Over the past few months, CNBC has had in-depth conversations with more than a dozen top executives and leaders in the retail industry. These industry leaders have not only witnessed the magnificent transformation of the retail industry in recent years, but also shared their unique insights on where the retail industry is headed in the next five years, how artificial intelligence will reshape the customer experience, and which emerging standards will lead the new retail trends in the future. Each professional's insights are intelligent and forward-looking, giving us a magnificent picture of the future of retail.
The experts in conversation expect more evolution in the future of retail. The impact of the new crown epidemic once hindered the logistics of the retail industry, resulting in a shortage of goods; In the current context of persistent inflation, the change in consumer demand has caused excess inventory in retail enterprises. And it is these new challenges and shocks faced by the retail industry that have accelerated the transformation of the retail industry. As the new year of 2024 arrives, hopefully the turmoil is behind us, and retail leaders are looking for change to build the businesses of the future. These changes will not only profoundly affect the future direction of the retail industry, but also reshape the ecological pattern of the entire industry.
So, what will retail look like in five years' time? What are the new and eye-catching changes? Here's what they can look like in five years from an industry perspective. Although these insights have been edited, they still maintain their original depth of thinking and forward-looking.
1.What role will stores play in five years, and how will brick-and-mortar stores change?
Abercrombie & Fitch CEO Fran Horowitz:: The future of retail will be smaller, more efficient, omnichannel stores, and stores will be located where consumers want to see them. For Abecrombi, the large stores are neither efficient nor productive from a customer experience perspective, because consumers want a more intimate shopping experience; And from an economic point of view, they are not productive. Today's retail businesses can't afford to get foot traffic through brick-and-mortar stores without digital options, as they did in the past. Therefore, when choosing a store location, retail enterprises must go through financial calculations, and the number of customers and digital orders in the location are the common factors that determine the location of the store.
Michelle Gass, CEO of Levi's:The role of the store needs to be more experiential than it is today. I think consumers will raise the bar for experience demand. In an era where a purchase and a transaction can be completed with just one click, consumers are only likely to come to a physical store when the store has the appeal to meet the consumer's more and higher shopping goals. And to do this, not only will consumer-facing stores need to make a lot of changes, but the management of the back end will also need to change a lot and become more important than ever, in an omnichannel shopping environment, the physical store has become a small distribution center. Perhaps its effect is to reduce the need to set up your next distribution center over time, as your business can use brick-and-mortar stores as small distribution centers.
Jens Gride, CEO of SKIMS:Set up shop in a more centralized, better location for the store. Tides come and go, but Fifth Avenue next to New York's Central Park is Fifth Avenue. It was like that a hundred years ago, and it will be the same a hundred years from now. So important locations are only going to become more and more important. I don't know where B and C are, but I think B and C's location will be difficult because they don't provide the experience. I think when people go shopping, they go to a place A or online, and there may really be very little need for location B and location C.
Geoffroy van Raemdonck, CEO of the Niemann Group:In 5 years' time, what we call "retail entertainment" is going to be much more prevalent – when you walk into a store, you have a multi-sensory experience that really takes you into a themed space where the brand or retailer is expressing something that transports you back to another world, and that experience is a physical experience, not a digital one.
Trina Spear, CEO of Figs:In the future, stores in the world will have a relatively smaller and smaller function of buying and selling goods as in the past; And the more important function is the customer experience. Bringing people in the community here is not just about building relationships with brands, it's about building relationships with each other.
Chris Nicholas, CEO, Sam's Club:One of the most expensive and challenging aspects of e-commerce is last-mile delivery, and if you have stores closest to your customers and are willing to dedicate all your resources to serving e-commerce, then you'll be able to provide your customers with what they want, i.e., more convenience and faster speed. First of all, you need to make sure that your store is excellent, that customers are well served in your store, and that it is an inspiration for them to shop. On top of that, your store is the last mile of delivery for online shopping, allowing you to serve your customers the way they want.
Under Armour's President, Americas Kara Trent:Some brands have moved to hyper-experiences, others have moved to hyper-deals (this should mean digital, compilation note). I think brands that drive business and experience at the same time will be successful. These changes in the brand will also affect their perception of commercial real estate, such as which streets and which neighborhoods are more important? Think more about the local area than you do about the wide area. We might be wondering: What might consumers in New York City need relative to a central U.S. city? Even in a big city like New York, how do you look at the different types of business? Different location retail stores?
2.What is the most disruptive force in retail? How will these forces reshape the future of retail?
Michelle Gass, CEO of Levi's:Technology, data, machine learning, and even artificial intelligence. I'm really, really excited about these new technologies, which means that leveraging analytics models can help businesses run their needs. Machine learning and analytics learning are powerful technologies that empower us as retailers to manage our business at a higher level and better serve our customers.
