Key emerging trends in the retail sector
In our recent retail industry whitepaper, ‘The great retail reset – fact or fiction?’ we analysed the impact Covid has had on the retail sector and how it has been forced to evolve, faster than probably anticipated, to meet changing consumer preferences and advancements in technology.
To stay competitive in this dynamic landscape, retailers must stay abreast of emerging trends and adapt their strategies accordingly. As an addendum to our whitepaper, we now explore some of the key trends shaping the retail industry today.
Sustainability and social responsibility practices
Customers are increasingly favouring brands that prioritise sustainability and social responsibility. Companies like Kuwaii and Patagonia have gained popularity by adopting circular economy models, practicing slow manufacturing, and using ethically sourced materials. This trend reflects a growing consumer consciousness about the environmental and social impact of their purchasing decisions. In 2022, Australia’s largest peak retail group, the Australian Retailers Association (ARA), has announced a new partnership with clean-tech start-up Greener to help retail and hospitality small businesses on their sustainability journey towards net-zero emissions1. Under the partnership, the ARA and Greener will co-design a new digital solution, called Greener Business, to help small businesses understand and prioritise the steps they can take to reduce their carbon footprint.
The integration of all retail channels, blurring the lines between in-store and online shopping, has become crucial. Customers now expect a seamless experience across multiple channels, including options like click and collect. 72% of Aussie shoppers say they have placed an order by click and collect due faster turnaround time and it’s cheaper than delivery2. Retail giants such as Coles, Myer, and Woolworths have successfully implemented omnichannel strategies, leading to increased customer engagement and higher spending. Omnichannel customers spend 1.7 times3 more than a single channel customer.
The ability to provide personalised experiences across various touchpoints, including in-store, online, and mobile platforms, has become a popular strategy deployed by many brands. According to Google’s global retail study4, 53% of shoppers surveyed think their shopping experience would be better if a retailer’s loyalty or rewards program activated automatically at checkout. By leveraging connected experiences, retailers can maintain stronger relationships with their customers and interact with them across different media. Personalisation helps retailers cater to individual preferences and enhance customer satisfaction.
Optimising inventory management
Retailers are adopting advanced techniques to optimise inventory to better meet customer demands. This includes improving on-shelf availability, modernising in-store fulfillment, and implementing robust loss prevention measures. Radio frequency identification tools (RFID) are gaining traction, offering improved inventory tracking, reduced inventory count time, and enhanced product visibility.
Unified commerce experience for customers
Retailers are striving to provide a seamless and unified commerce experience across all channels. Real-time inventory views are being leveraged to streamline order fulfillment processes and enhance overall customer satisfaction. By eliminating friction points and ensuring a consistent experience, retailers can drive greater profitability and customer loyalty.
With low unemployment rates, retailers are turning to human-centred automation to increase operational efficiency. Smart robots and other automation technologies are being used to manage repetitive tasks, freeing up human employees to focus on higher-value activities. This trend enables retailers to improve productivity and maintain high service levels.
Leveraging social media
Social media platforms are playing a pivotal role in retail. Retailers are exploring innovative ways to integrate payment information into social media platforms and harness the power of influencers, particularly in niche markets like beauty, fashion, and lifestyle. Social media is transforming the way customers discover and purchase products.
Contactless shopping and mobile payments
The adoption of contactless shopping and mobile payment platforms, such as Apple Pay, Google Wallet, and buy now, pay later (BNPL) services like Afterpay and Klarna, continues to grow. These convenient and secure payment methods offer customers greater flexibility and speed up the checkout process, enhancing the overall shopping experience. However, there has been an increased reliance on BNPL, with consumers having access far more debt than they’d be able to get on a credit card or a payday loan. On May 2023, Treasury announced the Government’s intention to regulate the BNPL industry. This is driven by concerns that consumers are not provided with the same protections that exist for consumer credit products under the Credit Act. Under Option 2 – Tailored regulation for under Credit Act, BNPL will be treated as a credit product and BNPL providers will be required to hold an Australian credit licence.
Virtual and augmented reality
Retailers are leveraging virtual reality (VR) and augmented reality (AR) technologies to enhance the online shopping experience. 66% of people say they are interested in using AR for help when shopping5. Interactive product demonstrations and virtual try-on features allow customers to visualise products more accurately, leading to increased confidence in purchasing.
Flagship and micro stores
Flagship stores are becoming a key retail brand strategy6, attracting customers with immersive experiences. Online retailers are also embracing micro stores as a physical display space for their products, bridging the gap between the digital and physical.
Subscription-based models have gained popularity in various retail sectors, including beauty, clothing, and groceries. Companies like HelloFresh and GlamCorner offer convenient and personalised experiences through regular product deliveries or rental services. Subscriptions provide customers with convenience and flexibility while fostering long-term loyalty.
Innovation and zero friction
Optimising customer experience and reducing costs have been drivers for key innovation and zero friction solutions7. For example, by enabling customers to scan and pay for their items independently, self-checkout systems eliminate the need for traditional manned checkout lanes. Although innovation and zero friction in retail are not limited to in-store experiences alone. Social media is also reshaping the future of frictionless retail. Gen Z shoppers have embraced the trend of shopping directly on social media platforms such as Instagram and TikTok. These platforms have become virtual marketplaces where users can click on links that connect them to digital or omnichannel retailers, all without leaving the social media app. This shift in consumer behaviour is also driven by the desire for instant gratification and immediate delivery. Gen Z shoppers, known for their tech-savvy and fast-paced lifestyles, seek instant access to the products they desire. By seamlessly integrating shopping functionalities into social media platforms, retailers can tap into this demand and provide a frictionless shopping experience for their target audience.
The retail industry is undergoing significant transformations driven by some key emerging trends and are forever reshaping the retail landscape. Retailers who adapt to these trends and leverage innovative technologies will be well-positioned to meet evolving customer expectations and drive future growth in the industry.