12.08.2017 By: Tulip Retail

Top 5 Retail Trends for 2018

As seen on Seeking Alpha.

Summary

  • Grocery eCommerce in the U.S. is primed to take off.
  • Chat and voice will change the way we interact with products and retailers.
  • Crypto Currencies will move from being an investment vehicle to a form of payment.
  • The tech enabled store associate will change the in-store experience.
  • 2018 will be the year of the comeback. Where old trends are new again.

Major trends of 2015, such as Cryptocurrencies, mobile POS solutions, and Grocery eCommerce, have waded through the trough of disillusionment and are primed to make a major impact on the retail landscape. While newer trends, chat and voice, will look to build upon and entrench themselves into the customer journey.

Other notable trends, not included below but ones I am watching closely, are in-store robotics, augmented reality, and the continued advancements in artificial intelligence and its impact on the retail supply chain.

Grocery eCommerce in the U.S. Reaches a tipping point

There are several factors for why grocery eCommerce adoption in the U.S. has been slower than their international counterparts; geography, logistics, and consumer preference have been first and foremost. So what has changed?

There have been two major contributors that make 2018 a year for explosive growth in this category:

Investment into the enabling technologies: According to CB Insights, an estimated $5B was invested across 315 supply chain and logistics startups in 2016. These investments have enabled major technological leaps in the efficiency of the last mile, which grocery specifically relies upon.

We have also seen several new eCommerce platforms, with a specific focus on the grocery vertical, enter that market. This has created competition in the space and introduced a greater feature set that has helped make eCommerce a profitable endeavor for grocery retailers. Rather than modifying generic ecommerce offerings or building in-house solutions, new platforms are offering the back-end logistics that enable the picking and packing and inventory management that make fulfillment scalable and profitable.

The results are in for early adopters: Many in the space have been taking a wait and see approach, letting a few early adopters establish best practices and validate the opportunity. After several years those efforts have proven fruitful and can no longer be ignored.

Via direct conversations with retailers and grocery eCommerce providers, they are seeing on average a 4x increase in average basket size. Even more exciting than the large basket size is the cause of the large basket size; new customers. Corporates, assisted living facilities, and universities are all realizing the benefits of being able to save your shopping list, click a button, and having those groceries delivered, same day or next day.

Both factors are amplified by the increasing competition from Amazon (NASDAQ:AMZN), Wal-Mart (NYSE:WMT), and others who continue to fragment grocery retailers share of basket.

Chat as a sales channel

There is little doubt that chat is the preferred communication platform for millennials and beyond. We started to see the rise of chat-bot like solutions in late 2015 through our investment in Msg.ai, a conversational AI platform. Them and many others and have focused on solving the scalability challenge of chat based customer service.

What companies like Drift and others have proven is that chat is an equally effective solution for sales nurturing. It’s rare that I visit a b2b SaaS company’s website and not see the Drift powered chat window in the bottom right corner of my browser.

The leap from b2b sales enablement to b2c chat interfaces that help guide the shoppers journey is not a far one. Many have already implemented this to help answer common customer service questions but few have unleashed its potential to provide a better shopping experience and to reduce cart abandonment.

According to a study by the Baymard Institute, 1 in 4 shoppers abandoned their cart due to a “too long / complicated checkout process” and that the average U.S. checkout flow contains 23.48 form elements displayed to users by default.

What if, instead of presenting the user with a complicated form to complete their purchase, you took a page out of Drift’s playbook and started gathering the data you need via a conversation.

This is one area where I expect retailers to start exploring. One might even say that Alexa is doing just that.

Voice as a platform

We could easily say that 2017 was the year of the voice interface. Alexa and Google Home saw amazing growth over the year with the Amazon Echo selling over 15 million units. The big difference in 2018 will be the leap outside of the specific Echo or Google (NASDAQ:GOOG) Home hardware devices. As of June, Alexa had over 15 thousand skills available on the platform. These are equivalent to apps on in the app store.

However, the distinct advantage voice has over the Apple (NASDAQ:AAPL) App Store is that the operating system is in the cloud. In theory, any device with a microphone and speaker should be able to connect to this cloud and manufacturers are going to start to build around optimizing that experience. This could be in your car, your appliances, or at your favorite quick serve restaurant.

Amazon knows that to win the voice platform wars, it needs to grow its Skills marketplace and will amplify that growth by untethering their reliance on their own hardware devices.

I look forward to asking my washing machine to order more detergent or my car to place my Starbucks (NASDAQ:SBUX) order. Voice as a platform has the potential to change the way we interact with our everyday items and change the way we shop as a consumer.

Crypto Currencies

In the crypto world, Bitcoin reigns supreme, rising to over $12 thousand this past month. There is no doubt that this asset class is not a fad and is growing more relevant every day.

At the moment however, this asset class is still treated as an asset class rather than a form of payment or currency. Almost every article I read, treats Bitcoin as an investment vehicle rather than a better form of currency to buy things. For retailers to start to benefit from this incredible growth, they will need to begin to integrate crypto payment capabilities.

Many have attempted but are still converting back to U.S. dollars or local currency post purchase. In order to realize the full potential, retailers will need to hold that currency in Bitcoin or whichever crypto currency they accept. By doing so they have the potential to eliminate the transfer fee that has been eating away at retailer margins for years and give back those savings to the consumer.

The Tech Enabled Store Associate 2.0

In 2012 Ron Johnson made big news by stating that J.C. Penney (NYSE:JCP) would be getting rid of all fixed checkout counters by 2014. “Think of a physical store without a cash rep,” Johnson said, taking a page from the Apple Stores model of handheld POS terminals which he had helped to spearhead at his prior role. On news of this announcement J.C. Penney shares jumped from $19 to $21 per share. Unfortunately for Ron Johnson, he never had the opportunity to realize that vision after being ousted early the following year, but I think his premise was right… Perhaps not his timing.

Several other retailers followed their footsteps, including Nordstrom’s (NYSE:JWN) and Home Depot (NYSE:HD). However, these efforts failed to take hold or roll out nationally.

2018 is the year for a comeback. Not just for in-store mobile POS systems but for the tech enabled store associate. A recent $40m investment this past August by Kleiner Perkins in Tulip Retail, a mobile application provider focused on empowering workers in retail stores, was a great sign that we are ready for this space to take off.

Dominique Essig, Chief Experience Officer at Bonobos, stated:

Our store growth has been expanding rapidly and we needed a way to provide our in-store associates, or ‘Guides,’ with the tools necessary to serve the customer.

The competitive advantage brick and mortar holds over eCommerce is the personal interaction of the store employee and customer. Giving them the tools to amplify the experience will be vital to the stores success and a pathway to the omnichannel experience everyone has been waiting for.

2018 will be less about the early adopters exploring new technologies and more about retail catching up to consumer preferences and their competition, Wal-Mart and Amazon.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: dunnhumby Ventures is an equity holder in Msg.ai, a private company, who was mentioned in the article.