The State of Retail Online 2019

The State of Retail Innovation 2019
Sucharita Kodali, Forrester

2© 2019 FORRESTER. REPRODUCTION PROHIBITED.
Sorry, did someone say apocalypse?
Source: The State of Retailing Online 2018 and 2019 (preliminary)
“…the strongest growth in the
last 6 years”
43%
36%
41%
57%
16%
7%
2018
2019
Net more Same Net less
Store openings vs closures

Agenda
› Top goals for the near-term
› Areas of investment
› Other predictions

Retailers have four key goals
Source: Global Business Technographics® Priorities And Journey Survey, 2018 - Global
Which of the following initiatives are likely to be your organization’s top
business priorities over the next 12 months?
45%
46%
49%
56%
Reduce costs
Improve products and features
Improve customer experience
Grow revenue
Source: 1,867 retail and wholesale executives

Here is what retailers are doing to achieve those goals
Grow revenue
1. Customer acquisition
2. Customer retention
3. Launch new products
Improve the customer experience
1. Improving the online customer
experience
2. Increasing frequency of
customer engagement
3. Improving store customer
experience

Here is what retailers are doing to achieve those goals
Improve products and features
1. Make products and services
easier to use
2. Increase customer input on
product or service design
3. Launch products faster
Reduce costs
1. Lower IT costs
2. Improve supply chain
3. Improve employee retention

Agenda

Specific areas of investment
Hot Lukewarm Cool
Robotics
Augmented reality
Virtual reality
Digital store
AI
Distributed selling
Data security
Personalization
Mobility
Cross-channel

Hot Lukewarm Cool
Robotics
Augmented reality
Virtual reality
Digital store
AI
Distributed selling
Data security
Personalization
Mobility
Cross-channel

Shoppers, especially wealthy consumers, are
distrustful of personalization
Source: North American Consumer Technographics Retail and Travel Survey Q4, 2017
34%
35%
36%
41%
48%
52%
16%
41%
43%
47%
53%
59%
I prefer to shop with retailers who use personal
information to improve my shopping experience
I am more likely to purchase from a retailer who
sends me personalized advertising
Retailers should do more to offer me more
personalized experiences
The information I get from retailers is relevant to
my tastes and interests
I'm uncomfortable with the amount of information
that retailers collect about me
I worry about retailers knowing too much about
me
HHs over $100k
Overall
To what extent, if at all, do you agree with each of the following statements? (Top
2 of 5 point scale)

Shoppers don’t want to share lots of personal
info for personalization
Source: “RetailMeNot Consumer Survey Data”, a commissioned study conducted by Forrester Consulting June 2018
What kinds of data are you willing to share in order to receive more personalized discounts or
offers (promotions, deals, coupons, etc.)?
17%
2%
4%
4%
6%
7%
26%
34%
35%
35%
37%
37%
40%
60%
I am not willing to share any data
Don't know
Permission to track social activities
My friends or followers on social networks
Permission to track my online activities
Social media information
How much I like to spend on products
Demographic information
My location
My previous purchases with other brands or retailers
Products I own
Favorites styles and colors
Hobbies and Interests
Products I like

› Recommendation in marketing
› Segmented emails
› Recommendation engines
› Personalized greetings or offers on mobile devices
› Remarketing and retargeting
The outputs of personalization haven’t changed
much over time
Source: The State of Retailing Online 2019

Hot Lukewarm Cool
Robotics
Augmented reality
Virtual reality
Digital store
AI
Distributed selling
Data security
Personalization
Mobility
Cross-channel

What shoppers do in stores with mobile devices
Source: Consumer Technographics NA Retail and Travel Online Benchmark Recontact 1, Q3 2015-18
*2018 data is “redeemed” a coupon
21%
17%
13%
16%
9%
15%
24%
18%
14%
18%
12%
10%
37%
30%
23%
20%
19%
14%
Compare prices
Look up product information
To read reviews
Search for a coupon*
Checked product's availability
Locate a nearby store or check hours
2015 2017 2018
In the PAST 3 MONTHS, what did you do when you researched products/services on your
mobile phone while shopping in a physical store?

