2009 was not kind to most retailers and there were very few positive stories when it came to sales results. A rising unemployment rate and a drop in consumer confidence both weighed heavily on consumer spending the entire year, and with the unemployment rate still at 10% for December, we’ll see this trend continue for at least the next few months.
But the news is not all bad. The State of Retailing Online report from Forrester recently predicted that online sales will see a 13% increase in 2010. That would be welcomed news for online retailers and e-commerce executives. However, when we look at retail as a whole, most analysts are predicting that overall retail sales will be flat. So, based on these two data points, online sales growth will mainly come from channel shift and not overall economic expansion.
Since the sales growth will come from online versus traditional retailers, I thought I would make 6 predictions for 2010 on the innovation that will help us get there:
- Channel Integration. In-store pick-up and inventory availability checks for multi-channel retailers are becoming the norm. Those that don’t offer these options are already behind the curve. We will continue to see an evolution in this type of cross-channel integration, primarily because enhanced services are one way to maintain product margin. We will also begin to see evolution in same-day delivery and delivery to 3rd-party locations based on GPS. The technology is already in place, so why wouldn’t retailers offer customers the option to have their groceries delivered to them at their local coffee shop? Finally, I think we can expect to see in-store pick-up continue to evolve with add-on services such as valet parking and more drive-through windows.
- Shift in Marketing Dollars. We will continue to see a shift of traditional media budgets to the online channel. This is an obvious one, but retailers will be faced with a variety of new challenges they haven’t considered before. As these dollars shift, new issues will emerge, such as how to handle vendor funding, what the right mix is, how online activity affects offline behavior and even a new set of KPIs. All of these issues require leadership within the organization or a solid agency partner to resolve.
- Google as a retailer. Google recently launched its first branded handheld device called Nexus One in partnership with HTC. Surprisingly, this was the first time Google has gotten into the retail business by selling the phone direct to the consumer. While many are looking at this move as a way for Google to compete with Apple and other device manufacturers, I do not. This is simply another Android phone and I believe it signals the beginning of something new for Google. It’s not the last we’ll see of them “selling” direct.
- Mobile. There will be a lot of activity in the mobile space this year. Almost every conversation we have with clients or potential clients includes mobile. We will continue to see a lot of apps launched, but most won’t provide much value or “staying power”. Retailers clearly haven’t figured mobile out yet and will continue to have trouble gaining traction (aka commerce) on smaller handheld devices without a real value proposition. Having said that, retailers should begin to dip their toes in and look for opportunities to “build the channel” by growing their mobile phone list, ensuring their brand is represented properly on the smaller devices and making sure their infrastructure can support mobile initiatives as they evolve and best practices are developed.
- Discounts. Price and savings will continue to be the message of the day and will dominate the marketing you see from the Sunday ads to emails. I really don’t see that changing for most of the year even with some of the innovations within the channel.
- 3D. ESPN and Discovery just announced the launch of a 3D network, and Sony and Panasonic announced that they are releasing 3D televisions in 2010. This will be a big challenge for retailers and agencies alike this year (although a big sales opportunity in the CE category). I definitely see this evolving throughout the year and changing the entertainment experience, eventually moving to the personal computer and even the handheld. Like mobile, retailers and agencies will need to figure out how to take advantage of this trend by creating user friendly “site experiences” that capitalize on the technology. We can expect to see companies like Adobe Scene7 leading the way with 3D product image technology.
We should have an interesting 2010. Retailers have some big challenges ahead, but these challenges also create opportunities for innovation.
Pat Duncan is an Associate Partner in Rosetta’s Consumer Products & Retail vertical