2019 looks to be another fascinating year for retail - read why here.

1. GET RETAIL SMART
The year ahead

2. GET RETAIL SMART
The year ahead
IKEA recently announced that it is cutting thousands of office-based jobs, whilst
simultaneously opening thirty new showroom stores in city centres, subsequently creating
more jobs than will be lost. Until now IKEA has largely weathered the retail storm, and
knows well that:
No retailer is exempt from needing to adapt; and the high
street is not dead, it’s simply being reborn.
Boris Planer, Director of Go-to-Market Insights at Planet Retail, says ‘retail is always a
reflection of social reality’. Our current social reality is that of an unprecedented rate of
change, technological, social etc. and a world in which the two of the most successful
global retailers – Alibaba and Amazon, move at a speed others simply can’t match.
They also famously put the consumer at the centre of their proposition with great success.
As a result, other retailers are having to offer value, selection and convenience and most
recently sustainability, at the highest standards, as hygiene factors, just to compete with
the ecommerce giants.
The retail category is now defined by the ecommerce giants who are first and foremost
tech companies. If we agree on this then the challenge for retailers is to adjust their
business models, product offerings and brands to compete in a context where consumers
can buy products more easily and cheaply from a pure player. The overriding challenge is
to work out what will incentivise people to buy from them instead.
With this backdrop Planet Retail predicts that in 2019 retail will be: ‘omnichannel, that is
digital as well as bricks and mortar; divided, with pressure on the squeezed middle due to
discounters and high-end retailers; and integrated, since independent retailers will
increasingly be supported by ecosystems’. In this way, we will see the radical
transformation of the sector continue.
OMNICHANNEL: SEAMLESS EXPERIENCES
As we know, people shop using a number of digital and physical channels. 2019 will see
digital shopping become even more commonplace, with social commerce via Snapchat
and Instagram continuing to grow: smartphone penetration and income growth mean that
the digitally-accessible population is growing, many emerging markets are mobile-first,
and Generation Z are increasingly shopping via their phones.

3. GET RETAIL SMART
The year ahead
Meanwhile, the need for physical stores remains: a recent report showed that 90% of
worldwide retail sales are in-store;1
and according to research firm IHL Group, in the US
2018 will have seen a net growth of more than 3,800 stores, with 12,664 stores opening
and 8,828 shuttering.2
Shopping experiences need to be omnichannel, combining digital and physical
experiences. Retailers are getting better at integrating the two in-store: based on their
consumers’ behaviour John Lewis has rolled out the ability to check stock in-store via an
app;3
Neiman Marcus has launched Memory Mirrors, which allow shoppers to compare
different looks using AR; and Gap’s Dressing Room app allows users to customise a virtual
3D model to their proportions and preview outfits digitally from their own home.
Whilst traditional retailers include digital channels in-store and expand their online
offerings, pure players continue to innovate in physical spaces. For example, Amazon’s
seasonal pop ups, ‘Amazon Loft for Christmas’, across Europe. This shift appears to be
influencing the growth of concept stores, which shows retailers using physical space as a
stage, or ‘cathedral to the brand… a destination’.4
For example, Gwyneth Paltrow’s Goop
Lab is described as a shop-able bungalow, designed by the interior designers who created
Paltrow’s own home.
In the context that consumer spending on experiences is up and spending on products is
down, retailers need to continue to consider how they can best adapt their store space
accordingly. Whilst omnichannel is important, understanding how best to use each
channel is fundamental.
DIVIDED: STANDING OUT & STANDING FOR SOMETHING
The divide between big and small retailers will increase: in terms of physical store space
and businesses’ positioning, the middle will continue to be squeezed. In relation to store
formats this will be especially powerful, thanks to what Planer refers to as ‘the most
powerful disrupter in retail today… the ageing society’. As households continue to get
smaller and older, there is a greater need for small shops which forefront convenience.
Big box formats remain relevant for experiential, for example, Sainsbury’s in the UK has
just opened a 67,000 square ft pilot store, which is a department store/supermarket
1
Worldwide retail and ecommerce sales: eMarketer’s estimates for 2016–2021. eMarketer. 2017. Quoted by ‘Global Powers of
Retailing 2018’, Deloitte. 2018. Link
2
Retailers aim to pick up business from defunct, dying rivals, AJC. 2018. Link
3
John Lewis & Partners Retail Report 2018: How we shop, live and look. 2018
4
Henry Eccles, Google, TBD conference. 2018