What shoppers do outside of stores with mobile
devices
Source: Consumer Technographics NA Retail and Travel Online Benchmark Recontact 1, Q3 2015-18
*2018 data is “redeemed” a coupon
30%
29%
24%
20%
24%
30%
22%
33%
28%
26%
25%
19%
18%
11%
Compare prices
Look up product information
To read reviews
Checked product's availability
To purchase a product
Locate a nearby store or check hours
Search for a coupon*
2015 2018
In the PAST 3 MONTHS, have you used your mobile phone for any of the following while you
were NOT in a physical store?

Mobile retail solutions in the future need to address
the following
Solutions Users
Frictionless feedback
Real-time monitoring
Self-service anywhere Shoppers
In-store
On-the-go
Stores
Associates
Merchants
Marketers
Store Operations
Partners
Suppliers

Hot Lukewarm Cool
Robotics
Augmented reality
Virtual reality
Digital store
AI
Distributed selling
Data security
Personalization
Mobility
Cross-channel

The state of omnichannel integration in the US
Source: The State of Retailing Online 2018
2%
2%
7%
7%
13%
18%
22%
24%
36%
36%
42%
44%
47%
47%
51%
60%
2%
4%
9%
7%
9%
7%
7%
16%
4%
11%
11%
4%
4%
9%
13%
2%
4%
20%
9%
11%
16%
24%
11%
7%
13%
16%
7%
16%
58%
42%
58%
49%
36%
40%
44%
33%
22%
22%
16%
22%
18%
13%
18%
9%
2%
4%
2%
2%
2%
31%
53%
16%
38%
44%
11%
18%
22%
20%
11%
13%
22%
11%
13%
20%
11%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Ship to locker, post office or other location
Return to other stores (not your company)
Same day delivery
DTC (one warehouse)
Return to other stores (another brand within your…
Third party marketplace
Reserve online, pick up in store
Endless aisle
Ship to my store
BOPIS
Online visibility of in-store inventory
Store to store transfers
Drop ship vendors
Ship from store
DTC (multiple warehouses)
Buy online, return in store
2016 or earlier 2017 Implementation Plans for 2018 No plans Have removed N/A
What are your plans to offer the following fulfillment services?

Hot Lukewarm Cool
Robotics
Augmented reality
Virtual reality
Digital store
AI
Distributed selling
Data security
Personalization
Mobility
Cross-channel

The digital store
• Wi-fi
• Labor and task
management solutions
• Digital pricing
• Kiosks
• RFID
• Digital payments
• Connected shelves
• Connected dressing rooms
• “Just walk out” technology
• Same-day delivery
Must-haves Nice-to-haves Optional things

Hot Lukewarm Cool
Robotics
Augmented reality
Virtual reality
Digital store
AI
Distributed selling
Data security
Personalization
Mobility
Cross-channel

AI
Machine
learning
Deep
learning
“imitating human behavior”
“automating data crunching”
• eCommerce platforms
• Voice assistants
• Markdown optimization
• Site availability
• Recommendations engines
• The Waze app
• Self-driving cars
• Westworld

The poster child for AI

But we’ve been doing ML for years already
Source: Stitchfix Algorithms Tour; Forrester
Merchandising
• Merchandise exception
reports (e.g. content
completeness)
• Recommendation
systems
• Inventory management
• New style development
• Demand modeling
Marketing
• Lifecycle management
• Acquisition marketing
• Chatbots and automated
service
• Competitive insights
Operations
• IT performance metrics
• Fraud detection
• Warehouse optimization
• Logistics optimization
• Hiring
• Labor optimization
• Store efficiency

