The retail landscape is becoming increasingly complex as a strong US economy boosts consumer spending. However, as technology evolves, the ways customers purchase from and interact with retailers continue to change.
Although online and digital purchases are the new normal for shoppers, physical brick and mortar stores still play an important role, working in tandem with digital platforms to influence purchasing choices.
Below, we outline important trends and insight retailers should consider when determining strategies.
The Offline Revolution
While the digital revolution transformed how people shop, 90% of retail dollars are still spent in store, according to Business Insider. Brick and mortar stores aren’t necessarily disappearing. Instead, they’re experiencing a cultural shift and serving as an offline component of shopping processes.
Consumers may research products online, but often wait to make the purchase in store. This is especially true for companies like Apple that rarely discount online. Consumers still like to have physical contact with goods they purchase and value human contact during the process.
To engage shoppers, brands should have a strong identity to which their customers can connect. In our Instagram and social media-driven world, it’s also important to provide an exciting in-store experience that will educate as well as delight and surprise customers.
In addition, unique products not easily found with other retailers can help drive customers to physical stores.
Consumers seek, desire, and expect personalization. Promotions and ads must be tailored to the individual so they can see themselves within a company’s brand.
Data science drives personalization and helps businesses collect crucial customer information such as geography, household composition, and previous purchases that can be used for one-on-one interactions and promotions.
Companies need to determine the strongest methods to access this information, whether it’s through loyalty programs, obtaining information at the point of sale, post-sale surveys, or other tactics.
Many retailers are using this data to interact with customers and anticipate what customers will want to purchase next.
The Connected Associate
Technology can help evolve sales associates into more than just cashiers. Using tablets and other devices, associates can act as personal advisors who provide important person-to-person contact.
For example, when engaging a customer with a device, the associate can enter their information and access that customer’s past purchases and other data.
This can also allow for a more seamless shopping experience. Associates can immediately suggest complementary items based on the customer’s purchase. If a customer can’t find an item, the associate can search inventory to see if it’s available at the store or another location. Technology allows the associate to check inventory while staying with the customer, rather than disappearing to check stock. The associate can also check a customer out with their device rather than sending them to a separate checkout area or ship out-of-stock items to a customer’s home.
Emerging and valuable demographics should be a focus for retailers.
Up to 80% of all purchases are made by women, according to Forbes. Price is the top factor that influences their purchase decisions, and 89% of women will wait for an item to go on sale before making a purchase. Effective loyalty programs can help put the right sales items in front of select customers.
According to Traxia, women view shopping as an event. They want to know the benefits of a product and respond well when they feel a product can improve something. They also believe asking for help while shopping is efficient.
The global LGBTQ community has incredible buying power. According to Medium, if the population were based in one country, they would have a gross domestic product (GDP) of $4.9 trillion—rivaling the world’s highest five GDPs.
LGBTQ shoppers place high importance on inclusion, diversity, and brand authenticity. It’s important LGBTQ-inclusive advertising and connection efforts be seen and made year-round—not just during Pride season.
Companies dedicated to nonbinary customers have also become more prominent. Nonbinary customers don’t identify as male or female and are interested in gender-neutral products or styles that aren’t categorized or defined by gender.
Phluid Project, a gender agnostic retailer, collaborated with companies such as Levi’s and Fila in 2019 to create exclusive products lines.
Millennials have a combined spending power of $600 billion, according to Chief Marketer. Millennials are projected to number 73 million in 2019, overtaking baby boomers as the largest living adult generation, according to Pew Research Group.
Millennials place high value on convenience and are typically willing to grant access to personal information to guarantee an easy transaction. They generally prefer electronic payment methods over cash transactions. While the segment doesn’t like credit card debt in general, millennials are open to alternative payment processes such as installment planning for which you receive the item immediately but pay in installments.
Cybersecurity is important for any company, but significantly more so in the retail industry where companies have access to customers’ personal data, such as credit card and Social Security numbers. The after effects of a data breach can be just as costly as the loss of the information itself. Depending on the scale, a company’s reputation could be significantly damaged, driving down profit, jeopardizing customer relationships, and leading to potential future loss of business.
While companies should have systems in place to prevent data breaches, it’s equally important to have plans ready to react quickly in the event of a breach.
Incident response-team members should have clearly defined roles and be able to adequately address incidents as they arise. In addition, a business continuity and disaster recovery plan should be prepared to help restore normal activity in a timely manner.
Plan reviews and tests should be conducted at least annually. These plans should be implemented companywide and include input and communication from legal, marketing, and IT departments.
To benefit from continuing advancements, retailers should consider how they’re using technology or start using the following to stay competitive in the marketplace:
- Artificial Intelligence (AI). Collecting customer data through AI allows retailers to predict future purchases and can help pricing be fluid based on specific periods when products may be in greater demand.
- Robots. Robots are often used for tasks with repetitive processes or manual labor, freeing up human labor to work on tasks that benefit from human intelligence and interaction.
- Drones. Drones offer huge possibilities, especially for deliveries, however it may be some time before drones can reach their full business potential due to regulatory issues.
- Autonomous vehicles (AVs). AVs could revolution and make delivery processes more efficient, accurate, and safer, but the lack of regulatory clarity around AVs impose major obstacles as the technology evolves.
- Voice. Voice-assisted devices allow for multitasking when driving, cooking, and working and can turn any of these activities into a potential purchase points.
- Visual. Visual technology is being leveraged by retailers, including Amazon’s thumbs-up and thumbs-down voting mechanism, which pares down choices for consumers. eBay’s computer vision allows users to upload photos to find similar products to bid on rather than through searches.
Lease Accounting Complications
In 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, Leases, which provided new guidelines that required lessees to record assets and liabilities on the balance sheet for almost every lease.
With updates provided by the FASB since the initial Accounting Standards Codification Topic 842 release, much of the focus for retailers in the following year was on revenue recognition. Most retailers have now shifted focus to comply with the lease accounting standards.
According to a study by LeaseAccelerator Inc., the biggest obstacle in implementing the new standards is collecting the data because many lease processes have been operating in silos and are decentralized.
Two proposed changes by the FASB in 2018 may help companies adopt the leasing guidance in a timely manner. These changes allow:
- Entities to apply the provisions of the new lease guidance at the effective date of January 1, 2019, without adjusting the comparative periods presented
- Lessors to elect, under certain circumstances, not to separate the nonlease components from the lease
There are however, discussions within the FASB of deferring the effective dates for an additional year.
Although the new standard will require additional cost and effort to implement, many solutions will provide retailers information to help better manage real estate activities and negotiate new leases by having better data at their disposal.
The US Supreme Court’s ruling in South Dakota v. Wayfair, Inc., removed physical presence as a requirement for sales tax nexus. In response to the ruling, states are swiftly modifying nexus laws nationwide.
As laws continue to evolve state by state, it’s crucial companies stay informed and in compliance with laws of each state in which they conduct business.
We’re Here to Help
Implementing new technology or re-examining connections with your customers can be a challenging and exciting process. To learn more about how these trends can affect your business, implementation strategies, or recession-related tactics, contact your Moss Adams professional.