U.S. retailers are feeling the heat: E-commerce brands must contend with expectations set by Amazon's same-day delivery, meanwhile brick-and-mortar businesses face their own survival challenges--2019 will be the last year of operations for an estimated 12,000 stores, according to advisory firm Coresight Research. Staying relevant--let alone getting ahead--in this environment requires staying on top of what's trending in retail strategies. As such, read on for a short list of trends that'll carry over into the new year, according to a few innovative founders in the industry.
1. Prioritizing experiences over shelf space.
While filling precious real estate with experiences--rather just than standard display shelves--isn't a new idea, it is still well worth the investment if you can swing it. Just ask Ben Kaufman, co-founder and CEO of experiential toy store Camp. (You might remember Kaufman as the founder of the now-defunct Quirky.) With its flagship located near New York City's Union Square and four other locations around the country, Camp has rotating themes each quarter and offers workshops and interactive play spaces, and even lets parents drop off their kids for supervised workshops. Inside the store, kids can play with a pretend vehicle, a slide, a dress-up shop, and more--and most of what they can touch is for sale. The company says it has raised $17 million in funding to date?.
"The knock on experiential retail, generally, is that it can't be as productive on a per square foot basis as racks and pins and boards," Kaufman told Inc. when we visited Camp in September.
The New York flagship store sees 30,000 to 50,000 visitors monthly, according to Camp, with 90 minutes on average spent in the store. About a third of transactions are from returning families, and 56 percent of visiting families purchase something in the store.
Kaufman says he sees brands too often investing in expensive tech updates that, say, make customers interact with robots or artificial intelligence. "[Retailers put the focus on] all these things that make a store feel like a website, when really what people crave to leave their home is human connection," he said.
2. Taking online brands offline in creative ways.
In keeping with the experiential retail trend, even digital-first e-commerce companies like Glossier, Casper, and countless others increasingly want to give shoppers a way to see products in person. Some have tried pop-ups or glamorous flagship stores. Santa Monica, California-based direct-to-consumer outdoor furniture company Outer says it's seeing traction experimenting with what it calls "neighborhood showrooms."
Traditional showrooms are typically huge and expensive to maintain, so Outer asks customers to apply to volunteer their backyards as showrooms so shoppers can see the products in a real home setting. In exchange, Outer offers a discount on furniture and a flat fee per visitor that co-founder Jiake Liu says ranges from $200 to $2,000 a month, depending on the showroom's location and commitment level. Launched in May 2019, the company is slated to pull in over $1 million in 2019 revenue, makes six digits in monthly sales, and counts Patrick Schwarzenegger as an investor, says Liu.
"In the beginning, we didn't know what it was going to take," Liu said in July about recruiting neighborhood showroom hosts. "But now we're looking at thousands of applications from all over the country, all over the world."
3. Giving customers more ways to pay.
If you're not already integrating digital wallet technology into your sales operations, now's the time to do it. In the U.S., 17 percent of consumers use a digital wallet, according to 2019 research from U.K. payment researcher Merchant Machine. Market research firm Statista predicts that digital payment transactions will grow more than 8 percent annually between 2019 and 2023.
U.S.-based retail brands would be wise to stay ahead of this trend, says Mona Bijoor, partner of New York City-based investment firm Kings Circle Capital. Previously, Bijoor founded wholesale fashion marketplace Joor after years of working in the buying departments for global retailers.
She advises brands to take advantage of all the business benefits of adopting digital wallet technology, such as integrating loyalty programs, which is another way to stay connected to customers. "Your POS (point of sale) should integrate with ApplePay, GooglePay, and Samsung Pay," Bijoor advises. "Gift cards, alerts, tickets. Ensure that you offer the bells and whistles."
4. Recession-proofing prices.
Bijoor predicts that with looming talk of a recession ahead, your customers are going to be increasingly more thoughtful about the purchases they make. And midsize retail businesses--those bigger than a mom-and-pop shop but smaller than a Walmart or Target--"will get squeezed and hurt the most," she says.
"As a retailer, you need to analyze your opening, mid-, and high-price-point buckets," Bijoor suggests. 'If 60 to 80 percent of your items are priced at the mid-tier price point during a recession, then you might get squeezed. If retailers don't do this analysis in advance, it might be too late, especially if the items that you carry have a long lead-time from factory to store."
5. Adopting artificial intelligence in the right way.
To Kaufman's point, more and more companies are going to embrace A.I. in their business, says Bijoor. The key to doing this well is to keep in mind the end goal--any A.I. integration must help you drive sales and customer loyalty. Bijoor says retailers might learn from how a retailer like Stitch Fix uses humans and sophisticated data analysis to match styles of clothing and accessories to customers' personal preferences.
She suggests retailers explore A.I. for inventory forecasting, allocation, restocking--but warns against relying too heavily on technology for customer service purposes. Instead, think of it as a compliment to your employees, who understand the nuance of customer interactions better and respond accordingly.
"It's not necessarily that A.I. will have faddish applications--it's the retailers that get suckered into thinking that they are 'adopting' A.I. applications to check the box or seem innovative," Bijoor says. "And what's worse is that the A.I. they've adopted doesn't really move the needle on their business or profitability."