Tom Ward, Chief E-Commerce Officer, Walmart USA: The most disruptive force is always the customer's demand. Whether consumers want to go, it is the future development direction of the retail industry and the direction of technical support, including front-end, back-end and **chain. There is no doubt that the customer will always be the driving force of change. If you assume that all customers are making the same change, then the emerging technologies that help retailers most effectively adapt to customer changes will be the most disruptive. Obviously, technologies like AI are going to be important.
A&F CEO Fran Horowitz:The biggest change we've seen, and a very important part of our business, is live streaming. We have long-standing relationships with brand enthusiasts (e.g. social influencers) who will take the time (online) to sell your brand's merchandise to you. As the world continues to grow digitally, anything is possible, and live streaming may become a very effective business model.
Trina Spear, CEO of Figs:Turn brick-and-mortar stores into true hubs. It's going to be a shift for a lot of brands, right? People want a place to gather and learn, they want to experience experiences that transcend themselves, to be a part of something beyond themselves. Especially the younger generation, Gen Z, can't just trade, everybody wants to find faith beyond themselves and turn themselves into a more important part of this world, and I think this will be the most disruptive force.
Former CEO of Walmart U.S. e-commerce, JetCom Founder Mark Lohr:I think conversational commerce is one of those things that takes time to develop. In five years, people will understand that this is the future. I think we've come far enough that people will be able to connect those dots to a future where the world will evolve into more conversational commerce, where people can use voice or text to talk to a digital assistant who knows you as well as your best friend.
Gap and JMickey Drexler, former CEO of CREW:Social** has had a huge impact on the retail industry. When I was a kid, I was advertised in the New York Times, in Time magazine, on TV, etc. Both Gap and Old N**Y were created with highly creative TV commercials. Now the ads are on social**, on Instagram. In the mail. Instagram and TikTok are very powerful in influencing consumers.
D**e Kimbell, CEO of Ulta:The lines between digital and physical are indeed blurred, and we can't see the difference between them, but they do come together. Customers will have a wide range of connections, the tools they have and the expectations they have built, even in the difficult years of the last three years, have improved greatly. It's very important that we understand how to leverage the assets that we have. Not only do we have nearly 1,400 store physical assets, but we also have the digital tools and associated capabilities.
3.What technology will change retail in five years? How to change? How do you see the impact of AI and automation on the industry?
Former Walmart executive Marc Lore:If there's anything you want to learn from this conversation, it's my belief that conversational commerce will spark change in the industry. Conversational commerce is unlocked by artificial intelligence and unprecedented natural language processing capabilities. Search engines will become obsolete. This will be tape in 20 years. The younger generation will scoff at the idea of using search engines because search engines are not that smart.
Raemdonck, CEO of Niemann Group::Now, if you look at a product, you have to try it on and see if it fits your size. For try-ons, I think there are a lot of 3D-based techniques that can be used to showcase the product and see if it fits you and if it's just right. There are many ways that companies can interact with you, identify you, and what you want. There's going to be a lot of friction when it's helping customers buy the right product for them, there's going to be a lot of friction removed from technology, and I think we're going to see returns go down and customer satisfaction up.
Levi's CEO GASS: If you think about today's technology, broadly speaking, you're probably going to see a lot of things in personalized design. If you're an avid buyer of Levi's 501 (jeans), you might get a recommendation for the next exciting 501 (jeans), or something similar. But I think the direction of technology is to be able to jump, from recommending a 501 jeans, to recommending a perfect denim skirt, or a bolder jump. But do it all based on your shopping history and who you are. This doesn't mean it's just a service for the digital world. I think the most powerful and exciting way to do that is to serve with a stylist, because if you stay with a stylist, they get to know you, they know your buying history, and putting that together is an art and a science.
Trina Spear, CEO of Figs:Artificial intelligence will be very helpful, he will recommend the style of clothing, the size, and what is best for the consumer. AI will be a real game-changer because it helps people quickly find and get exactly what they need, whether online or in a physical store, with quick support and response. How does it create a more personalized experience that recommends products for you? How do we know you? We know you, you've been here before, we know what you like, what you do, what you do, your body type, your style, what's best for you, so that awareness can be very helpful for retailers. I think it's going to be a game-changer in the long run.
Yael Cosset, CIO at Kroger:The biggest shift related to AI will revolve first around our colleagues, and instead of replacing the work our colleagues are doing now, AI will expand the scope and authority of the work they do. How can we simplify some of our colleagues' work so they have more time to interact with customers? If our colleagues are in the cheese section, they will be able to serve our customers better and help them answer their questions, or solve problems with cheese pairing with wine or bread, so that they can have a better experience. This will be an easy goal for us to achieve.
