December 27, 2016

Retail pundits predict 2017 and beyond

Pythia (photo: Olga Kuevda_shutterstock)
Olga Kuevda_shutterstock
The mother of all soothsayers is regrettably no longer available to advise traders on the marketplace
In ancient times when the priestess Pythia presided over the Oracle of Apollo at Delphi, interpreting the future was big business. Little has changed since then; we just call our soothsayers consultants. Then, as now, we urgently need to demythologise the often sibylline answers today's highly-paid experts give to the overhyped mystery of things to come.

The best way to predict the future is, of course, to make it yourself. The next best thing is to interpret what the movers and shakers are doing as the minnows will usually follow the Tritons.

In retrospect, the future may have looked unfathomable to most contemporaries, but often turns out to be little more than a continuation of existing trends that should have been glaringly obvious to all concerned at the time. So perhaps we should look at what is in order to know what will be.

But do the trade gurus we have asked to ponder the future agree?

A reality-show world

This year has seen some big game changers in the political arena that will inevitably affect retailing in 2017 and far beyond. These include the Brexit referendum on June 23 and the post-truth victory of cocksure showman Donald Trump and the alt-right over Martha's Vineyard liberalism in the US presidential election on November 8.

Clearly, political establishments in the West face a populist backlash against globalism. As UK Independence Party's Nigel Farage chums up to The Donald in the latter's gold-plated tower on Fifth Avenue, Marine Le Pen gains momentum for the French presidency in April.

Democratic institutions will also continue to face the fall-out from the Great Recession, bequeathed to us by the banker fraternity, which has martyred Greece. Further strains will be imposed by waves of migrants and refugees from less prosperous regions with a deadly undercurrent of religious fanaticism.

Experts view: Future view (photo:
Scanning the horizon
As the world awaits the inevitable sequel to 'The Big Short', Trump's nationalist agenda means that the reset button will be hit on international free trade agreements as well as US relations with Russia, the People's Republic of China, the Arab world, and emerging markets.

Meanwhile, cyber technology continues to encroach relentlessly into every area of our lives via the smart home and the internet of things. These blessings have not been attended by any noticeable increase in transparency and accountability from FANG (Facebook, Amazon, Netflix, Google) & Co, unless one includes relations with the NSA and US immigration authorities. Last but not least, Amazon's experiments with a checkout-free store, delivery drones, self-driving trucks, and even a flying warehouse do not bode well for many low-paid jobs in retail.

In fact, increasingly smart and environmentally friendly commercial drones, as tested recently by Amazon near Cambridge in the UK, look set to revolutionise trade logistics. Deutsche Bank estimates that delivery costs by quadrocopter ($0.05 per delivery mile) significantly undercut last-mile delivery by van (more than $2). So when the maths add up, the next instalment of our brave new world is only a matter of time.

But what do the international experts think? As in previous years, we asked:

"What do you see as the most significant or exciting development in retailing/the fmcg industry and the most important challenge for the future?"

Their answers are given below in alphabetical order of surname.

Getting Ahead of Tomorrow

Professor Joshua Bamfield, Director, Centre for Retail Research, Newark Beacon Innovation Centre, UK:

Prof. Joshua Bamfield, Director, Centre for Retail Research (photo: Newark Beacon Innovation Centre)
Newark Beacon Innovation Centre
Joshua Bamfield: "Retailers will need employees to be more productive"
"There are four major challenges confronting every retailer in the UK. Online retailing, both food and especially non-food, is growing apace, with more than 20 per cent of UK non-food sales likely to be done online next year. This will be bad news for stores that are poorly positioned commercially. Not everyone will survive.

Converting 'omnichannel' from a 'strategic insight' into something operational, integrating store and web operations, payments, customer databases etc. is a major task, and some companies are seeing it work. In 2017, the customer focus will again be on mobile retailing, now the fastest-growing online channel, making it effective, safe and operational.

There are even larger problems on the political front. Significant annual wage increases have been imposed through the new Living Wage for the next few years by government, at a time when retail price competition is acute and the recent depreciation of sterling will force up the prices of imports and foodstuffs.