What we are hearing retailers say we’ll see more in
the future
Function Solution
Merchandising “Robobuyers” and “roboplanners” (like roboadvisors in private wealth management)
Checkout Sophisticated fraud checks for online orders; policing unauthorized sellers
Merchandising Automation of image processing for lifestyle images; automation of product descriptions
Merchandising Predictions for new products (including StyleSage, Boomerang)
Merchandising Dynamic pricing algorithms
Fulfillment Route optimization for warehouse picks or delivery of packages
Customer service Smarter chatbots
Customer service Speech to text for product requests in stores; complaints and other issues

Hot Lukewarm Cool
Robotics
Augmented reality
Virtual reality
Digital store
AI
Distributed selling
Data security
Personalization
Mobility
Cross-channel

More consumers know VR than AR
Source: Consumer Technographics North American And European Technology, Media, and Telecom Topic Insights Survey 2, 2018 (US)
Which of the following best describes
your experience with augmented reality
in the past 12 months?
Which of the following best describes your
experience with virtual reality headsets in
the past 12 months?
45%
34%
8%
14%
Never heard of until
now
Heard of, never used
Have used >12 mos
Have used <12 mos
14%
57%
17%
12%
Never heard of until
now
Heard of, never used
Don't own but used
Currently own a
headset

People still don’t know what they don’t know
How interested would you be in using augmented reality for
the following activities?
41%
28%
31%
33%
26%
22%
20%
28%
24%
19%
27%
26%
38%
43%
44%
44%
46%
50%
1%
1%
4%
1%
1%
Testing different cosmetics
Measuring or leveling physical objects
Trying on clothes or accessories
Playing video games
Locating restaurants or shops nearby
Navigating or receiving directions
Not interested Middle Interested Already use

People still don’t know what they don’t know
How interested would you be in using virtual reality for the following
activities?
41%
41%
35%
27%
24%
17%
25%
23%
34%
38%
39%
49%
1%
0%
1%
Shopping in a virtual store
Playing video games
Training for specific job duties
Touring a location or sightseeing
Not interested Middle Interested Already use

Agenda

2019: The Year of Collisions and Clashes
1. Amazon vs Walmart
2. Brands vs Amazon
3. Personalization vs Privacy
4. Focus vs innovation

1. Amazon vs Walmart: The battlefronts
Category Size of the prize Who wins and why
B2B $1T+
Amazon with an early lead; Walmart would need to
acquire Grainger or other
Grocery ~$1T Walmart; store footprint and omnichannel dominates
International $1T+
Slight edge to Amazon; both have struggled in China;
size of prize is small in India; Amazon is strong in UK
and Germany
Last mile
delivery
<$50B Amazon; focus and willingness to “play the long game”
3rd Party
Sellers
<$50B Amazon; early, dominant lead
Media <$20B Amazon; early lead
Advertising <$20B Walmart; needs to activate stores

2. Brands vs Amazon: This was the last risk factor in
the 2017 annual report

This shocked many people last year

Brands now have aggressive reactions to IP
violations of their goods; this should protect unique
merchandise

3. Personalization vs privacy: Privacy laws are
coming

4. Focus vs innovation: Diversification and new
businesses are essential
Company Revenue in 2000 Revenue now
Amazon ~100% from 1st party retail
~40% from 3rd party retail,
hardware, cloud
Apple 80% from Macs 10% from PCs and laptops
Google 44% off-Google ads
16% off-Google; licensing and
on-Google bigger (e.g.
YouTube, Waze)
Microsoft
~80% from Windows and
Office
~50% from cloud, hardware
and social networks

Retailer-led
media networks
are attractive

Walmart is experimenting with being a landlord, not
just a retailer

Did you know IKEA was one of the biggest
restaurants in the country?

Summary
› Retail has demonstrated resilience in 2018
› Revenue growth is top-of-mind for retailers
› Mobility and cross-channel solutions are still areas of investment for
many retailers and brands
› Many opposing forces will be a wet blanket on current trends (e.g.
privacy laws, brands selling DTC)

The State of Retail Online 2019

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