The ones to watch: 5 retail trends for 2018

shoppingbags, shopping, bag, walking, street2018 is already off to a racing start and as Australia’s biggest brands prepare for half-year results in February and March, executives are busy bedding down specific strategic goals for the year ahead. Here are five of the macro trends to keep an eye on this year.

1.   Speed, speed, speed

Online retail spending is forecast to hit a double-digit proportion of total retail spending in 2018, currently sitting around seven per cent.

A wide range of retailers reported strong online growth over Christmas, and while ongoing growth isn’t a groundbreaking prediction, the increasingly competitive online landscape is shaping up to be a key focus for both pureplay and omnichannel retailers in 2018.

Speed is emerging at the forefront of that fight. Australia is a geographically challenging market for retailers and logistics providers delivering to doors, but this is quickly becoming a mute excuse with customers, as select brands begin to mount the local delivery hurdle with same day delivery.

Bricks-and-mortar retailers are already out of the gate. Women’s fashion retailer Cue has already unveiled a three-hour delivery model that’s fulfilled from its network of 89 stores nationwide, while others like shoe group RCG are planning to implement a similar model before the end of July.

Amazon, which launched to an unexpectedly muted reception last year, is expected to launch its Prime and Fulfilment by Amazon programs locally in 2018, which will necessitate a significant investment in logistics capabilities, bringing a new level of speed to thousands of its partners.

Speed is also shaping up to be a focus for stores, as the likes of Woolworths and Super Retail Group invest in faster click-and-collect models and predictive data analytics software to better understand customer demand.

As Queensland University of Technology Associate Professor Gary Mortimer notes,speedy delivery is now an expectation rather than a pleasant surprises for shoppers.

“Products will be available at the right time, in the right quantities, at the right location and right price,” he says. “Retailers will invest in extensive data analytics software to more accurately understand the needs and wants of shoppers.”

2.   Converting the customer

With foot traffic becoming harder to come by for traders, converting customers once they come into stores and even through websites has become increasingly important. Competition will heat up in 2018 and retailers looking to get an edge will need adequate pathways to purchase in place.

As one publicly-listed retail CEO tells IRW, the rise of e-commerce has correlated with the rise of customers who know what they want when they come into store, which has brought more of a focus on conversion.

“We’ll continue to see less foot traffic in stores, but customers will have already made their minds up because of e-commerce, so it will be really important to be able to convert traffic coming in. Therefore being in-stock is ever more important,” the executive says.

Under that banner falls everything from click-and-collect to modern payments options such as buy-now-pay-later, contactless card systems and loyalty program benefits.

Ways for international customers to pay easily are also shaping up to be a focus for conversions, with the likes of Myer and PAS Group both having announced plans to expand payments functionality for foreign cards and currencies in 2018, particularly for Chinese shoppers.

3. Differentiate or die

Australia’s retail isolation is over, and with the entry of international players into the market, investment in providing customers with something unique will be a priority for traditional brands in 2018, especially fashion retailers.

As Retail Doctor Brian Walker explains, the middle-ground of Australian retail is quickly hollowing out and if brands aren’t careful, they could be caught in the middle.

“2018 will be less about store size and product price and more about remarkable experiences – expect data technologies to drive this,” he says.

This sentiment appears to be particularly focused on the beleaguered women’s fashion category, where businesses like Specialty Fashion Group, Premier Investments and Myer are all vying for consumer attention.

All three appear prepared to close stores in 2018, honing in on the notion that space and replication don’t necessarily equal sales in modern retail. Store closures will also free up funds for further investment in physical locations that remain as centre owners look to refurbish tier two and three assets throughout the country.

4. Consolidation on the horizon

For those unable to differentiate or otherwise lure in shoppers, consolidation appears likely.

The retail graveyard has already claimed a scalp in 2018, with plus-size fashion label Maggie T falling into administration this month.

Footwear brand Diana Ferrari, part of Munro Footwear Group, is also consolidating, having recently announced the closure of its national physical network.

Deloitte’s Australian retail lead David White expects brand consolidation to remain on the minds of executives in 2018, following a swathe of administrations and brand mergers in 2017.

“We’re going to see more consolidation, Christmas will have been a pain point for a few retailers,” White says. “There will be restructuring within multi-brand retailers – that refocus will be on the strongest and most profitable parts of businesses.”

Last year, Super Retail Group opted to merge Amart Sports and Rebel, and while the retailer has no intentions of putting together a resurgent BCF with struggling outdoor brand Rays, chief executive Peter Birtles says he is happy with the result for the sporting division.

5. Sustainable retail

While sustainable business has become a focus for all business, retail or otherwise, customer-facing businesses are often even more exposed, given their proximity to social and political sentiment.

As Mortimer says, younger customers understand the concept of voting with their wallets, and retailers that can showcase clear sustainability goals are likely to emerge as winners.

The added benefit is countering rising electricity prices, which has spurred activity in energy efficiency and renewable sources from the likes of Beacon, The Reject Shop, Woolworths and Coles over the last 12 months.

Landlords are getting onboard too. GPT and Vicinity both have well progressed solar programs they are looking to expand this year and Mirvac is investing in electric vehicle charging stations in centres as part of a broader re-think of how their centres should be laid out moving into the future.

“Within shopping centre car parks and inner-city streets, shoppers will be able to plu -in and recharge cars while they shop and dine. Councils will generate passive income, not from parking metres, but these recharge stations. Shopping centres will showcase sustainable, carbon-neutral, environmentally friendly retail,” Mortimer says.

 

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