Retailers will need employees to be more productive, which will mean more automation, higher investment and the closure of high-cost unproductive units and stores. Cuts in the labour force will follow. Retailers will also have to continue creating new, low-cost supply channels both to remain competitive next year and to ensure they can survive after Brexit.

We are more optimistic about the economy than many commentators who often lacked objectivity since the Brexit vote. We do not think there will be a recession next year, but the growth of consumer spending will reduce to about 1.5 per cent p.a. while inflation will rise to about 5.5 per cent.

Higher labour costs, lower growth and the need for heavy investment will make life quite tough for retail CEOs. UK retailers have seen worse than this, but no doubt it will be a struggle."

Dagmar Bottenbruch, Co-CEO of fintech start-up CrossLend, and Angel Investor, Kronberg/Germany:

Dagmar Bottenbruch, Co-CEO of fintech start-up CrossLend, and Angel Investor (photo: Bottenbruch)
Dagmar Bottenbruch: "The consumer space is becoming both super-standardised and super-fragmented"
"It looks like the consumer space is becoming super-standardised at one end (cheap undifferentiated stuff all over the world) and super-fragmented at the other with special offers in terms of products and stores for very specific consumer target groups (i.e. foodies and special food interest groups, older people, rich people, athletic people etc.).

Social media and Big Data make the specific targeting ever so much easier, and we are seeing these phenomena affect all areas of daily life. This is a huge challenge because the business thinking before the internet era, which demanded either focus on value or volume, is being totally challenged.

Not surprisingly the company that seems to be able to do it all is Amazon…"

Professor Simonetta Carbonaro, Co-Owner of REAL_ISE Strategic Consultants, Karlsruhe/Germany:

Professor Simonetta Carbonaro (photo: Ilvio Gallo)
Ilvio Gallo
Simonetta Carbonaro: "Consumption has always been closely connected with trust in the future"
"Consumption has always been closely connected with trust in the future. Today, the dream of ever increasing prosperity has come to an end in western societies. This has been replaced by a general lack of perspective, which has eroded trust in the political and economic establishment as well as in the power of democracy to change our lives.

Therefore more and more people are taking their fate into their own hands instead of relying on traditional forms of political democracy.

This trend runs in two contrary directions. On the one hand, there is backward-looking political activism which yearns for the dreams of yesteryear. This is opposed by a completely different type of activism, which tries to effect change via ecological and social projects. Such a polarisation of future perspectives will increasingly be reflected in what and how consumers buy.

As with New Balance sneakers, products will conquer the market that are based on discriminatory patriotism and aggressive, self-absorbed localism. The activism behind these nationalistic products will primarily stimulate 'cheap-at-any-price' consumption because it embodies past dreams where everything can supposedly be in abundance.

Paradoxically this will give new life to our current globalised, mechanistic-industrial production and consumption model.

However, sustained consumption based on open-minded, intellectually-curious and global regionalism will also establish itself. The best examples of this are the Slow Food and Terra Madre movements.

Such movements aim to invent, mould and experiment with the future via a multitude of crowd-funding or crowd-investment platforms. For most of these activists the transformational dimension of the projects they support is far more important than risk assessment and return on investment.

These crowd-order viz. crowd-supply platforms even go one step further and combine the attempt to invest in the future with making a gesture when one buys. As part of an ecological and social movement, such platforms have developed a promising retail concept that will challenge classic retail in the near future.

They are based on four pillars: 

  • A short and vertically-integrated value-added chain that will make sustainability and fairness affordable for the end consumer;
  • Transparency along the whole food chain from field or factory to the consumer. This will create trust and involve the customer in the manufacturing and retail process;
  • A campaign principle based on collective orders. This reduces the complexity of the order process and increases the sensitivity of customers to the relevance of the product (contrary to Amazon's model of immediate availability);
  • The big-pack principle. This saves packaging and logistics costs and stimulates customer awareness of the use value of products. This is because customers are forced to decide whether they will store the goods they have ordered or distribute them among family and friends.

These new retail concepts will mobilise people on different levels to act in a communal way. In turn, they will make shopping more of an experience and give it greater meaning. Their success will depend upon whether they can find a point of interaction with the activists of the contrary movement without losing the support of their own members.

