What to Look for From the Retail Industry in 2015

Retail is an evolving, exciting industry right now, and that's unlikely to change in 2015. Disruptive forces will continue to play their part — whether technology based, competitively based or a combination — creating challenges for retailers, but also fantastic opportunities. Here are some things to watch for in 2015:

Market Share Challenge
The market share of established players will continue to face pressure from multiple angles — e.g., being squeezed by the likes of Amazon.com, which is raising the bar for everyone. As Amazon Fresh expands globally, existing grocers will need to look carefully at their overall capabilities from a customer experience and supply chain fulfilment perspective.

Simultaneously, competition from "the little guy" will continue via online sites enabling someone selling from their home to compete with long-standing suppliers. Additionally, overseas competition will increase as major retailers set up foreign language websites allowing consumers in different countries to order from them.

The Death of Loyalty?
Collection of loyalty data has armed retailers with vast information about shoppers, and offered customers money-saving opportunities. Since the 2008 financial crisis, consumers started looking harder for value. Loyalty to a specific brand has seemingly decreased as shoppers frequent multiple brands, formats and channels to get products they need.

Furthermore, the cost of running a loyalty program is becoming questionable relative to its benefit. Late in 2014, The Economist reported U.K.-based Tesco's Clubcard no longer produced enough sales to cover its annual operating costs. Sainsburys also warned members that points would be worth half the value.

The Rebirth of Loyalty?
While loyalty programs powered by physical cards struggle, new technology-based loyalty 2.0 initiatives are appearing and growing (e.g., smartphone applications). Loyalty 2.0 revolves around real-time personalization, which tailors an offer, ad, or other product placement or service to the person at the right time and place to make an impression and drive sales.

This involves an intricate weaving together of cutting-edge and tried-and-tested technologies. Face recognition will start to complement smartphones for identifying customers — loyalty system registered or not — and their position within a store. Existing customer relationship systems will need to be linked to offer management and combine with streams of data from in-store devices such as smartphones. This is a big data problem, and bringing all of these pieces together moves beyond predictive analytics into streaming analytics to achieve real-time personalization.

Fulfilment as a Battleground
The ability to deliver faster than the competition has long been a differentiator in retail. In the 1980s, some catalog retailers began promising delivery in only a few days compared to the previous 28-day delivery time. Now, in 2015, Amazon Fresh is enabling orders by 10 a.m. to be delivered for dinner.

Another response to this trend are delivery lockers at different locations (e.g., train stations, airports and town centers), allowing customers to pick up pre-ordered purchases as they pass. While Amazon's drones have been largely dismissed, for now, expect to see more innovation in the fulfilment arena in 2015.

Technology-Driven Response Initiatives
In 2015, we can expect to see technology used by retailers in an attempt to claw back market share and improve margin. Real-time supply chain initiatives will focus on in-store inventory management, waste reduction, vehicle tracking and real-time automated decisions based on specific events. Likewise, initiatives based on personalized offers will furnish customers with improved information in-store such as product specifications, availability, customer reviews, competitive pricing or other details often only available to online shoppers.

Oliver Guy is the retail industry director at Software AG, a provider of enterprise management software.