Even before the recession of 2008, there were signs that the retail sector was in trouble. Many brands at the time didn’t view online as a threat, and when they began to feel the effects in the 2010s, it was too late for many.
Leveraged buyouts by private equity of the likes of J.Crew and Gymboree in late 2010, premised on growth overseas, soon faltered. Teen retailers such as Wet Seal and Delia’s, lacking loyal customer bases, filed for bankruptcy in early 2015 and late 2014, respectively.
Even Walmart and Target seemed in peril, before they realized that to compete with Amazon, they had to spend—and invest they did.
Retail today is a battleground, with cash-rich Amazon, Target and Walmart all fighting for market share, offering consumers ever-cheaper goods and more convenience, subsidized by their balance sheets.
This puts increasing pressure on their competitors to be more creative than ever, to excite shoppers to visit both their physical and online stores.
In December, Adweek outlined a number of broad trends across retail we’ll see this year, including more media networks, voice shopping, personalization, improvement in the customer experience and increased attention to consumer privacy.
But there are also important trends developing within specific segments. Here’s an overview.
The apparel industry is likely to witness a marked decline in outlet centers, similar to the fallout in the suburban shopping-mall space, says Andrea Weiss, co-founder of The O Alliance, a retail consulting network.
Sucharita Kodali, a principal retail analyst at Forrester Research, agrees. “That seems like the next domino to fall. It’s too easy to get cheap merchandise online, and the brands aren’t putting good merchandise in the outlets to drive you there,” she says.
Outlets depend on the appeal of the wholesale brands sold in them, explains Weiss. If those brands lose relevancy, then department stores stop carrying them, and they cease to be a draw in the outlet centers. This challenge becomes particularly acute as department stores replace legacy brands with contemporary labels such as Bonobos, Madewell and Topshop.
“Only [outlet centers] that are well-placed and well-maintained will be successful,” notes Greg Portell, a lead partner of consulting firm Kearney.
Kodali, however, says that if outlet stores embraced a “drop” model similar to streetwear, they might have a chance of survival. “But the merchandise isn’t that compelling, and the marketers would need to be far more creative,” she says. “They are too tied up in Google search words now, and that keeps them from thinking outside the box.”
In the restaurant space, look for chains to continue to increase healthier menu options, from plant-based protein to keto to Whole30.
Denny’s, for example, is one of the most recent mainstream restaurant chains to expand a plant-based burger offering made by Beyond Meat from an initial launch in 2019 at its Los Angeles locations to its sites nationwide.
But while plant-based proteins will increasingly be on the menu, the trend will be more akin to the current oat milk phenomenon, Kodali says. Oat milk, for one, is part of the larger milk alternative category, and two, even though the global alternative dairy category is rapidly growing, it is still a small segment when compared to dairy.
In 2018, the category was valued at nearly $18 billion worldwide, and that includes all alternative dairy products, not just beverage. At this stage, plant-based protein is about giving consumers more choices to drive traffic.
Restaurants offering options tied to lifestyle preferences is a trend that’s here to stay, says Sara Al-Tukhaim, a retail analyst at Kantar. “It’s about giving people the option.”
Grocery will be as competitive as ever, with the likes of Aldi, Amazon, Dollar General, Kroger, Trader Joe’s and Walmart battling it out for consumer dollars.
Part of the contest will be determined by services chains can offer to either keep or attract customers. Expect the availability of click and collect to continue to expand in the space, Kodali says, citing Walmart as an example. The discount retailer has already expanded grocery pickup to 3,000 locations as of the end of the third quarter out of nearly 4,800 total stores.
Delivery, on the other hand, remains too expensive for food chains, she notes. “If Instacart can keep subsidizing delivery, there may be some modest growth,” she says, referring to the low rates Instacart charges for its grocery delivery service. “But grocery delivery is money-losing in the U.S. in an on-demand model.”
Weiss also says to watch for the rollout of “smart” shopping carts, which would help automate routine shopping trips.
Another retail trend that will gain momentum this year is upcycling, says Weiss. According to ThredUp, the secondhand market accounted for $24 billion in sales in 2018 and is projected to grow to $51 billion by 2023.
Nordstrom is the latest retailer to tap into the upcycling craze, with plans to sell secondhand luxury clothes online and at its New York flagship.
Startups such as TheRealReal and Rent the Runway helped establish the category, Weiss explains, but expect to see designer brands also capitalize on the popularity of consignment. Clothing brand M.M. LaFleur, for example, is partnering with ThredUp, offering customers an extra 20% when they redeem what they earn from the sale of their secondhand garments as an M.M. credit.
Kodali says she even expects brands to own their secondary market, citing Patagonia, which sells used clothing carrying its name via Worn Wear.
“Apparel companies will look to create closed-loop systems where customers will be able to extend the useful life of their clothes,” Portell agrees, adding that such systems would include capturing a portion of the resale market.
In addition, retail brands may seek to shut down rogue distributors in order to limit the amount of merchandise available in marketplaces, Kodali says.
Luxury brand Chanel, for example, has aggressively gone after those attempting to resell its goods, from eBay to TheRealReal to What Goes Around Comes Around.
Fashion brand alliances are also likely to reach new heights this year.
Disney and Gucci announced that they are partnering to celebrate the Chinese New Year, with the luxury brand’s clothing featuring none other than Mickey Mouse. This alliance is in addition to recent collaborations between H&M and the NFL as well as LVMH and the NBA, to name but two.
Such alliances serve to broaden these brands’ reach and visibility, while offering special-edition merchandise like Mickey Mouse-themed apparel can create a sense of urgency for shoppers.
“Apparel needs partnerships and revenue diversification to survive,” says Kodali. “There is no longer a compelling reason to shop at the Gap or J.Crew.”
She says that if fashion brands combine their offerings via interesting alliances—either with services, restaurants, sports or leisure and entertainment—they have a better chance of growing.
Kodali notes that apparel businesses need their version of Amazon Prime, which is essentially a combination of Costco, Netflix and Spotify Plus.
“Stores also have tremendous value as media assets. People are more likely to tune in to ads when they are shopping in a store than searching a search engine or on YouTube,” she says. “The lightbulb hasn’t gone off for retailers on that very valuable point yet.”