The end of the year is a time for reflection, a moment in time to stop, consider events of the past twelve months, and decide how to improve and adjust as we look ahead into the coming year with a sense of hope. But let’s not put a bow around 2019 just yet. In keeping with this tradition, I recently reflected back to my post of retail predictions for 2019 and was pleased to see that my hit rate was very high. I also found that there are many lessons still to be learned and additional work to be done, particularly as we consider the impact of new technologies and of staying aligned with the evolution of modern consumer expectations.
Soren Kierkegaard, a Danish philosopher and theologian said something in the 1800s that resonates to this day, “Life can only be understood backwards; but it must be lived forwards.” As we look ahead to not only another year, but another decade, let’s reflect back to five of my 2019 predictions and how they played out this year, with the hopes that they can give us a meaningful glimpse into the retail industry moving forward.
● Apple Jumps the Shark: Another lackluster year for Apple indeed. Not only was Apple a basic innovation no-show at its much-lauded WWDC 2019 event, the company continued to see falling sales on iPhones thanks to lack of innovation and oversaturation. While Apple recently reported modest revenue increases fueled by accessories and services, it’s hard to imagine these will become the bread and butter of Apple’s long-term growth. Apple still needs to do what it does best – launch entirely new categories that nobody knew they could live without. As I mentioned in a previous article, Apple’s current situation was actually predicted by Steve Jobs himself early in his career, when he foresaw Apple would likely follow in the footsteps of Xerox and IBM if the company “got away from the innovation that made them so successful in the first place.”
Adding to Apple’s 2019 flops was the hiring and firing of Angela Ahrendts, whom the company lured from luxury fashion house Burberry (LSE: BRBY.L). In my article on the matter, I discussed how the hire was completely out of sync with Apple consumers. Ms. Ahrendts’ expertise in retail was not applicable at a tech company where consumers primarily want cool gadgets, not necessarily shopping experiences.
One thing is for certain with Apple. If they are going to stay at the helm of tech innovation globally, they need to focus on their vision and find a way to listen to their customers. And they lack both. With 2020 shaping up to be more of the same, things aren’t looking great.
● Amazon: Prime membership plateaus and prices increase: I’ve made my feelings about Amazon pretty clear, particularly as the company continues to skirt tax payments regardless of how many billions of dollars it makes. We’ve been tracking consumer purchase behavior on Amazon for three years, and we found that the company’s core retail business is finally starting to lose its luster with customers, likely due in part to the constant fluctuation of its prices on its goods and the increasing cost of Prime, whose members are also falling off. Amazon probably already knows this, which is why it’s deepening its reach into web services and expanding into new channels like opening more and more physical locations, whether it’s new grocery stores, selling goods at Whole Foods or expanding Amazon Go stores.
We also found that increasingly, other retailers can offer the same online and shipping services, and consumers are less inclined to go onto Amazon. Walmart is a key example, and we found the company is actually gaining ground on Amazon as more shoppers continue to visit their online and in-store locations. This CNBC piece reported our data findings that the frequency of people buying items on Amazon six times or more per month has dropped to 40% this year from 80% in 2017. A majority of people this year, 55%, said they prefer to shop at Walmart versus Amazon, up from about 47% a year earlier. The percentage of people who favor Amazon has dropped to 45% from about 53% in 2018.
● Millennials will flock to luxury brands: “Flexing” was a term that took on a whole new meaning in 2019. Borrowed from Generation Z and Millennials, flexing can be described as wearing or displaying brands to show a personal association with the brand. This can be done to display wealth or status to make a statement. We found through our survey that the generation most likely to flex luxury brands in 2019 was Millennials in both the U.S. (19 percent) and the U.K. (22 percent). Luxury brands we included were Gucci, Louis Vuitton, Burberry, Hugo Boss and Michael Kors.
That said, Millennials were even more actively flexing sports and heritage brands than luxury brands. Here’s the full report if you’d like to read more.
As more and more Millennials and the up-and-coming Gen Z exercise their independence with their wallets, they’re also pushing luxury brands to innovate their e-commerce strategies. I mentioned in my 2019 predictions that Bain & Company forecasts that by 2025, Millennials and Generation Z will represent 45% of the global personal luxury goods market. As Boomers spend less, luxury brands will need to innovate their in-store and online shopping experiences, and fast, if they want to attract younger shoppers who are willing to flex really any brand, not just luxury.
● Baby boomers will constrict spending in a much bigger way. It’s indisputable. Boomers are pulling in their spending as they move further into their retirement years. We found that Millennials in both the U.S. (74 percent) as well as the U.K. (58 percent) were most likely to spend more than $50/50£ per visit in-store as well as online. This compares to 65 percent of Baby Boomers in the U.S. and 38 percent of Baby Boomers in the U.K.. Similarly, Millennials in the U.K. are also spending more than other generations online, as 50 percent of those surveyed spend more than £50 per visit, compared to 33 percent of Baby Boomers. In the U.S., more than half of Millennials (54 percent) are spending more than $50 per visit, followed by Baby Boomers (49 percent).
As Boomer shoppers get more conservative with their spending, they are also less likely to be tempted into impulse shopping. In the U.S., 87 percent of Millennials said they sometimes or always add items to their carts they weren’t planning to buy when shopping in-store. This compares to 78 percent of Baby Boomer respondents. U.K. respondents mirrored these responses closely, as 83 percent of Millennials said the same, compared to 69 percent of Baby Boomers.
● Customer-centricity will go mainstream: Nope. While I felt like we were on the cusp in late 2018, I was sadly mistaken. And you only have to look as far as the daily headlines about yet another brand misstep to realize this. And it’s not just limited to clothing. Just this week, the much beloved Peloton was slammed on social media for an advertisement that was deemed “sexist” and “dystopian.” Over and over brands and retailers continue to prove their disconnect with consumers, all the while talking the talk and saying they are “putting the customer at the center of everything they do,” without walking the walk. Why these companies continue to remain stubbornly against connecting with consumers before they launch products is dumbfounding. If we’ve learned anything from 2019, it’s that it is time to stop eye-rolling about oversensitivity of today’s shoppers, and embrace the idea that maybe you haven’t thought of every angle on an item, and it’s worth testing products with consumers before going to market, whether it’s an advertisement, a graphic t-shirt, or a new design. Until this happens, retailers and brands will continue to face consumer backlash, and as we’ve found in our research, recovering consumer loyalty is no easy task.
Throughout 2019 we saw some predictable trends shaping the industry, such as the evolution of different generations and shopping habits as well as the impact of technology and innovation. Retail also threw us some curve balls this year as fall-out from lack of customer-centric models was brought front-and-center. Without making any direct predictions (that’s for a future article) I’d say the industry continues to have its work cut out for it as we head into 2020. But those who are willing to align with consumers from experiences to technology to product will be most ready to meet the challenges that lie ahead.