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The 2019 Retail Trends Decision-Makers Should Be Watching Closely

By Michelle Carter, Senior Vice President

Expect the retail industry to innovate in these areas in the coming year

For the retail industry, 2018 was a vibrant year marked by solid sales growth and business innovation across channels. Omnichannel strategies and advanced analytics have become table stakes for retailers today – a reality driven home by Galagher Jeff, VP of Analytics and Merchandising Operations at Walmart, in his breakout session with Mastercard at NRF's 2019 Big Show this past January.

Arising 2019 retail trends promise to be equally dynamic, with some experimental concepts blossoming into full-scale norms.

Here are the biggest areas of retail innovation to watch in 2019:

Retail Trends 2019 Frictionless IoT innovation

Reducing Friction in Physical Retail Becomes a Priority

Retailers continue to seek ways to streamline shopping experiences, and for good reason. Half of shoppers that leave stores empty-handed cite long checkout lines as the reason, and numerous carts are abandoned online due to cumbersome checkout processes.

The very real impact of this dynamic on business performance is driving retailers to test initiatives to remove frictions from the shopping experience. New tech and innovations like scan-and-go, click-and-collect and invisible payment technologies have been successful at turning potential buyers into satisfied shoppers. Cashier-less concepts like Zippin and China's BingoBox have quickly gained traction, inspiring other larger retailers to follow suit.

For those shopping online, Secure Remote Commerce (SRC) technology eliminates the need for customers to enter in their information each time by creating a single, tokenized "buy" button.

While the importance of reducing frictions in the purchase journey cannot be overstated, the technological investments necessary to make frictionless commerce a reality are not trivial. Surgically testing such initiatives, and understanding their impacts across channels, is key to determining whether to roll these innovations out across one's network.

The Race for the Last Mile Accelerates

While established delivery partners like FedEx and UPS can efficiently ship across thousands of miles, delivering to customers' doorsteps remains a costly challenge — especially as online sales increase. With consumer expectations for delivery time growing increasingly demanding, retailers are doubling down on last-mile delivery concepts including crowd-sourced services such as UberRUSH, drone delivery systems, and ship-from-store to speed up fulfillment.

With the pressure to compete against internet giants with two-day (or shorter) shipping, specialty stores and big-box retailers are experimenting with same-day delivery services. Order by noon, deliver before bedtime rush services are offered by companies like Best Buy, Barnes & Noble and The Container Store, with most fulfillment coming from local stores.

In China, Alibaba's 60 Hema grocery stores in city centers have a promised delivery time of 30 minutes within 3 kilometers, setting a new standard that even leading online retailers will be challenged to match. This service is already available to tens of millions of people, with an expanding footprint.

Although it's important to be fast in today's retail landscape, each of these solution has its own complexities, and none are yet able to deliver products at the desired speed, cost and scale. By carefully monitoring and analyzing the real-time impact of delivery initiatives against a range of KPIs, including customer satisfaction, returns and cost, business leaders can identify opportunities to streamline operations, cut down on costs and tailor the right strategies to the right markets or locations.

Creative Partnerships Drive Engagement

Physical retail is far from dead. If anything, it's evolved to meet the heightened expectations of today's customers, engaging them on entirely new levels. To increase traffic and keep customers coming back, some retailers are looking to innovative brand partnerships and gamification strategies.

Brand partnerships are nothing new to retail. However, the way companies like Home Depot — as an example, in their recent partnership with Pinterest—approach partnerships is changing. Retailers are capitalizing on a wider range of channels, using store-within-store concepts, joint product launches, and digital platforms to reach target segments and build stronger engagement.

Building on the growth of mobile apps, some companies are also designing games to educate customers about the brand and its offerings, encourage interaction and provide a new stream of loyalty data. The trend is especially strong in China, where Alibaba has introduced a Pacman-style game that lets shoppers earn retail credits, and Sunrise Duty Free, in partnership with Guerlain, has launched a Tetris-inspired game on the widely-used WeChat platform. Their success demonstrates an opportunity for U.S. retailers to follow suit.

As partnerships and gamification strategies continue to grow in popularity, it'll be crucial for retailers to take a data-driven approach to understanding their customers' brand affinities and channel preferences. To that end, third-party data sources can help retailers look beyond their four walls to contextualize business performance and understand where else their customer segments are shopping, traveling and eating. Gleaning these rich, cross-industry insights empowers executives to confidently pursue the right brand partnerships and digital strategies to acquire and retain high-value customers.

Retail Gets More Personal Than Ever

While many retailers have invested significantly in building out customer-centric analytical practices as well as data centers, few have been able to fully capitalize on them. Retailers are looking for new ways to leverage their data insights to bolster 1:1 relationships with their customers, and AI has grown to be an answer for many, with 54% of marketers using AI to personalize customer experiences.

As customers expect better, faster, tailored service from retailers, a strong personalization strategy has become table stakes for those looking to compete with online upstarts. In a Mastercard-sponsored Harvard Business Review survey of more than 600 business executives, 90% of respondents indicate that their customers expect organizations to know their interests and anticipate their needs.

What will drive success for a retailer's personalization strategies is not just putting their own data insights to work and applying artificial intelligence to customer touch points, but leveraging third-party data sources to further fuel AI-driven personalization efforts as well. A deeper understanding of customers beyond the four walls of one's store provides greater opportunity to tailor experiences, drive loyalty and engage high-value customers.

Basha's supermarkets in Arizona has, for several years, been dishing up what it calls "personalized circulars" to its Thank You Card members, featuring an AI-driven individualized mix of retailer and manufacturer deals. Its personalized deal redemption rates reportedly outpace digital coupons by 100:1 while boosting average monthly spend by 35% year-over-year.

H&M has also recently turned to AI to bolster customer experiences, tailoring store assortments to help personalize merchandising to the different demographics it serves. Similarly, GPM Investments, which operates more than 1,200 convenience stores, began a program to create store-level planograms this fall.

For most retailers, however, it is difficult to fully capitalize on AI-driven personalization using only an internal view. Both depth and breadth of data is necessary. With powerful third-party insights and segmenting capabilities available, retailers will have greater opportunities to employ personalized recommendations, promotions and cross-channel experiences.

With 81% of organizations asserting personalization will be a significant financial driver by 2020, it's important that retailers have an answer to the personalization challenge — particularly in the face of complex regulations, such as GDPR.

Emerging Tech Is Implemented From End-To-End

Robots, virtual reality and blockchain have all taken turns in the spotlight as retailers explore technologies to improve the shopper experience and streamline operations.

For example, technologies such as AR and VR are being used both online and in-store to bring customers closer to experiences like Michael Jordan's iconic free-throw dunk. Using augmented reality, Jordan Brands recreated the star athlete's legendary jump for an interactive buyer experience. Combined with a successful partnership with Snapchat, they sold out of their new merchandise in 20 minutes. Meanwhile, on the back end, retailers such as Zara are turning to robotized distribution centers to expedite fulfillment and improve convenience.

Retail continues to change rapidly, with new players and new ideas constantly joining the landscape. While emerging technologies can breathe new life into the customer experience, the jury is still out on whether they will actually move the needle on profits in most cases. To be confident in rolling out changes, retailers should first test new initiatives on a small scale and target investments to those predicted to respond most profitably. By leveraging business experimentation to get ahead of the curve, savvy retailers can fully capitalize on these exciting new trends in 2019.

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