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Four Key Retail Market Trends Sweeping the Industry Right Now

We often visit the neighbourhood’s Walmart, Target, Tesco, Sainsbury’s, Boots, Carrefour for our everyday retail needs. Although we continue to buy goods from these brands, our lifestyles and external events have changed the way we shop over the years. This blog is about four key drivers that have been pivotal in the retail industry and how they have contributed to transforming these businesses for the better.

Key drivers

Physical Stores to Online Channels

The retail industry went through an apocalypse in the past decade when over 12,000 physical stores across many retailers closed down in North America owing to factors like over-expansion of malls, rising rents, bankruptcies, low quarterly profits outside holiday binge spending, delayed effects of the great recession, and shifts in spending habits[1]. However, previous statistics show that retail spending is increasing year on year. So where is all the sales happening if not at stores?

Due to the increasing usage of the internet connectivity and its penetration, online shopping has been a major driver for the retail industry. The Global Consumer Insights Survey 2019[2] shows that almost a third of consumers buy products online weekly or more frequently, up by 5% year-on-year (refer figure 1). As a result, consumer shopping habits have largely shifted from physical stores to digital channels like e-commerce websites and mobile apps.

Figure 1: Frequency of online shopping (Global Consumer Insights Survey 2019)

Further, actual numbers in the predicted environment show a growing number of mobile computing devices, smartphones and mobile payments driving consumer spending in retail. More often, today’s consumers shop on smartphones more often than on personal computers[3]. As a result, online retail industry alone has been valued at USD 23,460 billion in 2017 and is expected to register a CAGR of 5.3% during the forecast period (2018–2023), to reach USD 31,880.8 billion by 2023[4].

Omni-channel Experiences

Today consumers are not only using one channel to shop, they are engaged with retailers through several touch points. Hence, omni-channel experiences are on the rise; in 2016, compared to 7% of online-only buyers, the remaining majority or 73% of shoppers said they use multiple channels during their shopping journey[5]. Interestingly, these shoppers spent more time on shopping, spent more money than online shoppers and were also known to be more loyal.

Walgreens mobile retail app is popular amongst its consumers in the United States for the omni-channel experience it provides across all interfaces. The app allows users to manage pharmacy prescriptions, fill out rapid refill requests, and find deals on products in stores. Further, customers can place orders online or via the app that they can pick up at the nearest location. Overall, it complements the in-store experience. This requires the customer to be connected with the mobile app to sales fulfillment operation, inventory, available promotions from suppliers and more information equally offered within the store. Having an isolated customer database or gamut of disparate systems will not help, rather these systems need to work together to provide the omni-channel experience.

Evolving Stores

With more stores closing down in 2019, new formats of stores[6] are opening up in many regions. For instance, AmazonGO presents a new format of self-service, and sensor-based stores where customers can purchase groceries and checkout without staff intervention. Traditional stores have adopted this concept to a certain extent by introducing self-checkout machines and kiosks which are less automated. However, more vendors like Grabango and Zippin are promoting the hybrid store concept by integrating the store with digital components. With checkout-free experiences through sensor-based communication and innovative apps, customers feel they have more independence during shopping and no queues at checkout. Technology has been on the forefront of these store transformations and it will prove to be more useful in future as countries uptake contactless approaches.

Same-day Delivery

Delivery is an essential component of online retail. Business-to-consumer (B2C) retail delivery has evolved over the years from a few days to one-day and now same-day delivery[7] with the rise of e-commerce in domestic markets. Retailers like Amazon and Walmart have excelled in this area but speed has always come with a premium price.

In the long run, parcel logistics providers will be able to operate at the lowest cost while offering integrated logistics solutions ranging from orders through fulfillment to delivery and return. In fact, there are options like ‘Dropoff’ and ‘Uber’ that have leveraged their resources to offer an innovative delivery experience to customers. The opportunities ahead are huge. Logistics providers need to position themselves for the upcoming transformation, and adapt their existing networks accordingly. However, McKinsey states that companies need to build the necessary network to make this possible and technology plays a vital role in it. One of four key success factors[8] for same-day delivery is to have fast, integrated information technology systems. They must enable:

● Full inventory transparency across all warehouses and stores,

● Direct transfer of order data between web-shop and (in-store) fulfillment,

● Prioritized picking logic to allow fast tracking of same-day orders.

Unexpected Situations

The Covid-19 pandemic has caused a massive surge of grocery sales due to short-term panic buying and has increased people’s spending towards essential goods via e-commerce, mobile commerce, order online and pickup, and adopting other queue-less methods. Amidst the crisis, going digital has proven to be one of the critical success factors for business continuity of all retailers. Brands and stores that had embraced the digital revolution were best prepared and have thrived, but some have experienced limitations in scaling to unexpected customer demand. A number of small and medium retailers operating on agile practices quickly adapted and transformed their businesses to go online and serve customers. Smaller, brick-and-mortar retail stores in the locality have either adapted by means of instant messaging services like Whatsapp and Viber, or have remained closed for business. Improvised mechanisms are seen in all parts of the world irrespective of the state of their developed or underdeveloped economies.

As consumers get influenced by technology, retailers are going to be challenged in these four key areas — consumer behaviours, demand for omni-channel experiences, faster delivery and changing stores. In addition, the sudden need for safer shopping in times like Covid-19 strengthens the case for digital presence. However, most retailers haven’t been able to upkeep with the online demand and delivery, or been able to adapt to changing circumstances, as fast as the market has required, at least from what we’ve seen so far.

Further, the market segment for contactless payment and delivery in retail has strengthened in this short period. However, pandemic circumstances won’t last for long, but it has given rise to a new normal, and it is a reminder of how resilient and responsive you are as a business. As customer expectations continue to shift, retailers must establish agile and adaptive enterprises. A strong digital foundation has been one of the critical success factors in this context.

In my next blog, I look at how an organization’s business strategy will be impacted by these retail trends, and how a typical retailer can accommodate these trending needs by modeling a new business architecture.

Note: This is part of the Business Architecture Blog Series. Do follow me on Medium to get notified on new blogs in this series. Also, do feel free to share your thoughts and comments. Thank you!












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Lakshika Paiva

Lakshika Paiva

Passionate about business-side of tech. Advocate of education, wo/men in tech & mental health. In love with baking, travel, fitness & books. Mum to my pets.