Benchmark International

While ongoing geopolitical uncertainties could present challenges in 2019, the overall outlook for the global retail industry remains optimistic. In the world’s top retail market, the United States, retail sales are predicted to grow more than 3 percent to exceed $5.5 trillion. But for the first time ever, China is expected to outperform the U.S. in retail sales. China is forecasted to see a 7.5 percent growth in retail sales this year, reaching $5.6 trillion.

Impacts of Technology

A major force that is reshaping the retail industry is one that we are seeing affect most industries, and that is technology. Technology is driving change in various different capacities. People are shopping more than ever from their smartphones, tablets, computers, and smart-speaker devices, and retailer social media is offering improved commerce experiences.

The continued rise of ecommerce giants such as Amazon is causing some retailers to completely close, such as Toys R Us, and other retailers to shutter some of their physical store locations. If companies intend to remain competitive, they will need to adapt to changing technologies.

A great example of adaptation is the beauty chain Sephora. The company has not only created what is dubbed their Innovation Lab—a converted warehouse that is used for creating and testing new digital experiences—but is also crafting effective strategies that utilize augmented reality (AR) and artificial intelligence (AI).

AR and AI

More and more brands are using AR and AI to enhance customers’ experiences and improve company performance. AI spending is expected to grow $7.3 billion per year by 2022. That’s up from only $2 billion last year.

Companies are using AI to track demand, understand consumer behavior, offer targeted promotions, increase productivity, and boost revenue. AI is also being used to streamline inventory, automate tasks, educate employees, determine pricing, and test new ideas.

Global spending on AR and virtual reality is forecast to be nearly $20.4 billion this year. The big IT companies are continuing to put millions into AR projects and startups.

Retailers are using AR to allow customers to try on clothing and 3D products, see what products look like in their homes, and scan in-store signage to access additional product information. It has been noted that 50% of smartphone owners are using AR when shopping. The sectors leading the use of AR in retail are furniture and clothing.

DNVBs

There is another class of retailers that is maintaining a competitive edge. These companies are digitally native, vertical brands, known as DNVBs. These businesses sell their own products directly to consumers through their own online spaces, and they are growing at a remarkable rate. DNVBs cut out third parties and instead cultivate powerful direct relationships with their customers. They seek to inspire and give a new value to consumers’ experiences. Some examples of these niche brands are Blue Apron, Brilliant Earth, Dollar Shave Club, and Warby Parker. This newer generation of smaller brands is changing the buying experience by understanding their customers on a deeper level and creating loyalty and trust with their audiences. They are also more able to focus on the quality of their product because it is their only area of expertise. The world can expect the continued emergence of new DNVBs, creating a myriad of possibilities in the retail industry.

Physical Store Locations

Even with the surge of online retail, it is important to remember that shoppers are using multiple channels to shop, and that still includes brick-and-mortar store locations. For this reason, physical locations are becoming more integrated with online spaces and there is more focus being placed on seamless experiences and added convenience. As a result, some mass retailers are reducing the footprints of their large stores and downsizing them to smaller stores. For example, Ikea is opening smaller stores in big cities, and Target is closing six large stores this year, but they are planning to open 20 smaller stores. At the same time, those popular new DNVBs mentioned earlier are branching out of their digital space and opening brick-and-mortar stores. Amazon is even taking certain niche brands offline and into boutique locations. Plus, we are seeing a new trend in something called pop-up shops, also known as flash retailers. These are temporary sales spaces that crop up around the world, estimated to represent a $50 billion industry, making it a market to watch.

What’s Next for You?

As new technologies in retail evolve, fresh opportunities for entrepreneurs and investors are being generated. If you are interested in embarking on a new venture, contact Benchmark International for unique strategies that create value and lead to results.

Americas: Sam Smoot at +1 (813) 898 2350 / Smoot@BenchmarkCorporate.com

Europe: Carl Settle at +44 (0)161 359 4400 / Settle@BenchmarkCorporate.com

Africa: Anthony McCardle at +2721 300 2055 / McCardle@BenchmarkCorporate.com

ABOUT BENCHMARK INTERNATIONAL

Benchmark International’s global offices provide business owners in the middle market and lower middle market with creative, value-maximizing solutions for growing and exiting their businesses. To date, Benchmark International has handled engagements in excess of $6B across various industries worldwide. With decades of global M&A experience, Benchmark International’s deal teams, working from 12 offices across the world, have assisted hundreds of owners with achieving their personal objectives and ensuring the continued growth of their businesses.

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