For example, one can understand Fair Trade not only in terms of ethics, but also as an anti-migration measure.

All this represents a particularly big and exciting challenge for brands and corporate communication, which will be far more emotional than any form of 'emotional marketing'! But for the time being, the future of retailing will be dominated by the exclusion principle."

Teo Correia, Senior Managing Director, Accenture Consulting, Dublin:

Teo Correia, Senior Managing Director, Accenture Consulting (photo: Accenture)
Teo Correia: "CPG companies must re-invent the way they run their business"
"The consumer goods industry will grow by as much as $700bn globally by 2020, with much of this growth coming from beyond familiar brands. Meanwhile, today's consumers are more informed and will review, compare, consult and contrast purchase activity at any time in nearly any location, making digital and social influence important and trustworthy sources.

To capture a share of the growth, consumer packaged goods companies need to exceed the expectations of today's consumers, providing them with a new set of experiences for each brand, enabled by new agile and competitive ways of running their businesses. They must re-focus on the consumer rather than goods.

Digital technologies will allow CPG companies to put the consumer first. Thus, leading the engagement with the consumer becomes a real source of competitive advantage. It can also allow brands to regain consumer trust, not only relative to other brand owners but also ensuring increased channel power.

But to secure this position, CPG companies also need to re-invent the way they operate their business, giving them the agility and economic headroom to capture the new value creation opportunities on offer."

Professor Utho Creusen, Founder & CEO Positive Leadership:

Professor Utho Creusen, Positive Leadership (photo: Positive Leadership)
Positive Leadership
Utho Creusen: "Travelling to Silicon Valley is all very nice, but not enough"
"Digitization is not taken seriously in Germany. Research from consumer research company GfK shows that only 35 per cent of local CEOs have it at the top of their agenda and less than half have full responsibility to lead digital transformation. Travelling to Silicon Valley is all very nice, but not enough.

Investing in start-ups and accelerators is not enough either. We have seen many examples where big retailers strangle start-up cultures and kill innovation. We have to understand the revolution we are facing. Books and consumer electronics are just the beginning.

Corporate boards must ask the right questions: Is our digital readiness at the right level? Is our management fit for digital transformation? Who is going to attack and cannibalize our business? Do we need a digital unit? What competence does our Chief Digital Officer really have? Are we investing enough in big data analysis?

The correct answer to these questions will determine future success."

Linda Eatherton, Partner, Director Global Food & Nutrition Practice, Ketchum, Chicago:

Linda Eatherton, Partner, Ketchum (photo: Ketchum Pleon)
Ketchum Pleon
Linda Eatherton: "Retailers are following their tribes"
"This is a pivotal moment in retail industry history. The future is really up to the retail segment and how it chooses to respond, navigate and lead collectively. Typically in times of change and challenge competitors go separate ways and end up fracturing the marketplace and stealing share from each other. I expect we will see that very scenario as some lean into more online marketing; others focus on fresh and micro-sized stores; while others burrow in on the deep discount big box stores.

What is happening here is that retailers are following their tribes. At Ketchum, we have done extensive work to identify the nature of tribes – like-minded consumers – who are connected by behaviour, philosophy or values more than demographics.  It's a completely social world, and social norms create bonds of affinity that bring people together in thought and also in choices and actions.

The opportunity before the industry is to come together to identify what role retail will serve consumers in the future. Will retailers continue to be transactional purveyors, or will they unite around a new, modern and elevated role as advocates for the consumer; as third-party qualifiers of quality and safety; as activists for change?

Loyalty and value will be lost in a transactional marketplace unless retailers build a long-range plan to lead evolution versus face revolution."

Dr Kay Hafner, Founder & CEO, Hafner & Cie., Digital Change And Strategy GmbH, Essen/Germany:

Dr Kay Hafner (photo: Hafner & Cie)
Hafner & Cie
Kay Hafner: "Disruption will become the norm"
"Disruption will become the norm. The year 2016 has sharpened the digital awareness of all companies once and for all, but still only a few of them will tackle the necessary changes in an active way. Many CEOs and owners look longingly at start-ups all over the world, which at least seem to be mastering the new challenges with ease.