4. GET RETAIL SMART
The year ahead
hybrid.5
Large retailers are finding creative ways to use their space, such as Walmart’s
proposed development of spaces as Walmart Town Centres, which will include outdoor
spaces, health and fitness services, entertainment and local food vendors.6
Meanwhile, the rise of the discounters, independents and luxury retailers will continue. The
squeezed middle, such as House of Fraser and Debenhams in the UK will continue to
struggle. As Henry Eccles, Head of UK Commerce at Google comments, ‘if you’re selling
other people’s stuff and you’re not Amazon - you’re in trouble’.7
Retailers need to
strengthen their proposition: ‘To thrive as a retailer now, let alone in the future, you must
not only stand out from your competitors but you must also stand for something more.’8
INTEGRATED: INDEPENDENTS & ECOSYSTEMS
As independent retailers and ecosystems continue to boom, the two will increasingly
integrate. It’s predicted that marketplaces will dominate ecommerce, making up 62.8% of
all retail sales by 2023 and having stolen share from pure players.9
Meanwhile, small
independent brands, often referred to as microbrands are proving immensely successful,
especially as consumers are increasingly keen to buy into artisanal, authentic, handmade
and sustainable.
The Economist quotes consultancy Nielson: ‘the biggest 25 food-and-beverage
companies, for example, generated 45% of sales in the category in America but drove
only 3% of the total growth in the industry between 2011 and 2015. … A long tail of 20,000
companies below the top 100 produced half of all growth.’10
The rise of microbrands has partly been possible due to marketplaces/ecosystems, which
facilitate the growth of small brands by giving them access to a huge number of
consumers in one place. Meanwhile, these brands in turn fuel the growth of ecosystems,
giving them more access to different consumer data. Data represents a huge advantage
for ecosystems. It means they can create targeted/bespoke products, offerings and
communications. In contrast, traditional retailers whose propositions are not designed
around data and are trying to aggregate it as an after-thought are facing huge challenges.
80% of data generated by consumers is unstructured, and as Planer notes, ‘that’s
definitely keeping CEO’s up at night’. It’s important that retailers stop seeing data as an
add-on, but rather as central to their model.
5
Retail Gazette. Link
6
Walmart reimagines its big boxes as town centers, Retail Wire. 2018. Link
7
Henry Eccles, Google, TBD conference. 2018
8
John Lewis & Partners Retail Report 2018: How we shop, live and look
9
Planet Retail RNG, Retail Market Monitor. 2018
10
The growth of microbrands threatens consumer-goods giants, The Economist. 2018. Link

5. GET RETAIL SMART
The year ahead
THE PROBLEM WITH PREDICTIONS IN 2019
Despite analysts’ best efforts to predict consumer behaviour, unexpected business
performance continues to illustrate how futile this can be. Before Christmas ASOS
recorded its worst sales in the last four and a half years: its shares fell by 43% which wiped
more than $1.4 billion off the market value.11
Only the year before ASOS was the exception
to the the-British-high-street-is-dying rule.12
It appears that the trend towards sustainable
fashion is finally taking a toll. It’s not the trend of sustainability which is a surprise, but that
it’s impacted this business at that time. Ultimately, consumers are fickle and voting with
their feet. The most sure we can be of anything is that in 2019 the consumer will stay
firmly in control.
If you are interested in learning more about the subject of this article, please contact
Sophie Meadows, Insights Manager, meadowss@bbdoknows.com
ABOUT BBDO KNOWS
BBDO KNOWS is a planning resource for the BBDO network.
BBDO KNOWS offers thinking, strategy, insights and inspiration on key categories, key
themes and consumer segments.
If you are interested in learning more about the way BBDO thinks please contact Melanie
Norris, Global Planning Director, norrism@bbdoknows.com.
DISCLAIMER
The information and materials in this article are for general information purposes only. Whilst we try to ensure that
all information and data in this article is accurate, complete and up to date, this article should not be relied upon
and you should seek advice if you intend to use or rely upon any of the insights or data contained in this article.
This article must not be shared, downloaded, copied or distributed for commercial purposes without the prior
approval of BBDO. © BBDO 2019 All rights reserved.
11
Europe’s Online Retailers Suffer Nightmare Before Christmas, Fortune. 2018. Link 12
Five reasons ASOS continues to be successful, Fashion United. 2017. Link