Australian Consumer, Retail and Services (ACRS) senior research consultant Dr Eloise Zoppos looks at retail trends for 2020.
2019 was a great year for consumers. With more choice, channels and sales than ever before, consumer purchasing power was at an all-time high.
But how did retailers fare?
Although consumer spending remained low throughout the year, 2019 ended on a high with CBA data indicating that Australian consumers more than doubled their spend during the Black Friday sales compared to 2018, and that retail goods spending lifted 87% from the average spend in the three weeks prior to Black Friday.
And the outlook for 2020 is positive; Deloitte Access Economics expects that stronger wage growth and a reinvigorated housing market will support a 2.6% growth in Australian retail spending in the year ahead.
In 2020, retailers can expect to see a number of trends and opportunities lead the way to growth and increased store visitation: the rise of Gen Z, luxury resale retail, blurred retail lines, leveraging consumer data and building digital trust, and a renewed focus on (digitally) empowered employees.
Let's start with the rise of Gen Z.
The year to come will see Generation Z (those born from 1995 to 2009) grow in demographic power and consumer spend.
Research shows that a key life aspiration of Generation Z is making a difference (84% of Gen Z’s state they have made a charitable donation in the past 12 months), and in 2020 that attitude will re-shape retail.
This generation will use retail, particularly fashion, to bring attention to and fight for causes that are close to their heart.
Some retailers are already recognising this desire and have found success in this strategy. For example, LVMH Luxury Ventures recently led a US$1.8 million seed round for retail clothing brand Madhappy.
This Gen Z streetwear brand follows the typical drop model (once a style sells out, it’s off the market), but differentiates itself with an inclusive, community-driven strategy that involves mental health events.
On the other side of the market, luxury resale retail is also an interesting space to look at this year.
In 2020 the luxury second-hand market will continue to boom, with a forecast growth of 12% a year – significantly higher than the broader retail industry at 3%. Already worth US$24 billion, luxury resale is expected to grow to an impressive US$52 billion in the next two years.
Primarily driven by younger generations and their passion for sustainability and conscious consumerism, luxury resale presents an opportunity for retailers to capitalise on secondhand sales by owning their resale market.
Clothing brand Eileen Fisher’s ‘Renew’ take-back program allows its parent company to profit twice from the same piece of clothing. How? They accept used Eileen Fisher clothing to either on-sell at a discount or turn into new designs.
2020 will also see successful retailers blur traditional lines.
While experiential retail has led the way for several years, the newest evolution of retail sees the traditional sectors of retail, restaurant, hospitality, and entertainment blur as consumers look for innovative service delivery via both channels and products.
Consumers will engage with brands in a fluid manner, using new social media platforms like TikTok to complement traditional channels, and also expect cross-sectional product offerings. And retailers who embrace and adapt will have a competitive advantage.
One early example is department store David Jones, which in November 2019 opened its first high-end convenience store in collaboration with servo BP, with more stores scheduled to open in 2020.
The backdrop to all of this innovation will be the leveraging of consumer data and building digital trust.
Moving into 2020, consumers will demand greater control over their data and more transparency about exactly what personal information companies are collecting.
And with several new privacy acts coming into effect in 2020 (the California Consumer Privacy Act (CCPA) enters into application on 1 January, for example), internet security has never been more important for businesses and consumers alike.
Research by ACRS shows that information security can be an important driver of trust in various sectors of the retail industry, particularly in relation to the protection of personal information.
Additionally, research suggests that consumers are willing to take their business elsewhere if they don’t trust that a company is safeguarding their data.
Yet consumer data and insights from in-store behaviours, product interactions and loyalty engagement programs are crucial in developing actionable retail strategies and informing strategic decisions.
In 2020, retailers will need to balance the use of consumer data with building digital trust.
Finally, there’ are opportunities for retailers in 2020 to enhance the shopper experience with a renewed focus on (digitally) empowered employees.
A great retail experience starts with a frontline workforce that is knowledgeable, passionate, and knows how to get the shopper and store assistant relationship just right.
Research shows that there’s a thin line between love and hate of attention in a retail store.
An overly attentive salesperson can be perceived as desperate, pushy or aggressive and drive shoppers away, but too little attention can leave shoppers feeling ignored, unwanted and unworthy.
Retailers that invest in data-powered equipment (that is transparent and trusted by shoppers) to empower their staff, can expect a lift in customer experience.
Retailers like Melissa Shoes are leading the way; the Miami-based brand is currently piloting an opt-in facial recognition kiosk to recognise shoppers when they enter the store and notify sales associates of their arrival.
This provides employees with the shopper’s previous purchases and preferences to enable personalised greetings and service.
In 2020, the retail industry can look to the rise of Gen Z, luxury resale retail, blurred retail lines, leveraging consumer data and building digital trust, and a renewed focus on (digitally) empowered employees to help guide their efforts in driving retail sales, increasing store visitation, and ultimately enhancing the shopping experience.