As we begin the third decade of the 21st century, there are clear trends that will continue to impact the retail industry.

The seeds of many of these were planted decades ago and are beginning to bloom, while some are more mature. However, all will impact the trajectory of retailing for decades to come.

Here are my top six trends:

1- Niche Rich: Continued Customer Segmentation Refinement

2-Digital Meets Physical: Balancing Convenience and Connection

3-Sustainability: Casting a Very Long Shadow

4-New Formats: The Next Marketplaces, More DTC Brands

5-The Linchpin: Data and Technology

6-Mall Fall: Department Store Degradation and Mall Seizure

1- NICHE RICH: Continued Customer Segmentation Refinement

Niches within formerly homogeneous categories will continue to be unearthed and examined. Many will appeal to lifestyle, well-being, and leisure, particularly aimed at Millennial and Generation Z consumers whose passions can be engaged with unique products and services. Storytelling, quality, and authenticity will play a major role in bringing these products to market.

Digital has led to market fragmentation in nearly everything. Reduced opportunity costs have spawned a plethora of Direct to Consumer (DTC) brands which will continue for the foreseeable future. Small niche startups will continue to build followings and “tribes” in ways that couldn’t have been imagined in the pre-internet era.

Moreover, because the avenue of communication with customers is largely through social media, brands can be more highly focused on product content and development. The most successful will find unique ways to bridge online and offline.

Kyle McClure, co-founder and chief product officer for the online men’s wear brand Rhone told the Sourcing Journal Summit audience that “Being closer to the customer allows us to integrate that data in a way that’s a struggle for traditional retailers.”

Historically this is true, but all that is changing

Getting Personal

Personalization has been discussed for over a decade, whereby customers can have products customized, such as is the case with the Nike By You, where you can pick a style, color, and logo that makes the shoe, you.

However, there appears to be a broader trend of what Frog Designs calls “split personality branding”, where larger companies have multiple, smaller brands catering to more highly defined core demographic or psychographic groups.

2-DIGITAL MEETS PHYSICAL: Balancing Convenience and Connection

Since the inception of eCommerce, WAY back in the mid-90’s we’ve watched an evolution from single-channel to multi-channel, to cross-channel, and on to omnichannel. This is evolving into a state of what I call “unified commerce”, which recognizes that the consumer does not think in terms of channels, but of brands. And, all brand touchpoints are likely to be used in dynamic and totally fluid manners during a customer’s path-to-purchase. This fast-moving phenomenon has stymied by all but the most fleet-footed of retailers.

The new retail order has become a thing of extremes. On one hand, Amazon was rewriting the playbook based on a new level of convenience. On the other hand, with the point of sale now living in everyone’s purse, backpack, or back pocket, brands were losing their connection with the consumer, and customers were losing touch (literally) with the product, say nothing of the benefits of the marketplace.

Convenience meets connection in store

Over the past decade, we’ve watched as many physical retailers transitioned from transactional to experiential, some say to distance themselves from the “utility” of online shopping. I would argue that it’s to complement online. Today the best retailers need the attributes of both.

The Walker Sands Future of Retail 2019 study reports, “When asked if customers prefer the convenience of a one-stop shop or the experience of a branded store, there is no one category where consumers are completely aligned on preference”. This clearly demonstrates the need for brands in virtually all product categories to balance both convenience and connection, while also balancing the digital and the physical, but with endless creativity.

Counter-intuitive Trending

Both Generations Y and Z have grown up in a digital world. Their comfort with online everything might suggest that buying products online would be their first preference; not necessarily.

Research continues to show that while online shopping continues to grow across most demographics, the youngest customers, Gen Z’s remain very comfortable shopping in-store, particularly if it includes a high level of experience, both through tech and touch. Walker Sands research shows 59% of 18 to 25-year-olds prefer a “brand experience”, but it better be a good one!

