While dealing with the Delta variant and continuing to recover from the COVID-19 health crisis, the hot days of August is a good time to ponder the economic and retail predictions for the balance of 2021.
The global economy is quickly recovering from the impact of the COVID-19 pandemic, with growth likely to approach 6% in 2021 and continue at 4.6% in 2022. However, while the global economic recovery from the COVID-19 recession has shown strong rebound effects, global output is still expected to remain as much as 2% below the pre-pandemic forecast up until 2023.
Brick-and-mortar sales generated over $18.5 trillion in the United States in 2020. After the past few months, I predict that we will see similar exciting changes across the retail industry starting in advanced economies. The USA National Retail Federation (NRF) raised their 2021 forecast in June and predicted that this year will be the fastest retail growth year since 1984. On the other side of the world, in an equally important large economy, China retail sales are projected to increase 14.7% in 2021.
RFID has been around for years in the retail space — in fact, I’ve been writing about RFID in retail since as early as 2012 — with more recent articles focusing on the adoption trends at Nike and Walmart. As I discussed in January this year, the pandemic has become an accelerator of RFID adoption in retail with stores taking a central role with online orders fulfillment.
Accurate inventory has been a challenge for retailers for some time. According to a 2020 IHL Group report, inventory distortion worldwide is a $1.8 trillion problem or the equivalent of 10.3% of same store sales in retail and hospitality. “Or to put it another way, more than the annual GDP of Canada.”
RFID is one of three very important technologies that play a key role in addressing the problem of inventory distortion. While apparel has led the charge in the adoption of RFID technology for inventory control, other retail sectors are quickly expanding their activities. As summarized by IDTechEx, note the trajectory of UHF/RAIN RFID labels in retail in the last several years.
North America leads the trend of RFID adoption with 93% of retailers reporting that they use RFID in various stages of deployment. Positive to see that other markets around the world are also accelerating their deployment rates. By looking at the rate of full adoption of RFID, rather than just piloting or implementing, North America, Europe, and Asia-Pacific have all seen substantial increases in the use of RFID since 2018.
More adaptive retailers are discovering new applications of RFID, such as streamlining omnichannel offerings like BOPIS (buy online, pick up in-store) and improving supply chain visibility and self-checkout. In the past two years alone, the omnichannel options retailers offer have increased significantly, with 66% of RFID adopters and piloters offering five or more services, like BOPIS, ship from store, ship to store, reserve in-store, mobile app purchasing, and home delivery.
Why RFID is the Next (and Current) Big Thing
This past week I had the opportunity to spend quality time with a leading computer vision company headquartered in Ireland. As an advisor to this company, I have been lucky enough to see their transformation from a single application to a portfolio of retail visual innovative disruptive solutions that will enter the marketplace in the balance of this year.
Concurrently, I remembered where Gartner placed computer vision in the Hype Cycle of Artificial Intelligence, 2020.
As you can see, Gartner has Computer Vision in the ‘Trough of Disillusionment’ reaching the ‘Plateau of Productivity’ in 2 to 5 years. Based on my retail industry observations over the last several months and this past week, powerful computer vision solutions are arriving much sooner to a store near you.
In 2021, the major milestone of over 1 billion CCTV cameras installed around the world will be reached. What started as a security technology to prevent crime, the video camera is now a major visual data gathering device that will transform all industries including retail.
On many fronts, 2020 was a challenging year for the retail industry. During the early days of strict lockdowns to slow the spread of the coronavirus, governments around the world categorized some retailers as “essential” and others as “nonessential,” leading to a $285 billion transfer of wealth from nonessential retailers to essential retailers and a $250 billion transfer of wealth from small retailers to larger companies. This created a massive shock to the worldwide economy with GDP levels initially dropping 30% or more.
Even with widespread store closures, the United States saw an increase in retail fatalities and violent incidents in brick-and-mortar retail stores. In 2020, 485 violent incidents, up 14% from the previous year, led to 523 fatalities, up 5% from 2019. Customers, store associates, and security personnel made up 76% of the victims with the remaining 24% being suspects.
Managing new health and safety policies to fight the pandemic and violent incidents in retail stores elevated the importance of physical security in the retail industry. As with all other sectors, security was also impacted by the acceleration of digital trends that were already underway prior to COVID-19. The security “new normal” will include these top 5 physical security trends in retail to watch in 2021 and beyond.
Innovative Uses for Existing Security Technologies
Despite the coronavirus pandemic’s impact on how we work, shop, and entertain ourselves, the retail industry has managed to adapt in the face of these challenges. Although e-commerce has played a bigger role in retail sales than before the pandemic, the “retail apocalypse” has been largely overstated. In fact, with brick-and-mortar sales generating over $18.5 trillion in the United States in 2020, I anticipate that the physical store will continue to act as the epicenter of the post–COVID-19 retail experience.
