After the 'Retail Apocalypse' of 2017, What's Next?

These five forces are changing the face of retail.
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Photo: Riley Rose

Photo: Riley Rose

As online shopping gets easier and shoppers become savvier, the retail landscape is evolving so fast it can make your head spin, and driving revolutionary change throughout the industry. In our "State of Shopping" series, we're breaking down these changes with in-depth stories about what brands and retailers new and old are doing to adapt, both in stores and online.

Among other things, 2017 was the year that the term "retail apocalypse" officially entered our lexicon; it even has its own Wikipedia entry. And while, yes, a lot of stores closed this year — an estimated 6,700 by year's end, to be exact (many of them because of longstanding debt) — an estimated 3,000 will have opened as well. So while that term may be a little sensationalized, reflecting the downfall of a few high-profile retailers, and retail hasn't quite died this year, it has definitely evolved. 

Gone are the days that we drove to the mall, popped into Gap and Macy's, bought all the shoes, clothes and beauty products we needed for the season, grabbed some Orange Julius or Sbarro and went on our way. From the ways in which traditional retailers have pivoted to the smart strategies implemented by newer retailers right off the bat, we've learned a lot about what it takes to get people into, and spend money at, physical stores when there are myriad online alternatives; and, conversely, what online stores are doing to mimic the experience of shopping IRL.

After reviewing our own reporting, brands' earnings reports and analysis from companies like Euromonitor and McKinsey, we came up with five factors that seem to be driving the most change in the shopping landscape — particularly for fashion — right now, and are likely to become major themes as retail continues to transform in 2018 and beyond.

Personalization

Inside Nordstrom Local. Photo: Nordstrom

Inside Nordstrom Local. Photo: Nordstrom

If we had to pinpoint one overarching theme shaping the future of retail, it's personalization. In fact, in the Business of Fashion and McKinsey 2018 State of Fashion report, survey respondents identified personalization as the number-one trend of 2018; the report also cites a Linkdex survey which found that more than 70 percent of U.S. consumers expect some sort of personalization from online businesses.

Broadly, a big focus of retailers today is taking information they get from shoppers' browsing and purchasing habits and using it to create personalized experiences for those customers online — suggesting items you may like, for instance. Some have taken it a step further, introducing personal styling and personal shopping services, both on- and offline. Nordstrom, for instance, opened a store this year that holds none of its own inventory but is geared towards hosting personal styling sessions. Retailers like J.Crew and Topshop have also begun emphasizing their in-store personal styling services, wherein customers can make free appointments to have someone pull clothes for them and be more attentive than a typical sales associate.

Photo: @stitchfix/Instagram

Photo: @stitchfix/Instagram

There are also a number of digital-first startups that act as styling and shopping services, targeting men and women who don't want or don't have time to shop on their own. This year, one of these startups, Stitch Fix — a data-driven subscription box service that uses algorithms to send women clothing items it thinks they'll like — went public, raising $120 million in its IPO and proving the success of personalized retail.

We've also noticed a trend of smaller boutiques succeeding while chain retailers flounder — seemingly thanks to their ability to remain connected to their customers and thus make decisions based on their habits, as opposed to a top-down approach of dictating to customers what they should buy. Generally, we're likely to see much more personalized curation, by various methods, and retailers taking a more consumer-centric approach to stocking their stores — retailers that want to survive, that is.

Artificial Intelligence

Photo: Poshmark

Photo: Poshmark

Often utilized in ways that fall under the personalization umbrella, AI is something that fashion brands really started to understand and experiment with in 2017. Chatbots, often on Facebook Messenger, have been the most popular form of AI to be adopted by retailers. Some use them purely for customer service purposes to send order updates or as a more interactive FAQ page (and some have abandoned this use, finding that email is sufficient); others have used them to create personal styling or shopping services akin to the IRL ones mentioned above. Levi's, for instance, this year launched a bot to help shoppers find the perfect pair of jeans online. They hired the platform Mode.ai to build it, which last week announced it had been hired by Louis Vuitton for the luxury brand's first foray into AI: a Facebook Messenger bot that allows users to share products with friends, ask questions about the brand, browse products and ask basic customer service questions.

The next frontier in this space is voice-enabled hardware like Amazon Alexa. Jonathan Shriftman, Director at Snaps, a startup similar to Mode.ai that develops bots for companies like Nike, Coach and Macy's, recently told us, "With the proliferation of Alexa and Google Assistant, we're going to be talking to a lot of our hardware, too. We're going to a lot of brands and saying, 'You guys have an Instagram strategy; you guys have a Facebook strategy; you guys have a Youtube strategy, but what's your conversational strategy? Because this is the next big thing that's happening, and you need to be where your customers are.'" 

