Future Reality: 10 trends will define the New Year
VR. AR. AI… Oh my.
There is no question how much technology is changing not only the way retailers and brands engage consumers during the pre, during and post phases of the shopping experience, and reshaping the path to purchase, but also how brands bring new innovation to the market and rethink how products are merchandised online and in store.
Below, DSN outlines the big trends, predictions and critical issues that will make the news in 2017 and beyond.
1. VR takes over
With the advent of virtual reality experiences, it won’t be what you say but what your audience experiences that matters. That experience will define differentiation on all levels, from customer engagement to product development and market analysis. In fact, it’s already reshaping reality. GSK Consumer Healthcare created a migraine immersion experience also using VR in a new, high-tech Innovation Lab at its Warren, N.J., headquarters. Meanwhile, in the home improvement channel, Lowes is testing service robots in the aisles and has been piloting Microsoft’s Hololens technology in a special “Holo-room” where customers can visualize do-it-yourself project options. Kantar is using VR to track consumer reaction to in-store signage.
According to a Perkins Coie survey, 89% of tech execs believe VR development will be a major focus over the next two years.
2. The marriage of health and beauty
The future of beauty is health. The vast majority of the growth in non-cosmetic beauty is being driven by products and brands that communicate and deliver a definitive health benefit. More and more, beauty will be a critical part of how women define health and wellness. The best new product launches in 2017 will reflect that trend, and DSN expects to see more growth among high-ticket “medi-derm” therapeutic skin care brands.
3. Purpose matters
According to a survey by Echo Research, 87% of shoppers said they factor social responsibility, sustainability and authenticity into their purchase decisions. More and more, consumers will expect this from retailers as much as CPG brands.
Kroger is developing an anaerobic conversion system to turn organic food waste (food not fit for sale or donation) into energy. Walmart has doubled down on its commitment to sustainability leadership with a new set of 2025 goals.
The big challenge for all brands will be to understand that corporate social responsibility, or CSR, is not just about being “green,” it’s about being genuinely committed to delivering on a vision of sustainability, social service, authenticity and other important consumer ideals. The very best brands and retailers will be hardwired for purpose — it will be an inseparable part of their DNA.
4. Healthy foods
Kantar Retail predicts that between 2016 and 2020, 25% to 50% of innovations made by major suppliers and retailers will include some sort of a FLONH component (fresh, local, organic, natural, and/or healthy). Fresh is a challenge, but DSN expects to see drug stores use data targeting to identify demand, reformatting clusters stores and leveraging external partnerships to offer consumers more of the healthy foods they want.
5. Affordability of health care
Make health care affordable, again. That was the voter mandate in 2016.
Regardless of whether a Trump White House and a Republican-controlled Congress seeks to repeal or just rollback certain elements of ObamaCare, the retailization of health care will continue in 2017 and beyond. Expect the continued expansion of clinical services at community pharmacy — quite possibly capped by the long-awaited enactment of provider status for pharmacists — more partnerships between retail pharmacy, hospitals, big health systems and other key stakeholders, including some pairings that once would have made pretty strange bedfellows, such as CVS’s new PBM-to-PBM relationship with OptumRx, and the broader use of technology and digitization to expand access and lower the cost of patient care.
6. Flipping the ‘switch’
The Food and Drug Administration will consider a new class of OTC hearing aids that could bring an entirely new category to retail pharmacy. Also up for consideration in 2017 — though perhaps not quite as likely — could be a switch of the migraine-treating triptan class of drugs and erectile dysfunction drugs Viagra and Cialis.
Meanwhile, the newly enacted 21st Century Cures Act will speed FDA approvals, leading to breakthrough new medications, new indications, new therapeutic classes and new device categories.
7. That’s retail-tainment
According to a Harris Poll, 72% of millennials prefer to spend on experiences versus products. For retailers, that means a need to bring theater back to the brick-and-mortar shopping experience. The approach seems to be working in smaller markets. Australian firm Roy Morgan Research found that 90 million more Aussies shopped brick-and-mortar stores in June 2016 than in June 2015, which it attributed to a rise in “retail-tainment.”