For nearly a decade, e-commerce has been seen as a threat to traditional retailers, positioning online retailers as more capable of meeting growing consumer expectations for convenience and affordability. But the retail industry is nothing if not resilient. Faced with reduced in-store shopping due to widespread social distancing and stay-at-home orders, retailers turned to newer solutions like curbside pickup and buy-online-pickup-in-store (BOPIS).
One-third of retailers also reported investing in solutions to facilitate in-store pickup and returns for online purchases, offering customers the speed of brick-and-mortar retail with the convenience of online shopping.
A Wall Street Journal article this weekend on robotics coming to a garden near you brought back memories of my office in Neuhausen am Rheinfall in Switzerland. Every afternoon, while doing the continuous string of international conference calls, I would observe a robot mower in the yard outside my window. The autonomous roamer would emerge from its electrically protected doghouse, run Swiss precision patterns across the lawn, and when finished return to its home to recharge.
This memory, plus the long string of articles below published in the last week on retail robotics inspired this article.
>> Domino's testing pizza delivery by self-driving robot car in Houston'
>> Chick-fil-A tests robot delivery in Southern California
>> Kroger is Amassing a Robot Army to Battle Amazon, Walmart
>> Save Mart kicks off pilot of shelf-scanning robots
>> Gap rushes in more robots to warehouses to solve virus disruption
>> Alibaba Group Xiomanlv delivery robots hit Chinese Universities
>> Your Drone-Delivered Coffee is (Almost) Here
Above seems to be counter to Walmart's announcement late last year that it was stopping its deployment of aisle scanning robots after installing them in hundreds of stores. Was the Walmart decision an anomaly in the growth of robots in retail? What role are robots playing in E-commerce? How has the pandemic impacted the trajectory of robotics? What's in-store for retail robotics?
Throughout my retail career, I have closely followed the growth and progress of the grocery sector. Partially this is the result of actually having worked in a supermarket for 9+ years across many departments.
The importance of this retail segment is reinforced by Deloitte in their annual 'Global Powers of Retailing Report'. The 2020 edition found that fast moving consumer goods (FMCG) which includes grocery, drug, mass merchants, and convenience represents 66.5% of the total retail sales for the global top 250 retailers. Also interesting from that research, this sector tends to least globalize operations and recorded in 2020 the lowest composite net profit margin at 2% of sales.
The pandemic has become a brutal accelerator of digital transformation trends for all retail and grocery has not been immune from the disruption. Being classified as an essential business was a tremendous advantage for food, drug, convenience, and mass merchandise retailers. During the lockdowns, nearly $300 billion in wealth was transferred from general merchandise / hospitality to FMCG retailers.
As I stated in a recent Rethink Retail podcast, grocery sales which were only up 3% in 2019, jumped 11.5% in 2020. The sector stayed financially positive throughout the pandemic and still has substantial opportunities for additional growth. This podcast, recent grocery news from Amazon, and new research inspired this article.
"The world’s most successful companies all have one thing in common: powerful brands ... Branding strategy is one of the foundational pillars of business. Simply presenting a unified brand message can increase profits by nearly 25%." - EU Business School
From multiple sources, this article summarizes key insights from the just published Brand Finance top 500 world's most valuable brands report.
As we continue to make progress emerging out of the COVID-19 health crisis, key trends that I have been following closely are both consumer priorities and retailers' technology focus areas. At the height of the lockdowns in 2020, consumers chased convenience and safety as primary purchasing drivers.
Forty-percent of the time in four countries (USA, UK, France, and Germany), this included switching retailers that were more responsive to their new shopping patterns. This was especially prevalent in the United States where 46% of the consumers made the switch. Subsequent research indicated that 88% plan to stick with their new shopping brand choices.
On the technology front, digital acceleration was the operative challenge that all retailers faced. "By some estimates, we (retail) have vaulted ten years ahead in consumer and business digital penetration in less than three months."
This article highlights technology focus areas that consumers are prioritizing as we enter a disrupted new normal. It also summarizes new research on the top retailer technology priorities to meet the demands of a digitally empowered consumer.
In early 2020, the retail industry was off to a very strong start. Through February USA retail sales grew 7.5%. Then March came in as a pandemic lion with a substantial part of the world hitting the pause button. We all very quickly learned the difference between essential and non-essential retailers. The financial pain for the global retail industry for all of 2020 will total over $1.6 trillion.
An April 2020 consumer survey found that consumers felt safest in grocery stores, followed by drug stores and big box retailers. Malls ranked lowest with only 33% of respondents saying they would feel safe shopping in these locations. Sixty-five percent of women did not feel safe trying clothes in dressing rooms, 78% felt unsafe testing beauty products, and 66% had similar concerns working with sales associates.