In order not to belong to the 50 per cent of companies who won't be successful in 2020 or even still in existence, one must kill some old myths in 2017 even though or precisely because they are still making good money.

Every company should realise pronto who their future attackers are, what their customers really want, and how they can rethink their business model in a sustainable way. This could be via a start-up of one's own or by creating a separate digital unit. It will certainly involve hiring more digital natives and giving more scope to leadership in order to overcome one's own static processes.

As a rule this can't be achieved simply with a few digital projects, you have to create a whole new roadmap for change."

Tim Harrap, Head of Collaboration, Lye Cross Farm, UK:

Tim Harrap (photo: Harrap)
Tim Harrap: "There is a significant lack of political leadership surrounding Brexit"
"The most significant development in retailing/fmcg industry has to be the lack of political leadership surrounding Brexit. We are within a major social transformation where old structures are being challenged (more so than ever), whether cultural, political or economic.
Economically, the market place for corporates is facing cartelization through M&A activity to the point where the biggest players are quasi "state-controlled" enterprises. Yet they are unable to deliver to parts of the market in terms of smaller and swifter sales – the giants cannot necessarily do up their own buttons!

Conversely, the smaller players, SME, artisanal, craft production, remain fleet of foot and continue to have distinct opportunities to capture business and stand out. The recent publication of food marketing guidelines by the Food Safety Authority of Ireland (FSAI) is a case in point and shows how big business cannot just buy its way to authenticity.
Culturally, I know there continues to be fertile social exchange between nations in Europe and across the world over food and beverage. The fmcg commercial world breaks down barriers and pleasingly, I would suggest, can counter overzealous petty nationalisms. For the British (English?), however, the current climate sees our soft power credentials being seriously undermined.
Politically, fmcg, especially in the UK, faces immense problems with the risk and uncertainty thrown up by populist governments and the lack of a cohesive polity. From farmers' fields to food production, delivery and at retail, the costs of doing business are set to ramp up with no guidance from the political classes as to how this scenario will play out.
The most important challenge in the near term is what @umairh recently tweeted, namely, that the Americans are now facing the equivalent of the collapse of the Soviet Union – something I have thought for a while. If you are into your Kondratieff waves, I would suggest they are longer than 60 years and go out to 72 years.

With the Bolshevik revolution in 1917 we see the collapse of the USSR in 1989. The end of WW2/Hiroshima/Nagasaki in 1945 suggests to me a major, critical turning point in 2017. That is quite a context in which to operate an FMCG business. Certainly we are living in febrile times."

Ibrahim Ibrahim, Managing Director, Portland Design Associates Ltd, London:

Ibrahim Ibrahim, Managing Director, Portland (photo: Portland)
Ibrahim Ibrahim: "Parallel retail will augment shopping in public spaces"
"I think a very interesting development next year could be the potential growth of 'parallel retail' with augmented shopping in public spaces. Where the virtual world is linked to the physical world creating a 'parallel' realm of digital engagement and shopping overlaid on the physical world.

As Tom Henrikkson suggested: "A 'clickable world' where the world around us becomes our web and the mobile device our cursor." This may engage people in the real world in a different way to find a new meaning for space. Creating places that are more fluid, less prescribed with more opportunities for appropriation and serendipity.

If this idea of 'parallel retail' becomes widespread, it will question the whole notion of public realm and tenanted space as well as the GLA/GFA (Gross Leasable Area/Gross Floor Area) model."

Boris Planer, Chief Economist, PlanetRetail, Frankfurt:

Boris Planer, PlanetRetail (photo: World Retail Congress)
Boris Planer: "Retailers must prepare for all outcomes"
"2017 will be a decisive year for Europe. The probable start of Brexit negotiations, as well as the upcoming general elections in France and Germany, will prepare the ground for whatever will be left of the world's largest internal market in three years' time. A hard Brexit alone will reduce consumer spending in the free trade area by 17.4 per cent.

No one expects retailers and their suppliers to be intimidated by worst-case scenarios. However, it will be important for them to prepare for all outcomes. Modern retailing needs open borders, and there is a real possibility that borders, in the coming years, will feature more barriers than in the past – be it non-tariff trade barriers, which are now on the advance globally as economic nationalism spreads, or financial barriers such as the heavy currency fluctuations seen in the UK or Russia.

