7 retail surprises from 2017 and the opportunities they present for the future
2017 was a year of retail surprises. Amazon dominated retail news headlines and entered into nearly every retail category, but the year held other notable surprises, including store closures, bankruptcies and acquisitions. We are feeling cautiously optimistic about 2018, given that 2017 ended on a high note, with a record-breaking holiday season marked by 4.9% retail sales growth, according to Mastercard SpendingPulse. Retail disruption will continue in the new year as consumers seek out convenience, personalization and speed. This will further challenge retailers, but also provide them with opportunities to collaborate, take more risks and be more innovative. Here, we discuss seven retail surprises from 2017 and associated areas of opportunity for 2018.
- Retailers Announced an Unprecedented Number of Store Closures
2017 was a watershed year, with an unprecedented 6,985 announced store closures and more than 15 major retail bankruptcies. The store closure announcements included 596 department stores—most of which act as mall anchors. This provided a wake-up call and prompted a retail rightsizing at malls. We heard many times this year that “we are over-retailed.”
- Retail Opportunity for 2018: Store closures provide an opportunity for brands to occupy retail spaces and for landlords to use spaces in nontraditional ways, such as for shorter-term leases, smaller-format stores, and product and brand rotations. In 2018, retailers and mall owners will need to think strategically about the in-store experience, improving customer service, working with influencers, and using artificial intelligence technology to better understand and communicate with customers.
- Retail M&A Activity Surged
2017 was a very busy year for retail M&A and investment. Amazon acquired Whole Foods Market for $13.7 billion in cash and Walmart acquired numerous e-commerce brands, including Bonobos, Hayneedle and Moosejaw. Target invested an unconfirmed $75 million in direct-to-consumer mattress brand Casper, according to technology news website Recode, and started selling Casper products in Target stores. In addition, grocery retailer Albertsons acquired meal-kit firm Plated for an undisclosed sum. These are a just a few of the many notable retail deals from 2017.
- Retail Opportunity for 2018: Retailers are discovering that many startups are creating innovative solutions that help drive top-line and bottom-line revenue growth and increase traffic. M&A activity is likely to continue in 2018 as retailers seek to benefit from these startups’ solutions and from synergies with other companies.
- Walmart Worked to Become a Fashion Destination
Walmart acquired a number of e-commerce fashion apparel brands and retailers in 2017: the retail giant bought ShoeBuy in January, Moosejaw in February, ModCloth in March and Bonobos in June. Walmart is also creating a premium fashion destination on Walmart.com, building out elements of discovery and inspiration within the fashion portal. In the spring of 2018, Walmart will begin hosting a Lord & Taylor storefront on its portal, too.
- Retail Opportunity for 2018: Walmart will continue to be an industry leader and forward thinker in 2018. The company is challenging the entire retail industry to do some self-reflecting and step up to the plate to innovate and take risks.
- Walmart Saw Explosive E-Commerce Growth
Walmart saw its e-commerce revenue growth take off when it acquired Jet.com in September 2016, and the company has reported explosive online growth the last few quarters: e-commerce sales grew by 63%, 60% and 50% in the first, second and third quarters of 2017, respectively. Walmart is proving that it is a serious competitor to Amazon in e-commerce.
- Retail Opportunity for 2018: Walmart is likely to continue to build its e-commerce strategy around growing its Jet.com business. The company’s aggressive “plan, build, grow” model of innovation should lead to continued growth in 2018.
- Alibaba Guided for Revenue Growth of Almost 50%
At its 2017 Investor Day, Alibaba guided for 45%–49% revenue growth for its 2018 fiscal year (which ends in March), and the company is on track so far to meet its full-year guidance. The company reported annual growth of 56% in fiscal 2017 and of 33% in fiscal 2016. Alibaba is now partnering with US retailers for growth and has announced that it plans to invest $15 billion in global R&D.
- Retail Opportunity for 2018: Alibaba will continue to collaborate with US retailers to grow its platform in 2018, and its various events will encourage US retailers to join its open innovation platform. The company will continue to be an example of both east to west and west to east collaboration.
- Online Went Offline
In 2017, many retailers that were previously online pure plays expanded into offline formats, ranging from pop-ups, to stores within stores, to more traditional physical stores. For companies that are primarily e-commerce operators, physical stores serve as marketing assets that support their online business models. Examples of online retailers that have expanded into physical formats include Amazon, Birchbox, Bonobos, Everlane, Rent the Runway and Warby Parker.
Additionally, traditional retailers are partnering with e-commerce brands to offer those brands in stores. For example, Target partnered with online men’s shaving brand Harry’s to offer the brand in its stores and with Casper to offer Casper mattresses in Target stores. Also, Macy’s collaborated with Samsung and b8ta to offer a Samsung in-store experience center at the Macy’s Herald Square flagship store this year.
- Retail Opportunity for 2018: There are multiple ways for e-commerce players to leverage the physical retail experience. In 2018, online retailers will continue to expand offline, and the number and size of collaborations with incumbent physical retailers will continue to grow, as both parties can benefit from the business model.
- Amazon Acquired Whole Foods
On June 16, Amazon announced its intention to acquire Whole Foods Market for $13.7 billion in cash. Amazon closed the deal on August 28, and promptly reduced prices for some items at Whole Foods by as much as 43%.
- Retail Opportunity for 2018: Amazon gained a foothold in the grocery business with its acquisition of Whole Foods and prompted a new conversation about food retail. In 2018, food retail will focus not only on convenience, but also on home delivery, private label, organics, local markets, specialty foods, pricing, loyalty and retail real estate.
After a strong holiday season that saw retail sales growth of 4.9%, we are cautiously optimistic about 2018 and the retail opportunities ahead. Retail disruption will continue in the new year, but, along with challenges, it will bring opportunities for retailers to partner, collaborate and take risks. In 2018, we expect to see more flexibility in terms of store formats and emerging brands in dedicated spaces, more e-commerce brands going offline and collaborating with physical retailers, more innovation and risk taking from retailers, and new formats and offerings in food retail.
Original article can be found here.