“The future belongs to those who prepare for it today” – civil rights activist Malcolm X unexpectedly hit on a business truth with this quote. Retailers and brands now face constant waves of disruption.

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Shifts such as the rise of small-volume logistics, the growth of social commerce and the need for environmental and social transparency are likely to shape the future, according to Edge by Ascential’s annual Retail Disruption Report, which outlines several macro trends that will affect retail and brand business models.

Here are five key trends to consider when drawing up a growth strategy for this year and beyond.

Health, wellbeing and conscious consumption take centre stage

The shopper trend for plant-based diets means brands are scrambling to formulate and manufacture relevant products.

Consumption trends will continue to shift as shoppers become more aware of their health, as well as the environmental and social impact of their purchases. That presents an opportunity for retailers across grocery and pharmaceuticals, including the potential to offer consultancy services.

Millennials, Generation Z and the older segments of the population are all seeking to stay fit. Global ‘free-from’ food sales are projected to grow by 9.5% annually to reach $338bn (£261bn) by 2024, while the total organic market in the UK jumped 5.3% in value in 2018.

Retailers and suppliers of consumer packaged goods need to define a credible health and wellness strategy, with transparency on credentials featuring in marketing, labelling, in-store positioning and online product descriptions.

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Blockchain technology that can trace ingredients from source has a large role to play in reassuring consumers – Carrefour is already enjoying a revenue uplift from using this technology.

Retailers and brands are already addressing shopper concerns about over-packaging and non-recyclable packaging, but the pace needs to pick up.

Alternative solutions, such as refill points for shoppers bringing their own containers for goods, are one option. Asda is testing a ‘sustainability store’, offering refill with both own-label and some FMCG partners.

An overlapping trend is a hunger for experiences over product consumption, especially evident with, but not exclusive to, millennials and Gen Z.

The retail share of consumer spending is dropping in all regions, and in Europe it is predicted to fall from 39% in 2000 to 37% in 2024 according to Edge research.

As a result, retailers need to concentrate on building differentiating and engaging experiences into their store offering. Recent UK innovations include a Boots concept store featuring live demos, an Instagram zone and a YouTube studio.

Retail powered by AI

Global annual retail spending on AI is projected to nearly quadruple to $7.3bn (£5.7bn) by 2022 – up from an estimated $2bn (£1.6bn) in 2018. AI capability will be integral in delivering a competitive advantage for research and development, customer engagement and delivery fulfilment.

AI can process huge amounts of data generated by customers. This data ‘vapour trail’ is increasingly coming from smartphone usage. Penetration has plateaued in the UK, but screen time is rising and currently clocks in at three hours and 23 minutes per day.

Online access via high-speed mobile means loyalty is eroding as shoppers now have more choice and price transparency is prevalent. But the huge amount of data generated can be leveraged to inform real-time product development and speed to market.

It also means retailers and brands can track and respond to customer interactions with relevant content and tailored engagement.

Japanese beauty company Shiseido’s Optune app uses data collected by smartphones, such as sleeping patterns, weather conditions and skin images, to provide optimised and personalised skincare recommendations as a subscription service to customers.

Increasing demand for convenience and a friction-free experience can also be supported by AI solutions, both in-store and online. Global checkout-free stores will increase to 10,000 by 2024, with the highest growth in tech-savvy markets such as China.

However, retailers need to be careful to maintain the ‘human’ in the mix and understand how far UK shoppers want to go in this direction. Sainsbury’s had to roll back a till-free trial at its Holborn, London, store last September.

Rapid delivery becomes its own channel as supply chains evolve

Fast delivery and flexibility in fulfilment are essential as consumers increasingly value proximity, speed and convenience.

Household sizes are shrinking, and consumer behaviours will shift away from both regular cooking and big weekly shopping trips, opening up opportunities for convenience-driven cooking solutions and foodservice offers in-store and via delivery.

These trends are also driven by younger consumers, who value individualism, cook less, socialise more and adopt faster, on-the-go lifestyles. Shoppers are making fast and frequent convenience missions close to home, as well as turning to online, as the norm.