Retailers will think carefully about which countries can be part of reliable international supply chains going forward. Medium-sized suppliers will hedge themselves against geopolitical risks by pushing into new markets outside the EU."

Ben Policella, International Food Sales & Marketing Consultant, Rome:

Ben Policella (photo: Policella)
Ben Policella: "The challenges for 2017 will come from the uncertainty thrown up by recent events in the UK and the USA"
"Retailing is heading towards a technological revolution aimed at greater customer engagement, enhancing the experience and significantly altering the concept of consumer interaction. Targeted mobile apps and analysis of feedback will lead to a more personalised service.

The goal is for the offer to be so closely matched, that we will spend less time browsing for goods (on the High Street or online) and ultimately spend more money and feel a greater sense of satisfaction.

The challenges for 2017 will come from the uncertainty thrown up by recent events in the UK and the USA – companies who currently export to those markets and also those looking to enter them may delay investment until some light is thrown on how trade policies will evolve.

2017 will also see a series of elections across Europe and the results may exacerbate issues such as nationalism, protectionism and weakness of the euro, holding back consumer confidence and opportunities for growth in an already fragile region."

Christiaan Rikkers, CEO & Chief Creative Officer, JosDeVries; Maarssen/NL:

Christiaan Rikkers, CEO, JosDeVries (photo: JosDeFries)
Christiaan Rikkers: "Rigid format thinking is no longer efficient in times where change is the only constant"
"The most exiting development for us as a design agency is to see that the overall role of the store is slowly transforming. It is ever more important that we use the physical store as an advantage to maintain and deepen the customer relationship in a time where digitalization and access are the norm.

This is of course not without consequences for how we approach format differentiation. Rigid format thinking is no longer efficient in times where change is the only constant. So a flexible approach to viewing formats is an exiting new opportunity to connect with the customer on a completely different level.

Therefore we view formats as building blocks that can act and function as standalones but which can also be blended together. They must rise to the challenge and really make the customer engage and connect with the brand. New technologies will obviously play an important role in facilitating these kinds of interactions.

Of course one can already find great examples of where projections, screens and gamification have been applied in the store, but our belief is that we can expect many more innovative solutions in the near future. We are already getting excited about new technologies such as altered reality, the Internet of Things and artificial intelligence, not just on a functional level, but also as a way to facilitate interaction and experience."

Dr Alan Treadgold, London-based independent consultant to retail and consumer products businesses globally:

Dr. Alan Treadgold (photo: Alan Treadgold)
A. Treadgold
Alan Treadgold: "Digitize the product and the experience itself"
"More disruptive and even quicker change will surely define 2017 and beyond for retailers, consumer products businesses, and consumers. It feels very old school now to be talking about accelerated growth in e-commerce, mobile platforms, omni-channel retailing, and so on, as key trends. That's just a given. 

In 2017 there's surely going to be a lot more focus on getting stuff to shoppers far more quickly, flexibly and effectively. I'm expecting – and certainly hoping – to see a lot more attention given to the fulfilment challenge. For a lot of retailers with omni-channel operations current 'solutions' just don't work – either in terms of cost or from an immediacy point of view for their shoppers.

One answer may well involve physical solutions more compatible with contemporary urban systems. So more drones in the air, more tunnels underground with driverless pods, and – please – far, far fewer delivery vans on streets.

But another much more creative answer is to digitize the product and the experience. So 2017 could be the year that 3D printing (additive manufacturing) and Virtual Reality really come of age, when it's code and digitized experiences that shoppers are buying, rather than physical stuff. Truly, the revolution for the retail industry is only just beginning.

These and other themes relating to the nature of change in retailing and the challenges for retail enterprise leaders are discussed in my recent book, co-authored with Jonathan Reynolds: 'Navigating the New Retail Landscape: A Guide for Business Leaders', Oxford University Press, July 2016."

