Retail Predictions For 2019: Moving Beyond Dog Bites Man
Happy New Year! Retail predictions started early this year. I’ve had lots of time to read, and the first one that popped across my email came on December 26 at 9:08 am… Seriously? I’m not going to name names, but my first reaction was, ”I also predict that dogs will continue to bite people, the sun will continue to rise, and the tides will rise and fall,” but then, when you’re writing an article on Christmas day for a 9 am publication, you’re unlikely to bring your A game. This guy didn’t. The theme was pretty much as I describe other prediction articles below. A snooze.
Still, the predictions keep coming, except from Scott Galloway who said, “I’m just not feeling it.” Smart man, Scott. Most predictions out there are utterly uninspiring. “The Retail Apocalypse has been canceled.” That’s a snooze. It never existed. “People are coming back to stores.” Um, 90% of them never left. “Omnichannel is everything.” Ya think?
So having been extra snarky, do I dare dip my feet in the predictions waters? Sure, why not? I welcome your snarks right back at me!
Prediction #1: Amazon’s retail growth is going to start leveling out. That’s actually not as shocking as it sounds. Two boring axioms that we tend to forget all too easily: No markets are infinite and every business has to ultimately make money. Amazon has changed the way retailers operate, but the conventional wisdom that “Amazon is pouring all its retail profits into R&D” is not quite correct. There were not a lot of retail profits at Amazon in the first place. And now, to some extent the playing field has been leveled. Prices have been matched, and on the outbound side, shipping charges are crazy when you have a mammoth assortment like Amazon does. And Amazon’s foray into apparel, while generating a lot of top line growth, is also generating boatloads of returns.
So as a means of lowering shipping costs, Amazon has started outsourcing Prime fulfillment to 3rd parties, with varying degrees of success. Have you noticed? And 2 day Prime is simply not always the promise anymore. Have you noticed?
Long and short, retailers, take heart. You have met yet another challenge, and I expect your futures will be bright, unless:
Prediction #2: Carelessly implemented tariffs will be the act of killing the goose that lays the golden egg for retailers. I have always believed we need to manufacture more stuff here in the U.S. Clothes, towels, appliances, furniture… we can’t just be a nation of fatted calves consuming what others make. But getting from here to there is the hard part, and I have seen no evidence of thoughtfulness around how to do this right. So beware and hold onto a few sheckels, just in case. And speaking of those sheckels:
Prediction #3: Retailers will be under more pressure to improve the lot of their workforces, both in store and in distribution centers. The economy is strong, and low-paying jobs are too easy to find. But retailers really do need a knowledgeable workforce to meet customer expectations in-store and in the customer service locations. So, on the one hand, expect to spend money on technologies to support the workforce, but on the other, expect demands for better wages and fringe benefits (can you spell ‘healthcare?’). No one will force a retailer to comply - that’s not the way governments are operating - but market forces are strong right now. If you want any kind of talent at all, you’re going to have to pay for it.
Prediction #4: Data privacy will be one big fly in the conversational commerce ointment. First of all, it’s not clear that conversational commerce brought to you by a specific retailer (say, oh, Amazon) was ever going to fly without some kind of price checking capability, but let’s assume it was going to be a home run. People have insisted for some time that their phones are “listening to them” and no sooner do they finish discussing something, when their computer and phone starts serving up ads for that thing. I get asked about it all the time and have said over and over again “No way.” Then partner Steve Rowen sent me this article from Vice on December 29 which pretty much says “Yeah, they are.” Damn, I hate to be wrong!
When you think about it, it actually makes technical sense. If your phone is waiting for you to say “Hey Siri” or however you ask it for something, it obviously has to be listening. But that still leaves us with the question: how long are you keeping this data and are you selling it to anyone? If the answer is “longer than 30 seconds” and “yes” you are asking for a lot of trouble. A lot. Apple, Facebook, Google, take note. This could be a very big deal. Presume nothing. People care and sentiment is clearly running against you. Tread carefully. My advice to all other retailers is to be careful whose data you buy and how you use it. Just because you can do something, doesn’t mean you should, and being intrusive never made for a great customer experience.
Prediction #5: Alibaba will start making an impact in the West. In the early 2000’s, we fixated on Walmart. For the past decade, it has been all Amazon all the time. Alibaba is big in China, we all know that, but its initial entry into the U.S. market, 11 Main, was a bust. I did write a comparison between Alibaba’s “Single’s Day” and Amazon’s “Prime Day” in November. At that time I talked about Amazon and Alibaba being on parallel paths in different universes. I’m betting that Alibaba is going to make a bigger impact on Amazon’s universe than vice versa. I may be early by a year, but I believe Alibaba is coming. It may not decide its next major foray should be in the US, but it is going to make an impact somewhere in Europe or elsewhere in Asia/PAC. And you can be sure the company has a lot of headroom for growth. Jack Ma is a patient and clever guy. His company is going to be a lot bigger before it’s done. Plus, in some ways, Alibaba is a better karma company than Amazon, which is being pummeled by negative PR.
The retail industry will continue to change and evolve, forced to do so by new entrants who challenge the status quo. Alibaba is next up in the western world.
So those are my predictions for 2019. What do you think? It will be interesting to see if vendors have anticipated these predictions at the NRF Big Show, or if it turns out to be the dog-bites-man show. We’ll let you know what we see.