Industry pros pick the big retail trends for 2019

Retail and AI experts on the emerging trends shaping retail in the year ahead.

Just a few weeks of retailing left in 2018, and what a year it has been. Certainly for us here at Nextail, but also for the retail industry as a whole.

For those who missed it, retail in 2018 was defined by: more speed, faster product rotation, a focus on in-store customer experience and a race to up-skill digitally.

All that need for speed means we shouldn’t dwell too long on what was. Instead, our team of industry experts here has been discussing what will be next. These 5 trends will be shaping this industry in the months ahead.

1. Hybrid sales demands physical and digital presence

According to CB Insights, retail space occupied by brands that started online has grown by 1,000% since 2012 in the top 300 malls in America. Meanwhile, this week online-only retailer Asos posted its record share price loss, falling 43% in a single day.

These trends highlight the need to structure for hybrid sales. Measuring sales in off and online silos is no longer helpful, when the sale happens online and product is picked up in store, or when the customer selects the product in store but completes the purchase online. Hybrid sales demand agile merchandising from the retailer, but the end result is better service, increased loyalty and a reduction in overstocks.

Where once pure play was a lifelong commitment, now a new wave of online-only, direct-to-consumer retailers are embracing physical destinations. Young brands like All Birds, Everlane and Warby Parker are tackling offline with the agility that’s the very backbone of their businesses.

While that puts some pressure on traditional retailers to sharpen their understanding of what consumers will want, these digitally-native brands will have to up-skill fast.

Deborah Li, Head of New Markets here at Nextail predicts “2019 will deliver on the new retail spoken of over the last few years, breaking the molds for personalisation, delivery and consumer delight. Using highly innovative cross-industry tech, like automated cars, drones and smart geo-locating, retail will transcend previous definitions of on or off-line”.

In 2019 the new retailing world takes shape “breaking the molds for personalisation, delivery and consumer delight” — Deborah Li, Head of New Markets, Nextail.

2. Fashion goes beyond flirting with AI

While currently just 20% of retail has adopted AI, according to McKinsey and Business of Fashion State of Fashion, 75% of fashion retailers plan to invest in AI in 2018/2019.

That means in the year ahead we’ll see retailers engage with AI in more innovative ways than ever before. A study carried out by UK retail association IMRG and Hive last year found that retailers considered automation for merchandising 56% more valuable than automation for customer service.

Despite that, adoption of AI for external channels — chatbots for sites or computer vision software to enable better search — has been widespread. Until now, few retailers have harnessed the power of AI to benefit processes internally.

As Joaquin Villalba, Nextail cofounder, says, “In 2019, the real game changers in retail will invest in tech that impacts the very core of their business. The smartest will be leveraging new technologies that will augment the work of retail experts, elevating the decisions the business makes.”

“The real game changers in retail will invest in tech that impacts the very core of their business “— Joaquin Villalba, CEO Nextail.

And they’ll be looking to see results faster — today no retailer can wait around for a tech implementation to deliver results after years. Instead, the best AI will have traceable impact after the first month.

3. Going beyond the buzzwords in 2019

These are two words we’re all used to hearing a lot of in the industry: agile and sustainable. In 2019 these topics will go beyond the buzz and turn into necessity.

The first; agile. In 2019 we will see further polarization between nimble retailers and those who lag. Being flexible, set up for speed and getting rid of silos is absolutely critical for good retail in 2019.

The Business of Fashion/McKinsey State of Fashion Survey listed agility as a key priority in 2019–29% of its respondents want to “review organisational structures and focus on increasing employee productivity” in 2019.

Then; sustainability. It’s crunch-time for the planet — not only is the UN speaking out very clearly on the state of play with global warming, but we’re seeing the very real impacts with extreme weather and the first wave of climate refugees.

Stella McCartney’s ethics run to the core of her business.