Kimbell, CEO of Ulta:Artificial intelligence, on a broader level, has been a focus for us for some time, making the customer's connection with us more personal. The power of data and the ability to unleash it makes our conversations with guests more meaningful, relevant, and timely, which is really exciting. We've made progress in this area, but we see a lot of the future when it comes to our personalized experiences, and our ultimate goal is to achieve true one-to-one personalization.
Under Armour's President, Americas Kara Trent:It's a real life experience when you think of shopping malls, and one of the things that brands have to figure out when they think of all these digital connectivity tools is the internet. In fact, in these large venues, it is difficult to get fast internet. That's one of the biggest pain points that we're facing right now, in terms of bandwidth and wifi speed, to be able to decide if you can enable a smart fitting room, an RFID, a remote POS type system. So I do think that's one of the issues that commercial real estate development teams need to address in the long run.
4.In the five years from now, the majority of consumers' shopping activities will take place --- online or in physical stores?
Kimbell, CEO of Ulta:In the beauty industry and at Ulta Beauty, we're seeing most of the deals being the same as they are now, and we think that's going to be the case for the next five years.
Kroger CIO Cosset:In five years, stores will continue to account for the majority of sales, because even if a large part of our sales are digital, it will be realized in stores.
Figs CEO Spear:I don't think it's one of them. I think the more three-dimensional space there is, the more digital and offline it is, the more powerful it becomes. I do think the younger generation, they're back in the world, and you're seeing the growth of offline as well. I think there's more.
Horowitz, CEO of A&F:A brick-and-mortar store is important. You need a store. I've seen a lot of pure online players over the years who end up opening a store because you need a store, you need that hub for returns, exchanges, pickups, whatever it is, they're using this hub. Over the years, people have often said that brick-and-mortar malls and stores are going to disappear, but I don't believe it at all. A brick-and-mortar store is important. I've always said that, and I'm a firm believer that they're important. Online and offline are a balance between channels based on consumers' lifestyles and ages.
Grede, CEO of SKIMS:Most of the shopping will still take place at the Stone Store, but the vast majority of intentions or decisions to shop will start online. Today's young customers always know what they want to buy when they shop in a store, so the transaction happens in the store, but the customer journey starts online, and I think in the next five years, everyone will have that experience.
Former Walmart executive Marc Lore:Younger generations have a higher percentage of online shopping. As older generations age and younger generations grow, you'll see a higher percentage of online shopping by definition.
Group CEO Raemdonck:It's not going to be one or the other, and I really believe in this concept of integrated retail, where consumers will continue to choose different ways to shop depending on what day of the week, their mood, and what they want. I do believe, especially in the luxury industry, that connecting with one person, one who knows you, and one person who is most interested in you, will be the primary way for consumers to really engage in the luxury industry, and it's still very common in stores. But I think online sales complement that.
5.Which retailers and brands will be the most influential and dominant players in five years' time? Which ones are most likely not to exist?
Grede, CEO of SKIMS:It's hard to ignore the power of Temu and Shein's business models. Their **chain model is unlikely to be replicated by retailers in the US or Europe, so they have structural advantages. It's hard to see it go away, but that's on the real client. In general, I think every brand in the mid-price segment will hurt. The market is polarized between luxury, premium and value, and I think mid-range retailers are going to be wiped out. If you say Nike's mid-range**, then I really believe in Nike, I believe in Lulu, I believe in Yoga, I believe in SKIMS, I believe in Inditex, I believe in all retailers, either offer value for money ** or just the lowest**. All the mid-priced retailers, if I were them, I would be nervous. I can ** that in the next five years, the mass market brand will be reshuffled beyond recognition compared to today.
Gap and JDrexler, former CEO of CREW:TJX Corporation. Look at this growth, look at sales, look at revenue. I have to say zaraTheir products are all right in style. They follow the trend. Countless stores all over the world. Their operations and execution, their ability to merchandise in addition to their strong merchandise, I think they're always at the top of the game. Another name I'd like to mention is LVMH. What they did was extraordinary. Quality and integrity are exemplified in every one of their businesses.
Horowitz, CEO of A&F:Very specific category stores will have a more difficult time existing. Companies that cater to lifestyles and have a balanced mix will continue to thrive. If everyone dresses casually and you're totally a dress-up brand, you're in a bit of trouble. Having a balanced lifestyle brand is a must, and I've seen a lot of sports brands evolve into lifestyle brands, I mean, it's a huge trend that's happening, and my opinion is, you can't be too narrow.
