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Open for business: The trends that will define retail in 2020 and beyond

Right now in the UK, everyone's pretty down on retail. IMRG, for example, predicts mid-single-digit growth year-on-year for 2020. That by itself isn't great, but frankly - it's better than 2019.

But clearly, the experience for individual retailers is going to differ widely. The year started with some big-name retailers closing long lists of stores, yet at the same time, we're seeing other retailers expand their presence - both offline and online.

Anecdotally, with a holistic view of our retail clients globally, those retailers with a genuine understanding of their customers - usually in the form of a functioning single customer view - are outperforming those without one.

Now, this could represent a focus on emerging technologies and the 'early adopter' bonus associated with being among the first to adopt high-performing technologies. Or, it could be a positive symptom of well-performing retailers focussing on their customers more generally, from customer service right through to their brand and business model.

Good examples of businesses who impress me with an understanding of their understanding of their customers are Hackett, Cotton Traders and Matalan. All three have either access to a functioning single customer view, or an advanced understanding of their customers as individuals.

Increasing focus on digital opportunities

Crucially, as our world evolves ever-more to one with digital at its heart, we need to grow our understanding of digital - challenging conceptions that no longer make sense, and harnessing new capabilities.

We're seeing many of our clients increase their focus on sourcing digital talent, bringing capabilities in-house to shape their teams' wider skillset. Top of the list is developing an understanding that the 'hand-to-mouth' metrics offered by Google Analytics and other platforms are just that - they show a narrow window of consumer activity. These methods of measuring marketing aren't working in favour of retailers, and thankfully we're seeing an increasing number of retailers looking at measuring the incremental performance of their marketing.

Measuring the incremental return that marketing activity creates is not a new method of measurement - incrementality has been used to measure direct mail for decades, for example. But broader adoption of incrementality by retail marketing functions and beyond is a hugely positive trend for 2020.

As with most years, politics will play a significant role in determining the success of retail in 2020. There's obviously Brexit - discussed extensively elsewhere - but a key issue to watch out for will be the digital tax that's proposed for April. Assuming it goes ahead, does this mean the start of a defence on digital monopolies or the passing on of further costs to the consumer?

Sustainability and purpose

In his Retail Week blog, IBM's Roberto Battistoni discusses the inclusion of sustainability in the purpose of businesses, particularly retail and FMCG. "This has unequivocally been the year when most businesses recognised that purpose today cannot exist in absence of a credible sustainability theme embedded into it," Battistoni explains, highlighting a 2015 Nielson report that found 66% of consumers globally are willing to spend more on a product if it comes from a sustainable brand. For millennials, that figure rises to 73%.

Businesses that genuinely incorporate sustainability into their models - and communicate that effectively - will outperform those that don't.

Whether this sustainability comes in the form of optimising the manufacturing of products, supporting relevant NGOs financially or otherwise, even developing rental or second-hand markets for products, or something entirely different will be an exciting development to watch this year.

Aside from the sustainable function itself, how businesses elevate new and existing sustainability-linked purpose will define their success.

Rise of credit

A recent emerging trend has been the rapid on-boarding of payment systems such as Klarna and Clearpay. With the additional potential purchasing power these services afford consumers, will this positively impact average order values and customer lifetime value over the short- and long-term?

Additionally, what does the rapid rise of these services say about the average consumer's purchasing power? Is the UK consumer a wealthy consumer?

Free returns

With the ease of comparison for consumers, pressure for retailers to include costly additions such as free delivery, and the low barrier of entry to market for competitors, eCommerce platforms are often not as profitable as physical retail locations. I suspect we'll see more of an ongoing discussion with the gradual evolution of the market, but 2020 will likely see questions on how much longer this can be maintained. Meanwhile, the technological, digital, sustainability and credit-related trends above will all be utilised - at varying levels - as saviours.

Finally, who pays for consumers returning their purchases has been a critical discussion point for some time now, and this will continue in 2020.

Ultimately, retailers need to find the balance between offering free returns for genuine consumers who need such insurance before committing to purchase a product online, and those who seek out free returns to take advantage. Going full-circle back to my original point, employing a greater understanding of your consumers - and whether they are keeping the items they order - with a single customer view that is linked to your marketing activity offers salvation here

Those brands with accurate and actionable insight into their consumers will see success in 2020. For those that don't, it could be a bumpy start to the new decade.