Stella McCartney, a long-term advocate for eco-friendly fashion is launching a chapter for sustainable fashion within the UN next year to drive industry support. And consumers want it — fashion search site Lyst revealed a 47% rise in searches for ethical fashion items, such as “vegan leather” and “organic cotton” in the last year.

Every industry has a responsibility, but fashion retail, so driven by consumers, will need to act fast before backlash occurs. In 2018 the awareness of plastic waste fast became a global campaign via social media.The spotlight will quickly turn on wasteful practice in this industry, so retailers need to get serious about their sustainability stance.

4. An antidote for overstock

In 2018 if a retailer was struggling, it probably had a lot to do with overstock. Take H&M for example, with its $4.3 billion pile of unwanted apparel, dragging profits down by 28% in the first half of this year.

H&M will be looking to make a dent in its $4 billion overstock pile in 2019.

Consumers have become more demanding — they now pull products into the market, rather than those heady days of retail when you could push products to them. That means anticipating their desires, and getting product to where they want it, requires whole new approaches. Getting it wrong means overstock, those endless discounting banners and environment-harming waste (something that consumers are getting more sensitive to).

“Retail has long been lumbered with excess stock dragging down business and eroding the customer experience,” but Nextail CFO, Carlos Miragall, says it doesn’t stop there, with overstocks eventually leading to “dramatic discounting which also diminishes profit margins and sales performance.”

In 2019 we see retailers battling their over-stock issues in sophisticated ways — including with our own AI and machine learning platform! It not only uses prescriptive analytics to understand demand, but automates the process of moving stock from over-stocked stores to under-stocked stores, capitalizing on demand in the moment.

Already brands like Pepe Jeans and retailers like Stefanel are using it to transform their business decisions and we’re excited to see how more established retailers and department stores will embrace AI in 2019.

5. Seamless purchase for gold-class future retailers

A small format Amazon Go store.

When supermarket retailers first introduced the concept of self checkout — fact fans, that was in 1992, but it was another 10 years before they were commonly used — it seemed they could never possibly take off. The challenges around theft, payment verification and buggy technology at one point seemed insurmountable, yet the tech is now standard practice in grocery businesses. In China, entirely unstaffed convenience store chain, BingoBox has over 200 small-format locations, using RFID codes and a WeChat app to process shopper’s selections.

In 2019 auto-commerce will get rocket-fuelled. Using a mix of computer vision, artificial intelligence and sensors, the checkout will be disposed of altogether. Amazon led with its Go stores in 2018, using facial recognition to authenticate its shoppers. Zara and 7-Eleven soon followed, with their versions of slick checkout automation.

Next year we’ll see creases ironed out and more retailers implementing automated checkouts in locations that make sense — close to fitting rooms and near store entrances — as well as automated pick-ups and exchanges.

Nextail’s SVP of Global Business Development, Gonzalo Hafner thinks this is a win for the customer on all fronts. “Automated checkouts will be critical in streamlining the shopping experience. Retailers should be looking to cut friction points throughout the business, and seamless purchase is key to this.”

“Retailers should be looking to cut friction points throughout the business” — Gonzalo Hafner, SVP Global Business Development Nextail.

While auto-commerce is ideal for the fast-purchase of low cost goods, it’s not suited to all retailers. Luxury retailers specifically can focus on staffed transactions as a differentiator, instead hitting the need for speed and seamless experience by offering the shopper what they want, where they want it.

You might be in for a big 2019 and the team at Nextail is looking forward to it. We’re right here with you!

Visit our website to see some of the retailers that are already using AI and machine learning to transform their core merchandising decisions.

Nextail is a smart platform for retail merchandising. Developed by retail experts, it delivers agile data-driven decisions to meet increasing consumer demands. Using Nextail’s AI and advanced analytics, global retailers like Cortefiel, Twinset and Pepe Jeans are automating dynamic buying and merchandising. Within weeks, sales and margins increase while stock levels are reduced.

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