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Retailers are also beginning to use AI in tech-enabled stores. At Reformation's San Francisco store, for instance, shoppers can utilize a virtual assistant of sorts in each fitting room, using a monitor to request additional sizes or colors. 

Whatever the use, bots are also seen as being more scalable than humans, and a way for retailer to meet consumers' increasingly high expectations without necessarily hiring more salespeople.

Mobile/Omnichannel

Photo: Nordstrom

Photo: Nordstrom

As was the case last year and the year before it, more people than ever are using their phones to shop, so brands and retailers need the mobile infrastructure in place to facilitate that. According to the BoF/MicKinsey report, in the U.S., mobile transactions are projected to reach approximately $930 billion annually by the end of 2018. Shopping on Instagram is also poised to become more commonplace. The wildly popular social-media platform recently partnered with Shopify to launch in-app purchasing, which it plans to roll out to more and more brands.

Based on the earnings reports of several major retailers like J.Crew, Abercrombie & Fitch, H&M and Nordstrom, working to establish a more seamless connection between online and offline — aka omnichannel — is still a top priority. This year saw more retailers introduce features like buy online/pick up in-store, same-day delivery and mobile payment in stores that will surely become the norm next year.

Scarcity (Drops, Pop-ups)

Virgil Abloh and Heron Preston at 'The Drop @ Barneys.' Photo: BFA for Barneys New York

Virgil Abloh and Heron Preston at 'The Drop @ Barneys.' Photo: BFA for Barneys New York

Speaking of Shopify, the online retail platform has powered some of the most-hyped product drops of the year. From Kylie Cosmetics and Supreme to more traditional fashion brands like Alexander Wang and retailers like Barneys, seasonal deliveries are being eschewed for "drops" where there is little advanced notice and, often, a limited quantity of goods. They inherently generate buzz and hype on websites and social media and their fleeting nature appeals to the FOMO ingrained in all of us (or, resellers).

Photo: Jenni Kayne

Photo: Jenni Kayne

The same can be said of pop-ups. These ephemeral physical retail experiences were popular for merch drops in 2016, and it seems they've become even more popular and taken on new formats in 2017. Digital-first retailers like Outdoor Voices and Away launched pop-ups to test the brick-and-mortar waters. The mobile pop-up, in particular, gained a lot of speed (get it?) this year: Miansai and Jenni Kayne both set up traveling pop-ups in airstreams and Kylie Jenner recently sent her cosmetics around Los Angeles in a branded truck. 

Thinking outside the apparel box

The Wellery at Saks. Photo: Cindy Ord/Getty Images for Saks Fifth Avenue

The Wellery at Saks. Photo: Cindy Ord/Getty Images for Saks Fifth Avenue

A popular strategy among traditional apparel retailers is diversifying. This year, Madewell began offering a selection of on-brand beauty products, following in the footsteps of chains like Urban Outfitters and Anthropologie, for whom beauty has long been a major growth-driver; J.Crew seems to be in the process of expanding its beauty offering as well. Wellness, too: Saks Fifth Avenue has the "Wellery," while Fivestory recently opened a whole floor dedicated to wellness. Home has also been a popular category for brands to expand into as millennials grow up and begin "adulting" via home decor, from Garmentory to The Dreslyn to Gucci to Jenni Kayne.

Food has also become part of retailers' strategies to drive foot traffic. Quality food destinations like Eataly and Le District have replaced your standard food-court fair in malls, while department stores have been keen to install cafes or bars within their walls. Urban Outfitters invests in a pizza chain; Ralph Lauren has its Polo Bar and Tiffany & Co. recently opened a cafe in its flagship in which visitors can actually have "breakfast at Tiffany's." New beauty retailer Riley Rose offers all three: beauty products, home goods and candy.

Photo: Riley Rose

Photo: Riley Rose

A recent Euromonitor report on the luxury market noted that lifestyle and experiential categories were growing more quickly than products, summarizing, "Stronger global demand for luxury experiences is encouraging leading fashion houses to build bigger footprints in areas such as hotels, coffee shops, restaurants and bars." Indeed, as we've noted many times, millennial consumers are spending more on experiences than goods, and we've seen smart retailers capitalize on that in different ways: Outdoor Voices organizes hikes and jogs out of its stores; brands are opening pop-ups in hotels; and Maris Collective has bypassed the struggles of other retailers by focusing on hotel and travel retail, specifically. Gucci launched a home line recently: Could a Gucci restaurant or hotel be next? We wouldn't be surprised.

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