Been reading a lot of predictions about what’s ahead for retail and retail technology for 2018.
Some point to the continuation of an ongoing trend line – the digital influence of retail sales, for example. Or the growing shopper interest in (and use of) unified commerce capabilities such as click ‘n collect and extended aisle.
Some state the obvious: customer-centric retailers will continue to win.
And some – and here’s where it gets interesting – point to smoldering embers that are moments from bursting into flame.
Let’s discuss the one that I think is the most important, long-term:
This is the year that digital fully invades Fast-Moving Consumer Goods (FMCG.)
It’s not just because of Amazon and Whole Foods. It’s because there’s a generation of digital natives – in China, in the UK, in the States – who have now moved into their prime family – and household-formation years.
And for them, digital FMCG makes complete time-saving and convenience sense.
"A personal observation: It’s rarely the technology that moves the retail needle. Look instead to shopper behavior."
The data tells the story. Nielsen’s recent report on the US FMCG retail industry noted that online transactions are projected to drive $71.7 billion of FMCG retail revenue in 2017. That’s seven percent of the total business and reflective of 21.1% growth year-on-year.
"Do the math, and you find that online channels will drive 90% of the 1.3% YOY growth realized by US FMCG retailers in 2017."
Driving the US move to online are – no surprise – younger consumers, women, and families. Specifically, 22% of Millennials (that’s more than 1 in 5) are interested in shopping online for FMCG products. To the same question, it’s 15% of women – vs. 11% of men.
What products are driving the move to online? In a nutshell, babies/children, and pets. Four of the top five fastest-growing digital commerce categories meet the needs (diapers, baby food, baby bath or pet supplies) of one or the other.
And what else does it mean? Well,
...as in other digitally-shaped categories, the initial impact falls on store traffic.
The data shows a 1% decline overall in FMCG shopping trips overall.
There are increases in visits to online channels (7.2% YOY) and value grocers (+f1.6%, think Lidl, Aldi). There are slight increases (+0.6%) in visits to mass merchandisers and supercenters (think Walmart and Target.)
However, there are significant decreases in visits to pet stores (-3.4% YOY), drug stores (-2.3% YOY) and conventional grocers (-1.8%).
Pause for a second.
Embers are red. Sparks beginning to fly. Now the accelerants of shopper affinity schemes such as Prime and the ease/convenience of conversational commerce – where voice recognition and artificial intelligence creates shopping that a 2016 study found to be 3X faster and easier.
Won’t be long until the neighborhood is on fire.
If you weren’t smelling the smoke, you better wake up.
Let me know what you think.