“As the channel landscape undergoes tectonic shifts and channel borders become insignificant, grocery retailers will rapidly build online-to-offline capabilities to maximize customer reach and service flexibility,” said Edge by Ascential in its Future Retail Disruption report.
What will this look like? According to Edge by Ascential, more ecommerce players lacking store networks will seek associations with both modern and independent retailers to establish a complementary physical presence.
"As lifestyles urbanize and get busier, the share of time-poor shoppers expands, driving demand for convenience and fast solutions, such as frictionless checkouts," the report noted.
Possibly the most obvious example of this online-to-offline transition is the nationwide expansion of Amazon Go convenience stores which are now open in Seattle, San Francisco, Chicago, and New York.
The need for offline-to-online capabilities is largely driven by the macro shift of consumers placing greater value on experience than spending money on physical items. According to Edge by Ascential, consumers are redefining their life priorities around convenience and experience, and as a result are cooking less, in favor of going out to eat, socializing more, and adopting faster on-the-go lifestyles.
According to the report, three in four US millennials would choose desirable experiences over buying something. By 2024, the share of wallet consumers spend on products is expected to drop to 29%, down from 33% in 2000.
“Entangled in fears over an uncertain future, work stress and job market disruption, consumers are refocusing on the basics of life, prioritizing experiences, health, wellbeing and self-care while considering controlled digital detox. This will lead to a gradual shift of consumer spend towards out-of-home eating, events and services, which retailers will respond to by expanding their ecosystems,” noted Edge by Ascential.
However, this major market shift does not spell an end to brick-and-mortar stores since consumers are seeking these experiences away-from-home.
To capture the attention of a growing audience of experience-seeking consumers, more retailers will need to invest in the experiential aspect of their stores in an attempt to differentiate, offering services, inspiration, and product education, according to Edge by Ascential.
To capture a growing audience of conscious consumers, retailers will have to respond with proximity, convenience, and speed-enhancing solutions in the form of more small-box stores optimized for more frequent small-basket shopping missions; curated assortments optimized for households cooking less and searching for convenience; and fast fulfillment to meet the expectations of an on-demand generation growing into its prime spending years.
Target, for instance, has opened up a number of smaller-format neighborhood stores that carry a smaller but curated assortment of products to cater to on-the-go consumers who don't have time to complete a large shopping haul.
“Tailored and personalized offerings will be key to make emotional connections with shoppers,” said Edge by Ascential.
Smartphones to unlock unprecedented amount of data
Further signaling an on-the-go lifestyle, Edge by Ascential predicts that by 2025, the share of internet users who access the internet solely via smartphones will rise to 73%, up from 51% today.
"As smartphones develop into life management devices and customer touchpoints multiply, transparency and choice will expand for consumers, undermining traditional levels of shopper loyalty. Yet, smartphone and connected device growth will create unprecedented amounts of shopper data which brands and retailers will leverage to inform real-time product development and personalized targeting in an attempt to restore loyalty," said Edge by Ascential.
Retailers will need to be able to access this valuable shopper data to spot trends early on to drive rapid product development and develop personalized shopper experiences. Retailers must also implement flexible supply chains to support product availability and fulfillment.
"Mobile connectivity will provide more comprehensive shopper insight than ever and position mobile as a core standard in customer engagement and retention. Fast access for on-the-go consumers to relevant product information creates an opportunity for brands to differentiate and better communicate their competitive advantage. Recommended supplier focus must invest in mobile content and engagement to showcase and bring to life their products both in-store and online," added Edge by Ascential.