Clienteling and the New Brand Ambassador

At the core of a brand’s ability to differentiate itself by creating high value to consumers are the faces of the brand – the brand ambassador. We’ve all watched as the national department stores, once the epicenters of great customer experience, have immolated the category through discount (pun intended) cost-cutting. Personal service has become a thing of the past, in all but the few stalwarts.

The next decade will bring about a reversal of this trend. As the store continues to evolve from a place of storing to one of exploring, the “exploration guides” will become better educated, empowered, compensated and valued assets of the brand.

A Salesforce survey found that over 80% of customers say that the experience is as important as the products or services that a retailer or brand offers. Here again, the blend of convenience (online) and connection (offline) become the hallmarks of a great brand and customer experience.

3-SUSTAINABILITY: Casting a Very Long Shadow

Sustainability continues to have a bigger impact on consumer buying habits. In the next decade, we will see an increased emphasis and realignment around “people, planet, and profits”, in that order. Consumers are buying less, renting more, and are overall more conscientious of what a brand stands for. “You have to want what I want, in order for me to want what you sell.”

This typifies the attitudes of the most influential consumers. Sixty-five percent of customers between the ages of 18-35 feel it is important that a brand or retailer be committed to sustainability. Meanwhile, 66% of consumers are actually buying less due to new attitudes toward sustainability; simplifying and organizing their lives.

Redefining Value

Transparency in sourcing and manufacturing has become table stakes in the minds of over two-thirds of 18 to 35-year-olds. Where something is made, under what kinds of working conditions, and environmental sustainability across the entire distribution chain are now all a part of the decision-making process. This will only increase through the next decade as issues of the perils of the planet become more magnified in the public’s consciousness.

Resale Gets Real

The next decade will see an increased focus on the circular economy, with more alternatives to purchasing new, or purchasing at all. Retail resale has morphed from the ultra-cool Chicago Wicker Park consignment stores to the ubiquity of ThredUp within both Macy’s and JCPenney.

Industry research suggests the secondhand market will reach $51 billion by 2023 and will eclipse fast fashion by 2028, and it’s beginning to have a profound effect on how shoppers shop. Many Gen Y and Gen Z consumers now consider the resale value of an item on the secondary market before making the purchase.

And this newly emerging gig-economy is skewing younger. Peer-to-peer upstart Depop has over 15 million users, 90% of which are under 26 years old. Many of these young entrepreneurs go beyond their closets as a source for inventory and will make frequent visits to goodwill, with a buy and flip mindset.

Passing Buy

As 10-year-old Rent the Runway reached the coveted “unicorn” status as a billion-dollar company, and seven-year-old fashion rental business Le Tote bought Lord & Taylor, it has become abundantly clear that Americans are changing their clothes – habits. Just as most retailers came to the realization that being online or offline was no longer an and-or proposition, the same appears to be happening with retail resale and rental.

One of the newest examples comes from Urban Outfitters with their introduction of the clothes rental service, Nuuly. Customers can borrow up to six items from over 100 third party brands, for an $88 per month membership fee. The following month customers can return the items in a postage-paid packet and get eight more. This results in less drastic markdowns for the retailer, and a constantly refreshed wardrobe for the consumer.

Industry leader Rent the Runway recently launched a new closet concierge service in conjunction with W Hotels to have your wardrobe waiting for you at your next destination. Four styles for four days at the cost of $69 becomes a pretty appealing value proposition for those that really want to travel light.

4-NEW FORMATS: The Next Marketplaces, More DTC Brands

The internet has reduced the opportunity costs involved in launching retail concepts, of every size. Overlay that with prevailing attitudes of many Millennials to make a job, rather than take a job, and you have the makings of many new startups. Add some crowdfunding and the power of influencer marketing to take a product from obscurity to ubiquity in a YouTube nano-second.

In rapid-fire succession, we are witnessing a staggering number of business startups offering new products, concepts, and services to meet the needs of our dynamic, changing times.

