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2019 Retail Industry Outlook

Credit by Rod Sides.

Bolstered by a strong labor market, growth in disposable personal income, and elevated consumer confidence, 2018 was marked by strong retail sales. But the economy may face some headwinds in 2019—making the year one of transition for retailers, who may need bold moves if they want to set themselves up for success in the future.

Navigating Disruption

To stay competitive, many retailers have shifted their investment strategies over the past 10 to 20 years. They’ve moved from growth via new stores to growth via big investments in all areas of the business—for example, launching new digital sales models, acquiring other businesses, or transforming their fulfillment processes. The cost to increase market share continues to grow, and many retailers find themselves in a precarious position as they try to figure out how to win battles on multiple fronts.

Where can retailers focus their strategies in 2019 to help move to the right side of the tipping point? Six focus areas to consider are:

Loyalty: Emotional vs. transactional. Retailers would do well to look beyond tiered programs built around traditional loyalty and benefits—points, dollars off, gifts, mailers—that at best elicit “transactional” loyalty. In an industry shifting toward experience-based models, retailers can seek to make emotional connections, not just transactional ones.

Digital startups and funding. Digital startups are no longer playing in the shadows. They’re addressing chronic issues faced by the retail industry through innovative offerings, personalization, authentic engagement, differentiated fulfillment, and more. And the amount of capital flowing to retail tech startups is allowing these companies to realistically compete with established players.

To help offset the early gains made by these startups, traditional retailers will have to push ahead, blurring the lines between business development and corporate strategy. To acquire the next big idea, they might have to seek out guidance from specialists or through a scouting approach.

Emerging technologies. Gone are the days when IT strategy was limited to architecture, modernization, and enterprise resource planning (ERP) systems. Investment options, technologies, and vendors number in the thousands, making it challenging to navigate and home in on the next big thing.

Ultimately, retailers can figure out how to scale these solutions and embed them into their way of doing business. Leveraging the true power of next-generation technologies may require retailers to make some significant changes. They can seek to consistently mine the data they collect, transform their operations to deliver on the brand promise, and adapt to the future of work.

Leadership lessons from China. To build a competitive advantage, retailers can consider looking at global cross-industry trends and build capabilities that can shape consumer experiences. For example, in China, consumers and the retail market have skipped a generation of technology: Next-gen technologies in the United States are often yesterday’s technologies in China.

Retailers can look to the leaders in China to better understand the art of the possible in emergent areas such as online-to-offline, last-mile delivery, supply chain as a service, and social commerce.

Privacy by design. For retailers, consumer data is a must-have. For years, the industry struggled with how to create and use data. Now companies are on the hook for what data they have and what it says about individuals.

With regulation after regulation hitting the market, it’s time retailers had their privacy compliance road maps in place. But compliance can also be a catalyst for reinventing personalization and having honest conversations with consumers. Integrity matters in creating loyalty, especially when it comes to dealing with personal identity.

Supply chain as a differentiator. The supply chain is quickly becoming a way for retailers to offer consumers a differentiated service. But making the supply chain faster, more predictable, and cheaper is a difficult triad to manage simultaneously.

As retailers buckle down and prepare for potentially challenging times ahead, supply chain improvements can be a significant growth driver. But rather than just investing in trends like smart packaging in reaction to competitors, retailers would do well to think about accumulating long-term competitive advantages through wider supply chain strategies.

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