Half year update to our retail predictions for 2019

At the start of the year, we made some predictions about challenges and trends that the retail sector could expect to see in 2019. As the first six months of the year come to a close, we reflect on our forecasts and look at the latest market trends.

Environmental impact of products

We predicted a shift in attitude towards social consciousness through 2019 as consumers become increasingly concerned with the long-term environmental impact of their purchases. Fast-fashion and its environmental impact cannot be cured overnight, but there have been some bold moves in the supermarket space since Iceland’s mic drop moment (their banned Christmas ad) at the end of 2018. For example, in June Waitrose launched a packaging free trial store in Oxford where customers filled their own containers with products ranging from lentils to beer. The added bonus? These products work out at around 15 per cent cheaper than their packaged equivalents. Likewise, other supermarkets have made their own promises, Morrisons have a “buy bagless” scheme for fruit and vegetables and Iceland (leading the way again) plan to eliminate plastic in all their own brand packaging by 2023. The downside? – plastic helps to preserve fresh produce giving it a longer shelf life and reducing waste. Therefore, the key to success will be striking the balance between reducing the use of plastic without causing a surge in food waste.

Wearables and fitness trackers – what next?

We predicted that virtual workouts would increase in popularity as the technology behind them gets better. We’ve seen this ring true with the rise of Peloton, Fight Camp and Mirror – moreover, consumers are opting to work out from the comfort of their own home. These brands don’t provide your typical workout videos – users have access to statistics and engage with instructors and other participants in real-time providing the experience of a class without leaving home. They aren’t cheap either… for Peloton the basic package comes in at £1,990, and Fight Camp home gym kit at $1,095 – and that’s before paying the monthly subscription. As consumers lives become more transient with the rise of working from home and other flexible arrangements, the at-home workout market is becoming an increasingly relevant area with consumers willing to pay a premium for it. 

2019 will see AI fraudsters become a reality

Fraudsters use of AI and bots continues to be a key concern for retailers – especially in striking the balance between a secure payment process, and a friction-free experience for consumers. Retailers already use AI to their advantage to detect and identify fraud. For example, Ocado introduced an AI fraud detection system that uses past purchase data to predict and recognise fraud incidents, which they claim has increased fraud detection rates by a factor of 15 since its implementation. The algorithm makes a prediction which allows fraud agents to decide whether a transaction is genuine – it’s the perfect balance of humans and machines working side by side. 

Shops won’t look the same ever again

Consumers continue to look for a full “experience” from their retail offerings, and as a result we’re seeing an increase in mixed-use neighbourhoods under development. For example, the redevelopment of London’s Olympia has been given the green light and the plans include a theatre, two hotels and a variety of leisure and retail offerings. All in addition to its traditional draw as an exhibition centre, with the intention of creating a vibrant cultural hub that will draw people in. The intention is to create a multi-purpose destination for consumers - a place that people want to spend time - which attracts people to the city centre and will in turn provide a much-needed boost for the high street. This has been replicated across the country in Manchester (Circle Square) and Leeds (Wellington Place) to name just a few.

Consumers will no longer pay for delivery and returns

Free delivery and free returns are now a necessity to retaining a brand’s online customer base. RSM’s Consumer Markets Survey found that 90 per cent of online shoppers want free delivery and returns, and 50 per cent consider this to be essential. Forbes have gone so far as to refer to companies with high handling costs and high return rates as ticking time bombs.

Retailers need to reconsider the traditional delivery and returns processes. The “want it now” culture means next day delivery is the norm. Delivery methods are changing too – the frequency of deliveries means it’s no longer practical to wait at home for a delivery. Solutions such as lockers work as a win-win alternative for consumers and retailers alike. There are also solutions such as Net-a-Porter’s VIP try before you buy service (where the delivery team wait for you to try on the clothes) which looks set to increase in popularity.

Premium or discounting

In today’s Instagram culture, consumers are willing to spend more of their hard-earned money on experience items such as hobbies or gym memberships – which is where the premium virtual workouts mentioned above may win out.

As the high street continues to struggle, popular discount stores such as Lidl and Aldi are moving in. Rather than sticking to their traditional suburban locations, they’re moving into the higher density population areas – for example, Lidl have announced their first central London store.

The suffering experienced by legacy mid-range players such as Arcadia who are now paying the price for prime locations with declining footfall. Brands must focus on staying relevant to their target market by concentrating on their core product and associated technology, or face being left behind.

Find out more about how your business may be affected by future changes in the retail sector by contacting Andrew Westbrook.