Makers Markets and Craft Guilds

As robotics and automation eliminate many menial jobs, we will see new opportunities in new upstarts owned and run by tech-savvy entrepreneurs whose unique talents, paired with new product and service offerings begin to fill voids. Growing interests in craft-made, recycled, repurposed, and highly personalized items will give rise to new makers-markets.

Brooklyn, NY is the site of one such market called “The Makers Guild”. The 25,000 square-foot space includes nine artisan shops, where products are being made and sold. They balance both permanent and rotating pop-ups and provide a connection and greater appreciation for the artisan-made product.

Developers Taking Note

This movement has not been lost to some of the major shopping center developers who are battling with the deterioration of major specialty retailers at a seemingly endless rate. Nearly every major mall owner has created an incubation program that offers digital natives short-term leases to expose and nurture their brands.

Simon Development Group started with The Edit in Roosevelt Field, Mall of America followed with Fourpost, and most recently, Unibail-Rodamco-Westfield began a co-operative venture with Verishop to bring their upstart digital brands offline at Westfield shopping centers.

Third-Party, Retail as a Service (RaaS) Proliferates

Since b8ta opened its first store they have become the poster child for third-party matchmaking that brings emerging digital native brands to life in their tech and data-infused storefronts.

In March of 2011, while speaking to an audience at the Global Shop convention in Las Vegas, I introduced Rave Retail, a third-party intermediary between space-holders and space-users that I predicted would be necessary in order to fill the coming massive vacancies in centers and malls; essentially the first RaaS concept that I’m aware of.

WeWork for Retail

Another new player on the RaaS scene is ShopFulfill which will open their first Anchor Shops concept in downtown Philadelphia in the second quarter of 2020. Anchor Shops focuses on giving digital native brands the necessities to gain traction offline by providing both space as well as logistics and infrastructure that otherwise would not be affordable on their own.

Once open, ShopFulfill expects to house between 40 and 50 brands, charging in the neighborhood of $600 to $800 per month for the complete package.

Direct to Consumer (DTC) Brands are Replacing Specialty Brands

The devaluation of national brands is due in part to commoditization, in the aisles of once-great department stores, and the unbridled growth across the entire retail spectrum. Their tarnishing continues in discount department stores like Kohl’s and JCPenney.

Many of the new DTC brands are being positioned with the kind of care that many of the major brands used to be. They are keeping good company, being positioned in high-value environments of the likes of b8ta and Neighborhood Goods, where the value proposition can be clearly communicated and appreciated.

Additionally, because many of the brands are digital-first, their audience and place in the marketplace have already been established. It’s like taking the brands to prep school.

From Storeroom to Showroom

Neighborhood Goods, which got its start in Plano, TX, just opened a new 4,500 square-foot store in the Chelsea neighborhood of New York. They offer a rich and diverse set of rotating contemporary brands not seen in today’s department stores, most of which are digital natives.

Neighborhood Goods is very discerning in their mix. Additionally, they offer great flexibility around how the brands use their space, such as short-term events like trunk shows or pop-ups with “brethren brands.” So there is a constant fluidity in the store’s presentations which consumers are yearning for.

Forrester’s senior analyst, Anjali Lai reports, “Consumers view DTC brands as just another option. They’re able to deliver on convenience and quality while cultivating a sense of trust around the brand in a new way that the larger brands haven’t done in the past.”

5-THE LINCHPIN: Data and Technology

It seems as though the world is choking on data but starved for intelligence and knowledge. Retailers now and for the foreseeable future will live or die based on their ability to sift through mounds of data in order to create product and service offerings that resonate with their consumers. This includes dealing with the growing complexity of supply chain, inventory management, and more. At the same time, margins are being squeezed like no other time in history; therefore, the measure of success is becoming even more granular.

AI and Personalization

Every brand is in pursuit of personalizing the product and customer experience in order to establish greater loyalty in their goal of “lifetime customer value”, and technology is a fundamental key to achieving it.

Technology is contributing dramatically to the overall shopping experience, and it starts with aggregating personal information. Added levels of complexity come with gleaning what’s meaningful among the terabytes of data being left behind during the shopper’s journey. And finally, the most complex part is implementing or influencing the personal journey to reach retail nirvana.