Beauty offers an ideal proving ground. L’Occitane’s Flatiron New York City store, which opened in December, features its Smart Beauty Fitting Room, allowing customers to browse products in a private, digital format.
8. Omnichannel becomes ‘uni-channel’
The drift away from traditionally conceived channels to more of a ‘uni-channel’ experience that embraces the divide between in-store and online will continue in 2017. Rather than individual channels, the challenge for retailers will be to think in terms of “points of influence and points of fulfillment,” noted Kantar Retail chief knowledge officer Bryan Gildenberg. According to Kantar, 45% of retailers are committed to investing in multichannel fulfillment in 2016, including a push for in-store pickup of online purchases.
9. Retailers go ‘small’
Retailers are increasingly going “small.” This charge is currently being led by Amazon, who opened its first Amazon Go store, which has been called the “world’s most advanced shopping technology,” and Walmart, which has opened two “pickup and fuel” locations. Expect Amazon to focus on nonedible grocery offerings and quite likely health and beauty moving forward. Walmart will most certainly expand its pickup and fuel format in 2017. Both formats will rely heavily on mobile payment. Thus far, only Starbucks has perfected mobile payment, which has seen 8 million monthly transactions performed on its mobile app, or 21% of all payments.
10. Instant gratification
Today’s “I want it now” society certainly holds true with retail delivery platforms. 7-Eleven became the first retailer in 2016 to successfully deliver products via drone, but expect more retailers to join the fray. Such solutions as Dash buttons and artificial intelligence-enabled personal assistants like Amazon’s Alexa, Google Assistant and Microsoft’s Cortana will continue to flourish. Also, expect more retailers to take on the uberization of shipping and delivery; CVS began a test in November of a new same-day delivery service for frontstore merchandise, with plans to extend it to pharmacy in 2017.
There is no question how much technology is changing not only the way retailers and brands engage consumers during the pre, during and post phases of the shopping experience, and reshaping the path to purchase, but also how brands bring new innovation to the market and rethink how products are merchandised online and in store.
Below, DSN outlines the big trends, predictions and critical issues that will make the news in 2017 and beyond.
1. VR takes over
With the advent of virtual reality experiences, it won’t be what you say but what your audience experiences that matters. That experience will define differentiation on all levels, from customer engagement to product development and market analysis. In fact, it’s already reshaping reality. GSK Consumer Healthcare created a migraine immersion experience also using VR in a new, high-tech Innovation Lab at its Warren, N.J., headquarters. Meanwhile, in the home improvement channel, Lowes is testing service robots in the aisles and has been piloting Microsoft’s Hololens technology in a special “Holo-room” where customers can visualize do-it-yourself project options. Kantar is using VR to track consumer reaction to in-store signage.
According to a Perkins Coie survey, 89% of tech execs believe VR development will be a major focus over the next two years.
2. The marriage of health and beauty
The future of beauty is health. The vast majority of the growth in non-cosmetic beauty is being driven by products and brands that communicate and deliver a definitive health benefit. More and more, beauty will be a critical part of how women define health and wellness. The best new product launches in 2017 will reflect that trend, and DSN expects to see more growth among high-ticket “medi-derm” therapeutic skin care brands.
3. Purpose matters
According to a survey by Echo Research, 87% of shoppers said they factor social responsibility, sustainability and authenticity into their purchase decisions. More and more, consumers will expect this from retailers as much as CPG brands.
Kroger is developing an anaerobic conversion system to turn organic food waste (food not fit for sale or donation) into energy. Walmart has doubled down on its commitment to sustainability leadership with a new set of 2025 goals.
