For retailers, 2016 was both a year of triumph and torment, but what does 2017 have in store?

Price increases

Warnings about the likelihood of price increases in 2017 came thick and fast after the EU referendum in June, as the slumped value of the pound pushed up sourcing costs and threatened to stifle retailers’ margins.

AO.com, Next, The Entertainer, Lego and Carpetright all confessed that consumer inflation in 2017 is probable, and many retailers have been forced to hike prices already.

But, for many businesses, the difficulties will really surface with their individual FX hedging policies having run out at the start of the new year.

“Retailers are unlikely to mitigate these pressures fully and will then have to make trading decisions on whether to raise prices or take the hit to margins”

Kate Calvert, Investec

Investec analyst Kate Calvert predicts that, with higher cost of goods as well as wage inflation and business rate changes, 2017 will bring “softer sales”.

“Retailers are unlikely to mitigate these pressures fully and will then have to make trading decisions on whether to raise prices or take the hit to margins,” she says.

Price inflation may also negatively impact consumer confidence, which has swung dramatically in the wake of the EU referendum.

“Until there is visibility on consumer demand, the sector is likely to underperform,” Calvert warns.

This year could also bring more feuds between suppliers and retailers that want to avoid lumping consumers with price rises – such as that between Unilever and Tesco late last year.

Workers’ rights and pay

The rights of workers and pay were a big issue in 2016 and the focus is likely to intensify this year.

MPs launched an inquiry into the future of the “gig economy” and workers’ rights in October, with evidence sessions due to kick off in the new year.

The inquiry is being led by high-profile Labour MP Iain Wright, who made a name for himself last year by dragging Mike Ashley and Sir Philip Green in front of his committee.

Ashley’s Sports Direct is still not out of the woods in the eyes of Wright, after MPs were allegedly bugged during a visit to the retailer’s Shirebrook warehouse.

Fierce rival JD Sports also hit the headlines late last year over allegations around staff treatment at its main warehouse. The Bury-based retailer has vowed to conduct an internal investigation and we should hear the results of this in the coming months.

Asos' warehouse in Barnsley

Asos’ warehouse in Barnsley

Asos’s warehouse in Barnsley

Asos will also be included in Wright’s new inquiry after the fashion etailer was accused last year of poor working practices at its Barnsley facility.

Meanwhile, retailers will be preparing for more scrutiny over pay – inside and outside of the boardroom. 

A number of high-profile retailers came in for criticism last year over their approach to dealing with the cost of the government’s national living wage. With the living wage increasing again in April, MPs and unions will no doubt be keeping a close eye on retailers’ behaviour.

Prime Minister Theresa May has softened her stance slightly around tackling corporate excess, but the idea of ethical capitalism will continue to be pushed.

Under government plans, companies – including retailers – could be forced to publish pay ratios, revealing the gap in earnings between bosses and shopfloor staff. Shareholders could also be handed more power to vote against executive pay. Privately held firms could also be held to the same standards as publicly listed companies, to avoid a repeat of a BHS-style collapse, as part of the plans. 

Focus on ‘fair credit’

With price increases on the horizon, retailers will need to adapt to meet changing demands.

A tool businesses may employ to mitigate the impact for shoppers is increased finance options, so that customers can spread the cost of purchases.

Still, this may sharpen the focus on ‘fair credit’.

BrightHouse

BrightHouse

BrightHouse has admitted new rules are impacting its rent-to-buy business

As rent-to-buy retailer BrightHouse discovered in 2015, the Government has intensified its focus on transparency and affordability checks to ensure shoppers do not pay more than they’re expecting, or can ultimately afford.

Last year, BrightHouse chairman Henry Staunton admitted the newly rigorous processes were proving to be “onerous and time-consuming for our customers and colleagues” and were having a material impact on the level of customer sign-ups and consequently on profits.

Retailers with credit offerings will be nervously waiting the Government’s next move.

Pensions in the spotlight

After the almighty row in the wake of BHS’s collapse, the health and security of pension funds is likely to remain in focus next year across all business sectors, including retail.

The safety of pensions is likely to be more closely scrutinised than ever, particularly when acquisitions and disposals are on the cards.