Bill Webb
, The London College of Fashion Business School, Honorary UK Member The Ebeltoft Group of Retail Experts:

Bill Webb (photo: Bill Webb)
Bill Webb
Bill Webb: "The convergence and globalisation of leading brands is diluting their potential to add value and widen margins"
"I am increasingly concerned about the on-going viability of the fashion retail business model. Firstly, negative inflation, migration of sales to digital channels and the changing consumption preferences of young consumers are weakening top-line sales, while retail operating costs continue to rise.

Secondly, the convergence and globalisation of leading brands is diluting their potential to add value and widen margins. A recent visit to Dubai revealed a shopping city of shadows and ghosts with failed brands like Adams, BHS, and Jane Norman still in evidence, whilst others, operated by partner companies, seemed to have little relevance to their local market.

Debenhams, for example, was almost deserted. The brand character and any element of differentiation or surprise were conspicuously absent. COS was an honourable exception.

Fashion is becoming ubiquitous with innovation moving to other sectors including technology and food service. Those looking for an early warning of what is to come should note the closure of expensive flagship stores in Hong Kong and China by brands including Forever 21, Abercrombie & Fitch and Hugo Boss."

Julian Wild, Partner, Corporate Finance for Rollits LLP, Hull/UK:

Julian Wild, Partner, Corporate Finance, Rollits LLP (photo: Julian Wild)
Julian Wild
Julian Wild: "Retailers must keep consumers interested in these difficult economic times" (photo: Rollits)
"For me the most interesting retail development has been the growth of the high-quality, excellent farm shops like Keelham Hall at Skipton in North Yorkshire which opened in June 2015. For three generations its family of farmers and butchers have been dedicated to celebrating fresh food and making great-tasting affordable, locally-sourced food available to everyone.

Keelham Hall believes in championing the fantastic suppliers and food that Yorkshire has to offer with food from more than 400 farmers and suppliers. At Skipton you'll also find a bakery, juicery, alehouse, flower shop, award winning butchers, and barn stocked with seasonal produce. It's complemented by The Keelham Kitchen, a café-restaurant open seven days a week with everything made from scratch everyday using produce that can be bought from the shop.

The most important challenge for retailing and fmcg companies is to keep the consumer interested in difficult economic times when online is a huge threat to traditional grocers. Such farm shops are exemplary in this respect. (By the way, you can follow the new Rollits Food Group Twitter account for the latest UK food & drink news @RollitsFood.)"

Clive Woodger
, Founder, SCG London:

Clive Woodger, SCG (photo: SCG)
Clive Woodger: "It's either Alibaba's Singles Day or Buy Nothing Day"
"'Disruption' seems to be the current clichéd trend to describe the changes brought by empowered electorates, consumers and employees. Politicians along with retailers and corporations are still adjusting to a new world order.

Two opposite dynamics can be observed which retailers and brands need to face. At one extreme, you can still appeal to the massive potential of creating consumer desire through classic bargain events like Alibaba's recent Singles Day which grossed over $17.8bn in 24 hours.

In contrast, the growth of anti-consumerism sentiment targeting the big global operations is exemplified by the international spread of Adbusters activities like Buy Nothing Day, the increasing call for local sourcing, and the bypassing of manufacturers and retailers via self-help services swapping and recycling goods and services.

The disruption caused by Uber, Airbnb etc. in the so-called 'gig' economy is supposedly about independent workers, but the benefits it brings these workers is now being called into question. We may be seeing the beginning of a backlash against what were originally dynamic new players but who can be seen as just another form of multi-national corporate dominance.

For many years retailers have realised they should be far more than efficient distribution networks, but some are still grappling with the need to provide a clearly differentiated, consistently rewarding 'experience' across their digital and physical eco systems – and also respond to changing society demands and values. Consumers may talk ethics, localisation and environment, but they still want ultimate value and an efficient process.  

So the 'new normal' means that fundamentals are still the same for retailers despite disruptions…staying relevant to changing lifestyles and aspirations…achieving the right combination of quality, price and service...and being seen to do what you say you do!"

Lebensmittel Zeitung print and digital (photo: LZ)
Our German retail B2B newspaper, Lebensmittel Zeitung, in print & digital
Statements introduced and collated by Mike Dawson, international editor,
Lebensmittel Zeitung

A happy, healthy, wealthy and imaginative 2017 to all our readers!

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