As I share the first part of my annual retail predictions I’m reminded of a joke a colleague of mine recently shared with me:
Q. What’s the difference between God and a retail futurist?
A. God doesn’t think he’s a retail futurist.
So damn the humility and full speed ahead as I bring forth the first batch of my dozen educated guesses on what will shape the future of retail this year. With Part 2—out soon—I’ll publish the remaining six, plus three bonus long-shot prognostications.
- Physical experiences matter even more in a digital world. As it turns out, physical retail is still not dead. But the role of the store continues to evolve dramatically and brick-and-mortar locations that cannot demonstrate a clear reason for being are becoming increasingly irrelevant (see moderate department stores, Bed, Bath & Beyond, et al_. Struggling retailers need to move out of the boring middle and pick a lane between “buying” and “shopping.” Everyone need to be sure to amplify the wow in their in-store execution and invest to leverage the unique advantages of a physical location.
- C-Suite changes will accelerate. In recent months, we’ve already seen some big moves in the C-suite. As relentlessly mediocre retailers continue to deliver lackluster performance, many Boards will take more aggressive action to shake up their leadership ranks. And while this may be more hope than prediction, I would love to see more executives recruited to companies (or promoted from within) with much more diverse backgrounds. This diversity should reflect better representation, as well as experience beyond the channel and product-centric thinking that can limit the boldness of vision needed to become (and stay) remarkable.
- Disruptor reset. 2022 was a pretty rough year for retail disruptors. Profitless prosperity largely ruled the day, and valuations plummeted. 2023 is unlikely to be much better with big changes afoot for those not on a clear trajectory to profitability. These changes will include replacement of several founding executives, additional expense reductions, and more moves to take the D out of DTC (i.e. more wholesale distribution). The wobbliest of unicorns may also rethink their store expansion strategies and/or run into the arms of an acquisitive suitor.
- Media networks grow fast—but start to experience growing pains. The land rush to secure the potentially sizable profits from launching and growing captive media networks was the subject of not one, but two of our podcast episodes last year. The magnitude of the opportunity is undeniable, but so are the executional challenges. As retailers like Walmart
double down on their existing efforts, many more retailers will leap into the arena. In doing so the organizational challenges will become more pronounced and some will find that the cash will not rain down quite so easily. Moreover, brands will need to find the right balance between emphasizing their core value proposition with the interruption based marketing that can detract from the overall customer experience.
- Bold changes hit the Amazon retail flywheel. With big layoffs now announced, we should brace ourselves for a lot more change. While it’s likely to be steady as she goes with AWS and Advertising, just about everything else at Amazon is likely to get a big rethink given how obviously they overshot the runway on e-commerce and other parts of its business. The future of brick-and-mortar expansion in grocery stores, apparel, and convenience stores is very much up in the air as Amazon struggles to find winning formulas. The mess that is Whole Foods needs a long overdue fix. Fulfillment capacity need to be rationalized, merchandise margins need to be improved, returns need to be reduced, and much, much more. The days of growth over profits moon shots seem to be over.
- The collapse of the unremarkable middle picks up steam. More than a decade ago I noticed what eventually came to be called “retail’s great bifurcation.” In the years leading up to the pandemic, success was increasingly being found at either end of the price spectrum. Accordingly, poor financial performance and store closings were overwhelmingly concentrated among undifferentiated retailers stuck in the middle (think JC Penney, Macy’s, et al). During the depths of the pandemic—with interest rates hovering near zero and a big boost in retail spending propelled by stimulus payments—many struggling retailers were gifted a life line. That protection is now over and the retailers that think a slightly better version of mediocre is a winning strategy will find themselves edging every closer to the precipice.
For more color commentary, check out our recent Remarkable Retail podcast episode where we unpacked the first of my baker’s dozen of predictions.