The big challenge for all brands will be to understand that corporate social responsibility, or CSR, is not just about being “green,” it’s about being genuinely committed to delivering on a vision of sustainability, social service, authenticity and other important consumer ideals. The very best brands and retailers will be hardwired for purpose — it will be an inseparable part of their DNA.
4. Healthy foods
Kantar Retail predicts that between 2016 and 2020, 25% to 50% of innovations made by major suppliers and retailers will include some sort of a FLONH component (fresh, local, organic, natural, and/or healthy). Fresh is a challenge, but DSN expects to see drug stores use data targeting to identify demand, reformatting clusters stores and leveraging external partnerships to offer consumers more of the healthy foods they want.
5. Affordability of health care
Make health care affordable, again. That was the voter mandate in 2016.
Regardless of whether a Trump White House and a Republican-controlled Congress seeks to repeal or just rollback certain elements of ObamaCare, the retailization of health care will continue in 2017 and beyond. Expect the continued expansion of clinical services at community pharmacy — quite possibly capped by the long-awaited enactment of provider status for pharmacists — more partnerships between retail pharmacy, hospitals, big health systems and other key stakeholders, including some pairings that once would have made pretty strange bedfellows, such as CVS’s new PBM-to-PBM relationship with OptumRx, and the broader use of technology and digitization to expand access and lower the cost of patient care.
6. Flipping the ‘switch’
The Food and Drug Administration will consider a new class of OTC hearing aids that could bring an entirely new category to retail pharmacy. Also up for consideration in 2017 — though perhaps not quite as likely — could be a switch of the migraine-treating triptan class of drugs and erectile dysfunction drugs Viagra and Cialis.
Meanwhile, the newly enacted 21st Century Cures Act will speed FDA approvals, leading to breakthrough new medications, new indications, new therapeutic classes and new device categories.
7. That’s retail-tainment
According to a Harris Poll, 72% of millennials prefer to spend on experiences versus products. For retailers, that means a need to bring theater back to the brick-and-mortar shopping experience. The approach seems to be working in smaller markets. Australian firm Roy Morgan Research found that 90 million more Aussies shopped brick-and-mortar stores in June 2016 than in June 2015, which it attributed to a rise in “retail-tainment.”
Beauty offers an ideal proving ground. L’Occitane’s Flatiron New York City store, which opened in December, features its Smart Beauty Fitting Room, allowing customers to browse products in a private, digital format.
8. Omnichannel becomes ‘uni-channel’
The drift away from traditionally conceived channels to more of a ‘uni-channel’ experience that embraces the divide between in-store and online will continue in 2017. Rather than individual channels, the challenge for retailers will be to think in terms of “points of influence and points of fulfillment,” noted Kantar Retail chief knowledge officer Bryan Gildenberg. According to Kantar, 45% of retailers are committed to investing in multichannel fulfillment in 2016, including a push for in-store pickup of online purchases.
9. Retailers go ‘small’
Retailers are increasingly going “small.” This charge is currently being led by Amazon, who opened its first Amazon Go store, which has been called the “world’s most advanced shopping technology,” and Walmart, which has opened two “pickup and fuel” locations. Expect Amazon to focus on nonedible grocery offerings and quite likely health and beauty moving forward. Walmart will most certainly expand its pickup and fuel format in 2017. Both formats will rely heavily on mobile payment. Thus far, only Starbucks has perfected mobile payment, which has seen 8 million monthly transactions performed on its mobile app, or 21% of all payments.
10. Instant gratification
Today’s “I want it now” society certainly holds true with retail delivery platforms. 7-Eleven became the first retailer in 2016 to successfully deliver products via drone, but expect more retailers to join the fray. Such solutions as Dash buttons and artificial intelligence-enabled personal assistants like Amazon’s Alexa, Google Assistant and Microsoft’s Cortana will continue to flourish. Also, expect more retailers to take on the uberization of shipping and delivery; CVS began a test in November of a new same-day delivery service for frontstore merchandise, with plans to extend it to pharmacy in 2017.