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AlixPartners: Political Divides, Dead Malls and M-Commerce will Shake Up Retail This Year

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Although retail remains an uncertain landscape, AlixPartners is providing the industry with predictions it promises will be game changing in 2017.

Following a rocky fiscal 2016, the new year is looking positive for U.S. retailers. According to the United States Commerce Department, January retail sales beat economists’ predictions, indicating the possibility of strong economic growth for the first quarter. Compared to January 2016, retail sales increased by 4.1% in January 2017, including department stores that witnessed a 1.2% sales growth for the month.

AlixPartners says with a political divide, dead malls and the rise of m-commerce in the next 11 months, anything goes for the retail industry.

Import tax

As it turns out, Americans might be paying for that wall after all. The industry has been watching and waiting to find out if the Trump Administration’s proposed 20 percent tax on imports from trade-deficit countries, including Mexico, will materialize. If so, it could mean higher prices at the cash register. For apparel retailers, which import most of their goods from overseas, an additional tax—whether its Trump’s tax idea or the Republicans border adjustment tax—could negatively impact business.

COGS

U.S. tax reform isn’t the only threat to consumers’ wallets, protectionist sentiments have been bubbling up world wide, which could hike up costs of goods sold (COGS) this year. Should this go into effect, retailers may have to boost prices for consumers—not something the struggling retail segment needs right now. If prices go up, its likely that consumers will opt for cheaper goods rather than pay more

Political divide

Post-election, retailers are demonstrating their political perspectives and AlixPartners projects this trend will continue for 2017. As the political climate remains tricky domestically and internationally, brands are publicly championing their views on a host of issues, including equality and sustainability. From Patagonia boycotting the Outdoor Retailer Show to Nike’s vocal rebuke of the president’s so-called muslim ban, retailers are not shying away from adopting a political and social identities.

Amazon takedown

Amazon remains the e-commerce monarch, but many large retailers are making strides to compete with the company this year. Walmart debuted its own, more price-friendly version of Amazon Prime, which offers consumers free two-day shipping on orders more than $35. Despite attempts to outstep Amazon, many consumers still view the e-tailer as a convenient place for all their product needs, which could make this initiative more difficult for other big-box retailers.

Psychographics data

Many retailers are turning towards psychographic data to tap into the purchasing habits of consumers everywhere. Rather than focus only on age and gender, retailers are also analyzing attitudes, lifestyles and values to offer better services and transform experiences.

Store closures gain momentum

AlixPartners predicts that many more store closures will occur in 2017. And, in fact, only two months into the year, more doors have shuttered. What was once a taboo topic, the company says, is many retailers are turning to store closures to strengthen their competitive market strategies.

Demise of shopping malls

Things continue to look bad for malls, the once top destinations for apparel, accessories and home goods. As anchor stores close, space is left vacant across the U.S. Despite this trend, AlixPartners see an opportunity for off-price retailers to take advantage of shopping malls by opening stores and reaching new consumers, since many shoppers still prefer bargains when they purchase products.

M-Commerce in the spotlight

This year, brands will begin incorporating more delivery channels, including m-commerce, to enhance consumer experiences. Although Shopify data says mobile is on its way to becoming 70 percent of global e-commerce shares this year, retailers will have to think outside the box to keep consumers engaged on mobile devices.

Specialty stores

Niche shops are gaining momentum, enticing larger retailers to acquire them along with their technological know-how. In addition to offering consumers’ in-house branded products, the majors are establishing store-within-store boutiques to make in-store visits more memorable. Department stores, including Nordstrom, have set up specialty apparel pop-up shops to heighten brick-and-mortar personalization.

Subscription services

2017 may be a prime time for subscription services, as consumers continue to abandon the traditional fitting room experience. These business models offer convenience and customization, qualities that are often compromised with in-store visits. With subscription box services, consumers have the choice of trying on apparel at home, while receiving a curated assortment for their wardrobes on a regular basis.

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