January is that time of year when marketers have had the opportunity to reflect on the year just gone and look forward to the year ahead. Often we get inundated with all the “2016 – trends to look out for” blogs popping up on the various social newsfeeds and across the internet.
Well, here at Summit we like to think a little differently and while we still have an opinion on what is in store for retailers and brands in 2016 (yes mobile, social and personalisation are still important), what interests us more is looking further ahead and asking the big question, how can retailers and brands actually take advantage of these trends, and more importantly what will drive growth on the back of them? The answer to this I believe is through digital innovation.
In what has become a digitally dominated world it’s the innovators who are leading the charge. You would have had a hard time convincing anybody 10 years ago that by 2016 the largest global taxi company would own no taxis (Uber), the largest accommodation provider would own no real estate (AirBnB) and the world’s most valuable retailer would own no inventory (Alibaba), but that is in fact the state of play today.
The winning retailers and brands of tomorrow must be bold in how they imagine the future with only the most innovative likely to survive. So where do you start? How do you develop a unique solution when you don’t even know the problem? Well, one place you might start is by looking at some of the most important megatrends likely to impact the retailing industry in the coming years, and consider how innovation could be used to take advantage and/or avoid being left behind. I’ve considered three important ones below.
Shifts in demographics and economic power
By 2020 the global population will hit almost 8bn people. That’s more than 15% higher than the population in 2010 and the rate shows no sign of stopping. This explosive population growth is likely to be highly concentrated around developing countries, which at the same time are also experiencing the shift of economic power moving towards them. But what does that mean for retailers?
Well, if the fastest growing economies are also the ones who will eventually have the most spending power it’s no surprise that some of the leading innovators in the world have already started planning how best to take advantage. Amazon, now the US and UK’s largest retailer with nearly $10bn of sales last year, has been regularly purchasing thousands of sq. metres of fulfilment space across every corner of India since 2012 in preparation for the next digital revolution of a continent. Research suggests India’s ecommerce market will exceed $100bn in the next 5 years. Facebook and Google look set to go head-to-head in the battle to own the internet in Africa, with internet balloons floating high up in the stratosphere seemingly the key to success or failure when satellites just won’t reach. Have retailers even considered what impact that might have? How will supply chains and current logistics cope when demand for products and services suddenly start to emerge from corners of the globe that today they simply cannot reach? Those already planning for such an outcome will be best placed to react when it does.
The development of AI (artificial intelligence), robotics and other technological advances
With the advancement in technology today, the only real limitation for retailers it seems is that of their imagination. Again we can look to Amazon, one of the greatest innovators of the last 15 years who started life as a simple online book store but now have fulfilment warehouses run completely by robots and plan to use drone technology to further automate the retailing and delivery experience for customers – brilliantly innovative! Nanotechnology is another potential game changer and has such far reaching implications that even food can now be reformed to add more value to a product or lengthen its shelf life to comply with regulations more effectively. If a food manufacturer can add something to a product to make it easier and better for the body to use, and therefore more likely that the consumer will buy, the proposition suddenly becomes much more appealing (and unique!)
It’s one of those buzz phrases that seems to have been around for decades, but have retailers ever really considered what impact a few degrees change in global temperature could have on their industry and bottom line sales? We know, through Summit’s unique data insight and Forecaster technology that a 10oC rise or drop in temperature against the seasonal norm can lead to 100% uplift in sales conversion. So it came as no surprise that the unseasonably warm weather over Christmas led to a cluster of poor performance reports coming out of the major retailers such as Next and M&S this month who perhaps hadn’t even considered the impact of weather conditions. Retailers and brands who embrace digital analysis and data forecasting as a proactive strategy are far more likely to be the long term winners in an ever changing global climate that shows no sign of slowing down.
2016 is just the start…
There is no doubt that those retailers most open to change and at the forefront of technology and innovation will be the winners of tomorrow as urbanisation, climate change, rises in debt, technological advances and all the other global trends we are seeing start to directly impact consumer behaviour worldwide.
And while there are signs of innovation beginning across the retail industry, there is still a huge opportunity for retailers and brands to take advantage of should they have the courage. If it’s not already part of your strategy today, then it definitely should be, as 2016 and beyond becomes the era of digital innovation.