Bridging the Gap Between Convenience and Connection

The good news is we are leaving more and more data droppings along the way. The bad news is our shopping habits and paths to purchase are dynamic, erratic, and fluid. Our buying behavior is constantly changing as we adapt to a whole host of new smart devices driven by both new levels of convenience and a desire to be connected to like-minded brands, and each other.

Augmented reality is blending entertainment with shopping, introducing virtual fashion mirrors, interactive dressing rooms, and robot assistants. And, we are only at the beginning of a whole host of new tech-driven assistants that are intended to add both convenience and connectivity to our lives.

All of this will be delivered to us via artificial intelligence, which I would argue isn’t artificial at all. In fact, I think the term gets a bad rap; it should probably stand for Augmented Intelligence. Fundamentally, all of the data and algorithms behind the phenomenon are anything but artificial. Their very real but put to work in new and exciting ways.

6-MALL FALL: Department Store Degradation and Mall Seizure

History can sometimes be a sobering teacher. As I reported one year ago in a article entitled Can Macy’s Survive the Muddle in the Middle? “The unfortunate result of Macy’s and Federated Department Store’s race to buy seemingly every regional department store at the turn of the millennium, led to a systematic spreadsheet-buying approach and a homogenized look and feel.”

This all took place at a time when consumers were still gaga over national brands, and success was measured based upon revenue generation and stock price. Now, with increased interest in localization, and differentiated offerings that got lost in the shuffle, these decisions seem short-sighted, indeed. Lost were the once-great regional private labels, the value-added services, and the loyalty that many of regional department stores’ founders worked a lifetime to build.

Anchor’s Away

Unfortunately for many of the department stores, their health is also inextricably linked to that of this country’s malls, too many of which are on life support. Making matters worse, as of December 2019, retailers announced over 9,300 store closings, a 59% jump from 2018 and the highest number since Coresight Research began tracking the data in 2012.

It’s anticipated that only the healthiest regional malls and centers, with grades A, A-, and B+ are likely to make it long term. This accounts for about one-third of the 1,100 or so major malls and centers, implying the other two-thirds show a poor long-term prognosis. The good news is that, not surprisingly, the owners of the top-rated malls have been busy investing for what’s next; and it’s decidedly different than what was.

Vacated anchors are finding new uses as landlords continue to innovate. In the past five years, the percent of leasable space devoted to retail has dropped by about 7%. Restaurants, fitness, entertainment, and services have increased their share of these spaces by nearly 8%. Since 2012, the number of fitness and recreational sports centers has increased by 22.4%.

Mall Refit

December 2019 saw the opening of a 147,000 square-foot, $43 million Life Time Fitness in Southdale Mall, in Edina, MN; on the site of a previous JCPenney store. This represents the largest single investment ever made by the Minnesota-based health and wellness company. It also includes co-working, fitness, spa, and soccer facilities. It has been reported to be a prototype for future centers. Life Time is already working with Southdale property owners Simon Properties Group on at least 20 such deals across the country.

Staying the Course

Despite the fallout amongst many of the middle-market department stores, it appears that at least one name has been staying on course, remaining devoted to the tenets of its founders, that being Nordstrom. They have remained true to their original proposition of exceptional service, combined with a great product, merchandising, and design. They have also been unafraid to make bold experiments, such as with Nordstrom Local, a concept that fits beautifully into the new world of unified commerce, at the crossroads of online and offline.

First described as the “store with no inventory” when introduced in late 2017, it is indeed very much more. The store is built around three key offerings: online order pickup and return, styling services, and tailoring and alterations. Other services vary by location but include nail services, bars, gift wrapping, even stroller cleaning. Today there are a total of five Nordstrom Locals, three in LA and two in New York. For Nordstrom, the concept has become the embodiment of convenience meets connection. I’d not be surprised to see Macy’s introducing a similar, neighborhood touchpoint in the near future.