5 Questions Looming Over the Retail Industry in 2017

Jan 23 2017

CC_blog_RetailIndsutryQuestions_laptopWith 2016 now in the books, retailers are already putting their strategies for 2017 in motion. As well-intentioned as these plans are, they’ll also require a lot of flexibility. These days, as legacy retailers file for bankruptcy and close brick-and-mortar stores in growing numbers, no company is immune to the changing retail winds. Here are five issues that retailers will need to keep an eye on as 2017 unfolds.

1) Where does Amazon go next?

From cloud computing, credit cards, and video streaming to groceries, apparel, home services, and more, Amazon seems to be extending its reach into every corner of the consumer economy. With billions of dollars at its disposal and half of all U.S. households locked into the Amazon Prime eco-system, Amazon may very well be able to break into any industry it wants. In 2016, it further honed its drone delivery proficiencies; unveiled plans to disrupt the brick-and-mortar grocery sector; and expanded its already-extensive shipping and logistics capabilities. Although its recent interest in adding the American Apparel brand to its portfolio went for naught, that won’t be the last such opportunity that Amazon pursues. It will keep exploring ways to extend its considerable shadow, so retailers (and other companies) would be well-advised to stay on the lookout for such openings — and be prepared to adjust and adapt as needed.


2) How quickly will e-commerce grow?

In-store sales have been on the decline over the past few years as e-commerce makes it easier and more convenient for consumers to shop from home (or office or elsewhere). On Thanksgiving and Black Friday, the latter of which has traditionally been one of brick-and-mortar’s favorite days of the year, e-commerce sales grew 18%, while store traffic and sales dropped 11% and 10%, respectively. This offers yet more proof that consumers’ buying habits are changing.

Although e-commerce currently comprises around 10% of overall retail sales, it’s been growing at a double-digit rate for years. Retailers therefore need to place a heightened emphasis on reaching and catering to digital consumers — especially in light of Amazon Prime’s as-yet unchecked dominance in that area. Walmart, for one, took a bold step by purchasing Jet, and another legacy retailer, Macy’s, is shutting down stores and injecting $550 million into its digital efforts. Given these and other moves, 2017 will likely be another banner year for e-commerce.

3) Who will capitalize on mobile’s momentum?

Much of the recent e-commerce expansion has been driven by m-commerce. Over 200 million people in the U.S. now own smartphones, and mobile commerce growth worldwide is expected to double e-commerce growth this year. With the technology increasingly prevalent and easy to use, consumers are much more comfortable with shopping on smartphones and tablets. From November 1 to December 20, 2016, m-commerce surged in the U.S.:

  • More than $24 billion in sales came via mobile devices.
  • Smartphones rang up $16.63 billion (68%) of those sales.
  • Mobile devices were used in 31% of all e-commerce sales, up from 19% in 2014 and 28% in 2015.

CC_blog_RetailIndustryQuestions_SidePhoneImpressive as these numbers are, though, there’s a huge opening for individual retailers to capture a significant slice of the mobile audience.  During the 2016 holiday season, per Adobe:

  • Smartphones accounted for 41% of all online retail visits but only 21% of sales.
  • Desktops, meanwhile, accounted for 50% of all visits but 69% of sales.
  • Tablets accounted for 9% of visits and 10% of sales.

The problem, as CNET put it, is that “mobile shopping still stinks”; ongoing issues with the m-commerce platform include poor navigation, hard-to-see product images, and unwieldy checkout flows. Retailers that can give mobile customers what they want could enjoy big rewards in 2017.

4) How are online returns handled?

Returned merchandise cost retailers over $260 billion in 2015, according to the National Retail Federation. (As the NRF notes, a company earning that much revenue would rank third among the Fortune 500.) Best Buy lost $400 million in returns three years ago, which represented 10% of its sales. Categories like clothing, though, can see close to a 40% return rate.

A recent FreeShipping.com survey found that more than 60% of members consider free returns a top priority when deciding whether to shop again at a specific online retailer. Brands therefore need to find affordable ways to offer free, easy returns processes to their customers. Fortunately for retailers, a recent study found that lenient policies can lead to more purchases. Consumers aren’t able to try on or test online items, so a generous returns policy can give them the confidence needed to tip the scales when they’re unsure about a purchase.

5) What does the future of brick-and-mortar retail look like?

In-store shopping isn’t going away, but 14 major chains have announced plans to close at least 100 stores each in the past few years, which suggests structural weaknesses in existing brick-and-mortar retail models. While Amazon Go offers one potential blueprint for next-generation physical outlets, other retailers would do well to focus on developing robust, rewarding omnichannel experiences. Creating seamless shopping flows across multiple touchpoints allows physical retailers to leverage their locations and gain a competitive advantage over online-only stores. Just as critically, it can help them attract more valuable customers.

If the recent past is any indication, 2017 promises to bring more upheaval to the retail world.  To survive and thrive, retailers need to embrace the growing importance of e-commerce and m-commerce; cater to consumers’ evolving behaviors and preferences; and respond quickly and capably to potentially game-changing (or at least strategy-altering) news and events — and the opportunities they present.