and boost profits.
“Private label has become a way for successful retailers to offer unique products that cannot be found elsewhere and stand out,” says Castelán. Private label items range from comparable “store brand” versions that cost consumers less—but earn stores more—to unique apparel options. Customers still demand high quality from private label goods.
“For retailers to be successful in pursuing this strategy, the product quality for the category must be on par or superior to what’s on the shelf versus just a way to increase company margins,” says Castelán.
Good Influencers
Modern consumers have made it clear: they don’t want advertisements to sell to them, but to serve them. With ad-blocking software and DVRs, it’s easier than ever for people to ignore advertising. Because of this, retailers are now eschewing traditional commercials and focusing on less intrusive, more content-driven strategies. One method that has gained traction in recent years is enlisting social media influencers to promote products to their followers.
“Recommendations from friends and trusted influencers carry more weight today than paid ads and generic content,” says Arnof-Fenn. There are several factors to consider in selecting appropriate influencers, such as their reputation, follower demographics, and whether they can convincingly connect with the brand. “Authenticity is by far the top trait for an influencer’s success,” she says. “Brands [should] match campaign posts with the influencer’s usual look and feel. It should not feel like a paid opportunity, slapping on the #ad to a post. You want to give them the freedom to create their own content, but ensure it’s still getting the message across.”
Katalyst Can Help
While the actual retail trends for 2020 remain to be seen, one thing is sure; there’s no reason for your organization to navigate this year’s journey alone. Contact our experts to learn about software solutions and approaches that will guide you to success.