Under Armour's President, Americas Kara Trent:Luxury is a very specific space that brings a variety of different values to consumers. The value that Dior, Louis Vuitton or Hermes bring to consumers is only in this very niche and specific space. So I think these brands are here to stay and continue to exist and grow in this space.
Levi's CEO GASSI think the ones that are thriving are the brands that are staying true to themselves in their traditions, but also embracing the direction of the consumer, embracing these new tools that will help them personalize, shape their experience with the consumer.
Kimbell, CEO of Ulta:It's clear that you need to meet the rising expectations of consumers, who are becoming more savvy and raising higher expectations. Whether it's brick-and-mortar or online, their tolerance for a less-than-ideal experience is decreasing. With more options and higher expectations, it's important to build great human connections, whether in a physical store or online.
6.What will become the standard of the future of retail that does not exist today?
Under Armour's President, Americas Kara Trent:Customer service. To be honest, I think it's a lost art. I think if somebody tries and tries to get into your store, this face-to-face relationship that you have with your customers becomes an intangible asset for the business, and it's sometimes overlooked in retail these days.
Levi's CEO GASSWhile we're still using traditional cash registers today, in five years, I don't think you'll see them in our stores, right? This is an important commodity space ......The shopping transaction part will be very simple. Even today, with so much technology, there's still a lot of friction when you're actually going to buy something, right? Waiting in line, process, and more. I think the winners in five years are the merchants who remove those frictions, so the time customers spend in the store is all about discovery, inspiration, and almost nothing to do with the transaction.
Grede, CEO of SKIMS:Inclusive sizing has become the standard in retail. When my wife (Emma Grede) and Khloe Kardashian founded good American, they were really one of the first brands to offer a full range of sizes, from extra small to three or four Xs, and in department stores, they refused to divide the product line into different departments. So, since then, in the past.
In five, six, or seven years, this practice has become more and more common. I mean, when Kim (Kim Kardashian) and I founded SKIMS, we simply couldn't imagine not doing that. I think it's going to be very difficult to launch a brand that doesn't accept sizes these days. I believe that in five years' time, inclusive sizing will be the absolute standard. I think it's self-evident.
Tom Ward, Chief E-Commerce Officer, Walmart USACustomers expect a certain level of personalized service. Customers expect that if they spend a lot of time in a retail store like Walmart, we'll be able to understand them, get to know them, and we won't treat them like strangers every time they come back. ......If we know you have a pet dog and you buy from us every week**, then we should probably show you deals on pet beds, leashes or dog clothing and show it up in a way that makes you feel like we understand your needs and can serve you well.
Raemdonck, CEO of Niemann Group::Shopping will no longer be like shopping. Shopping will be an experience that can take place at home or in the most beautiful space, where the product plays a key role, but everything else that surrounds the product, from the service and experience to the environment, will be at the center. I can imagine a store that doesn't actually have a lot of visible products, no cash register, but really an incredible room where you can go and enjoy your own moments, where the products are shown to you, where you have time to get out of the room, have a drink at the bar and come back. I think it's going to be a real experience where all the retail artifacts are going to be gone, so you won't see the product shelves, you won't see the salespeople standing behind the counters and cash registers. I think you're going to interact with someone in an environment that doesn't look like retail, but looks like a wonderful experience. It's more like I'm going to a friend's house, which is intimate, and it's having dinner with someone I like.
Figs CEO Spear:Customization will become the new standard. It's going to be applicable to all areas of retail, right? It will be suitable for adding patches or specific details to your jacket or overalls. In other spaces, your headphones have initials on them, and your headphones are exactly what you need, not just on clothing, but in all aspects of the entire retail landscape. There will be fewer personnel, but their influence will be greater. As a result, they no longer answer technical questions or help you deal with technical questions because technology has already helped you deal with them.
Horowitz, CEO of A&F:Just-in-time inventory mode. You can use your imagination to your heart's content, whether it is a digital user terminal, or direct delivery to consumers, from factories directly to customers, replacing distribution centers, there are many different models to imagine.
Chris Nicholas, CEO, Sam's Club:In addition to customers, another criterion that is very important for the retail industry is energy. Having sustainable, renewable energy resources – i.e., solar, wind, community solar, electric vehicles, etc. – all of these will be important for sustainable operations in the future. If you haven't already thought about that right now, then you really should pay attention to this issue as soon as possible.
Kimbell, CEO of Ulta:The role of retail apps. We certainly all have apps, and they play a role today, but we often only see the growing opportunities and trends that apps bring with being a centralized hub. In today's increasingly need for personalized experiences and human connections, we see apps or some variation thereof providing customers with a great customer experience, educating and communicating the brand. It will also be a tool to increase customer loyalty or **; In-store navigation assistance can also be provided to customers.