John Lewis and Tesco are among the retailers to have made changes to their pension schemes as they grapple with the challenges schemes face such as the collapse in bond yields following the Brexit vote.

Technology enhancing retail

Tommy Hilfiger virtual reality 2

Tommy Hilfiger virtual reality 2

Tommy Hilfiger is one of the brands experimenting with virtual reality

Technology is playing an increasingly important role in retail and 2017 is expected to bring advances in virtual reality, augmented reality and biometric recognition.

Retailers such as Chinese ecommerce giant Alibaba have already dabbled with virtual reality, while the success of Pokémon Go demonstrated the potential of augmented reality as a way for retailers to draw footfall to their stores.

As these technologies move out their embryonic stages, they will increasingly influence retailers’ interactions with consumers.

“Virtual reality eliminates the limitations of space and time, so that retailers can dream of whatever experience or design they choose. As the technology evolves and costs lower, we can expect this to be more of a common site, with virtual showrooms and virtual fitting rooms becoming the norm,” says Capgemini management consultant Bhavesh Unadkat.

He adds that biometric recognition is also on the rise, enabling retailers to learn more about their customers, and in turn enrich their shopping experience.

“Biometric recognition allows retailers to instantly collect much more detail on their customers. That detail is then used to instantly offer bespoke shopping choices and experiences, whether they are in-store browsing or sat at home on a tablet device,” he explains.

The Internet of Things

The Internet of Things (IOT) will expand its reach in the retail sector next year, according to Unadkat.

“We can expect the number of internet-connected objects to increase significantly, and its impact on retail will be dramatic,” he predicts.

“We can expect the number of internet-connected objects to increase significantly, and its impact on retail will be dramatic”

Bhavesh Unadkat, Capgemini

“The number of wearable devices purchased doubled in 2016, and with technology like Amazon Echo facilitating a connected experience for the customer, the opportunities for retailers playing in this space become substantial.”

Unadkat suggests that, as well as experimenting with customer facing-opportunities, retailers will use IOT next year to unlock a number of supply chain benefits.

The technology enables retailers to more accurately measure supply and demand in near-real time – ensuring products do not run out based on a surge of demand, or that stores become overstocked.

Increased automation

Automation is already infiltrating retail, particularly in our warehouses. The likes of Ocado, Marks & Spencer and Amazon are using robots in their distribution centres.

In fact, Amazon owns its own robotics firm after buying specialist Kiva back in 2012.

However, law firm Pinsent Masons believes that the UK’s impending departure from the EU could stimulate more automation in retail.

As usual, all eyes will be on Amazon, and if its Go format proves successful it raises the prospect of more automation being introduced in the retail store

In the face of a shortage of migrant workers in retail’s supply chain, firms are expected to invest and integrate robotics into their warehouse operations.

Meanwhile, Amazon Go – the etail giant’s checkout-free convenience store which opens in Seattle last year – will take away the need for human interaction from the in-store experience.

The store uses sensor technology where shoppers scan a designated app upon entrance, collect their items from store shelves and walk out the door – automatically charging their Amazon accounts.

As usual, all eyes will be on Amazon, and if its Go format proves successful it raises the prospect of more automation being introduced in the retail store.

Seasonless fashion

Burberry has led the

Burberry menswear show

Burberry customers can buy what they see on the catwalk immediately

2016 was undoubtedly a difficult year for fashion retailers and, as usual, the old adversary, the weather, was to blame. 

A mild winter and cold spring gave way to a wet and windy start to summer followed by one of the warmest autumns on record.

All of this impacted sales and led to markdown across the high street.

With weather patterns growing more erratic there are signs that fashion retailers are prepared to move away from the traditional seasonal planning cycle.

Marks & Spencer highlighted the “seasonless” qualities of its AW16 collection, while Next has moved to a shorter season model, introducing smaller ranges closer to launches.

The move away from traditional fashion seasons has also been seen on the catwalk.

Brands including Burberry, Tommy Hilfiger, Topshop Unique and Ralph Lauren have embraced “see now, buy now” collections, allowing shoppers to buy the styles they see on the runway immediately rather than waiting six months.