A streamlined, flexible and optimised supply chain is a priority. In 2019, Amazon rolled out one-day delivery to Prime members across the US. The global benchmark for speed is Alibaba in China, which is delivering 30 minutes from order within a radius of 3km around its Hema stores.

As the desire for experiences over carrying out daily chores makes convenience king, the role of the delivery intermediary is assuming greater importance and becoming a channel in its own right. Exclusive arrangements with brands and retailers are beginning to impact on shopper decisions and expectations.

Grocery retailers including Walmart, Aldi, Tesco and Carrefour have alliances with intermediaries, and recent examples of UK exclusive partnerships include Pret A Manger’s arrangement with Deliveroo and the recently announced tie-up between Gregg’s and Just Eat.

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The digital touchpoints of delivery businesses will become increasingly powerful pieces of digital real estate and points of influence. Brands will have to make sure they maintain their profile with these platforms.

The shift to proximity small-box retail and online will demand warehouse automation to support high-frequency but small-volume logistics.

Changes to be embraced include developing appropriate pack sizes and labelling to be compatible with urban fulfilment methods, such as cargo bikes, and establishing real-time inventory visibility to ensure product availability.

Accelerating innovation cycles

The race to develop products to keep up with emerging trends puts pressure on innovation cycles. From initial research and development to appearing on the shelf, the product cycle needs to be shortened to meet shopper expectations of immediate gratification.

Spotting the opportunity will increasingly depend on building robust feedback loops and analysing real-time data on consumer behaviour and demographics. Data management is integral to operations and retailers need smooth-running processes to collate data and channel it to the right departments.

CPG brands will increasingly use AI in their shopper trend analytics, demand forecasting, inventory management and logistics to build smart and highly responsive manufacturing systems. This will build a competitive advantage over production cycles.

Fashion retailers are long used to fast turnaround to develop new designs and put them into production. Zara ships new products to stores twice a week – they take just 10 to 15 days to go from the production floor to the store. H&M has an equally swift design-to-store process but differs from Zara by outsourcing the bulk of its manufacturing.

Product design and innovation cycles will have to take into account the positive impact agenda.

The requirement to use sustainable source materials and build the ‘circular economy’ into manufacturing processes, while at the same time maintaining speed of innovation and delivery, is the next challenge.

Social commerce driving growth

Social commerce will be a growing channel for those consumers who look for the latest fashion, beauty and lifestyle products.

Platforms such as Facebook and Instagram are continually evolving in-app purchasing. By 2024, US sales from social commerce are predicted to reach $84bn (£65bn), taking a 1.7% share of overall retail sales.

“In China, more than half of millennials and Gen Z intend to shop on social platforms in the future, and only 31% on traditional ecommerce platforms”

Huda Beauty was one of the first brands to team up with Instagram on its new ‘Checkout’ feature, enabling shoppers to purchase products directly without leaving the platform.

In Asia-Pacific, social commerce growth is accelerating. In China, more than half of millennials and Gen Z intend to shop on social platforms such as WeChat and Red in the future, and only 31% on traditional ecommerce platforms.

Chinese-owned short-form video platform TikTok, famous for its ‘challenges’ to users, is growing in popularity in the West and is also experimenting with social commerce.

Forward-thinking brands are already testing out how to use TikTok in marketing. Last July, Kroger partnered with the platform to promote videos on its back-to-college products through social media influencers, using the hashtag #TransformUrDorm, and pushed shoppers towards conversion through in-app purchases.

Restaurant chain Chipotle has linked up with TikTok to reach Gen Z consumers. It challenged them to dance for free guacamole last year and worked with some of TikTok’s platform creators on a Super Bowl project this year. Creators spoke to fans directly through the game via a ‘TikTok Timeout’ hashtag to tell them of free-delivery Sundays for orders above $10 made via its app.

Retailers and brands should allocate a test-and-learn budget to explore the opportunities and parameters of social commerce. This will involve evaluating the features and client bases of different social shopping platforms and identifying the right channel or partner.