2016 Wrap-Up & 2017 Retail Industry Outlook

While 2016 was a pretty good year for US retail, for most retailers a repeat of 2016 growth will be not be easy replicate in 2017. After all, it is a transition year and as new economic and fiscal policies get activated, some amount of business and consumer spending uncertainty is expected.

The good news is that a relatively healthy GDP over the last couple of quarters and a largely stable housing market certainly bodes well for retailers early in the year. The key for retailers is to make sure that they absorb the policy change impact in the front half of the year without inflicting too much self-damage. Registering a bumper back half of the year through faster consolidation and slick execution is a must i.e. a robust Q3 & Q4 growth plan through proper customer segmentation, new product introduction and sound execution plans.

Humbly stated, my own fiscal round-up for US retail in 2016 indicates medium to strong fundamentals across a majority of retail concepts or segments. According to U.S. Census Bureau’s latest reported retail sales data total US retail sales from September 2016 through November 2016 were up 3.7 percent from the same period a year ago. The 11-month non-adjusted total retail and food services sales were up 3.1 percent from the same period a year ago. While electronic, gasoline, general merchandise and department stores showed clear signs of a sizeable slump in comp sales; other store retailers including DIY/building materials, drug, and furniture reported healthy positive sales comps when compared to 2015.

As expected, within the eCommerce channel, retailers saw the biggest gains as the last reported sales figures for 3rd quarter 2016 show a whopping 15.7 percent improvement over the corresponding period in 2015. The latest December 2016 digital retail sales data forecasts are reportedly quite positive as well.

With all this said, will 2017 bring positive news for US retail just like 2016? Let’s answer this question by spelling out the top US retail trends and assessments (not predictions!). Humbly stated, I arrived at these trends by synthesizing thousands of quantitative and qualitative data points and insights gathered from hundreds of retailers over the course of the last few weeks. Many of the trends stated below are my own independent assessments of the prevailing market reality and how companies are planning to slot their standard systems and innovation investments in the coming months. These trends will very likely shape the state of the retail business, processes and technologies this year and beyond. Several of these trends are expected to have a sizeable consumer behavior and operations-related impact as well.

  • Retailers will adopt more predictive pricing and product information data than ever before to fulfill digital and omnichannel demand.
  • On-hand inventories and freight traffic will see fluctuations due to likely changes to the global trade agreements and currency market shifts.
  • Digital payments will make decent gains in 2017. Store loyalty is waning somewhat even as investments in digital wallets and loyalty is expected to rise.
  • Fulfillment and order management will either prove to be a big success factor or a bust factor for some retailers as cost per order is still quite high for a majority of retailers.
  • Changes to labor hour/wage rate models may dampen a bit and will need a big push in 2017 from forward-looking retailers. Investments in improving digital task management and labor standards will take place.
  • More stores will shut shop in 2017 but new innovative smart store concepts will emerge.
  • Self-service check-out and related tools such as AI and digital Kiosks will see positive and broader adoption.
  • Retailers will outdo manufacturers in digital and supply chain innovation. Think private label, smart sourcing, robotics, 3-D, deeper catalogs etc…
  • On-demand subscription retail concepts will expand and grow further. Several non-traditional subscription areas will emerge i.e. organic farms, toys, cosmetics etc…
  • Point-of-Sale (POS) as we know it today will pretty much phase itself out to in 5 years. New automated/sensory and virtual/mobile checkout will emerge as new-age consumers will flock at retailers who will change the traditional POS status-quo in the stores.
  • Growing interest in artificial intelligence, sharebot, web bot and botnet adoption will soon become a Best-in-Class retailer fad.
  • Retailers will start to leap beyond eCommerce- investments will increase in re-platforming, connected devices, AR/VR integration, AI concierge, web bot etc.
  • Investment in augmented reality/virtual reality will offer unique store experiences. More and more AR/VR hardware and software companies will tie-up with retailers to roll-out new and unique experiential offerings for consumers and businesses.
  • Singular store and connected store networks will face increasing levels of data security and intrusion threats.
  • One view of product and customer will start becoming a reality. New smart analytics factories and internal retailer analytics SWAT teams will emerge who will provide un-filtered facts and solve complex customer and product data riddles via predictive and algorithmic data models.

Sahir Anand is an author, blogger and an industry analyst who analyzes and publishes regular retail and consumer industry research and insights. Sahir provides advisory, research and strategic services to Fortune 500 and Technology 1000 companies on an ongoing basis. Sahir worked in the retail industry and has pursued strategic retail and consumer industries research for much of his career. Sahir also supports technology startups bring innovation faster to market. Please feel free to reach out via email or Twitter: [email protected]; @sahiranand.