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2018 was a great year for retail 2019 is another story

  • Author:share
  • Source:Google
  • Release on:2019-01-21

Dive Brief:
After a healthy year that wiped away the notion of a “retail apocalypse,” 2019 is promising to be a year of transition amid economic and geopolitical uncertainty, and as pure-plays and other disruptive brands continue to take share, according to Deloitte's 2019 Retail Outlook, which was emailed to Retail Dive.

That also comes as back operations continue to compress, with fashion cycles shortening and supply chains speeding up, for example, and as the consumer demands convenience, Deloitte said.

To meet the challenges, legacy retailers must ensure that their brand position is clear, their data yields value and their loyalty programs are effective, according to the report. They should also be investing in disruptive startups in some way — partnering with them, acquiring them or drawing inspiration from them — without compromising their existing business operations, Deloitte said.

Dive Insight:
A stark aspect of Deloitte's outlook for this year is that it barely mentions Amazon.

In fact, the over-arching message the consultancy has for retailers has little to do with e-commerce per se, although the high expectations for convenience and communication have arguably been set by Amazon in particular and by internet-based capabilities more generally. Rather, Deloitte notes that retailers, faced with consumers who will be preoccupied by their finances and by the state of the world, must become more agile in getting their attention and dollars.

"2018 left the industry with a lot to digest—a strong U.S. economy, a record-breaking holiday season, mixed retail earnings, some high-profile bankruptcies, along with global trade and economic tensions," wrote report authors Rod Sides, Deloitte vice chairman U.S. sector leader, retail, wholesale and distribution, and Bryan Furman, Deloitte services retail sector specialist. "The next 12 to 18 months will likely see an industry in transition—an industry managing through uncertain times and placing bets on what will separate the winners from the losers. Those who can synchronize their investments to profitably empower the consumer will likely find themselves on the right side of the tipping point."

Target, Walmart and others have already employed many of the suggestions outlined in the report, including investing in some of the digital natives that have offered "advanced product features that are more expensive to develop;" pure-plays and marketplaces that offer advanced and more consumer-friendly fulfillment options; discount players and off-price companies with vastly different business models that allow for market-leading prices; [and] "business models that are not as profitable from retail operations alone but are supported by ancillary services, subscriptions, memberships, and external funding."

Many have also moved their loyalty programs away from being purely "transactional," as Deloitte suggests, to more personal and useful to the loyal customer. Without naming any brands, the report warns retailers away from tricking customers and describes the kind of "VIP" schemes favored by companies like TechStyle and AdoreMe. "Consumers are frustrated with a bait and switch on quality, price, and perceived discount," according to the report. "You might succeed in making a sale but could lose trust."

Above all, though, is the sense that retailers will have to really focus this year. "Opportunity abounds for retailers and entrants to capture share in the upcoming year. 2019 will likely require retailers to differentiate themselves in their investment strategy; the upcoming one to two years are unlikely to be a tide that lifts all boats."