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What will the retail sector look like in 2020?

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The retail sector has changed dramatically during the past eight years. And there is every reason to expect that many of these trends will continue through to 2020 and beyond. 

One of the main drivers for this change has been new technology, specifically in terms of how transactions are performed.

According to the UK Payments Council, UK consumers are already spending more with their debit cards than with cash. New payment technologies will continue to improve in the coming years: the chips that are currently used in your debit cards will increasingly feature in everyday items such as mobile phones. The popularity of non-cash payments will only grow.

Already, contactless technologies such as Near Field Communications (NFC) are making it possible to pay for everything from coffee to rail tickets with just a tap of a credit card or mobile phone handset. By 2020, customers will almost certainly be using their mobile devices to pay for a wide range of goods and services in this way. This model will also help retailers – customers will be spending their money more quickly and easily than ever before.

By 2020, the gap between wholesalers and consumers will have narrowed. Wholesalers will be much closer to consumers, removing the “middle man” and selling direct to end-users.  

Dell has already enjoyed great success with this model. By cutting operating costs, eliminating the middleman and carefully controlling its inventory, the computing giant has been able to focus on selling computers at the lowest possible price.

With its revenue still growing at nearly 15 per cent each year, Dell’s an attractive role model for other wholesalers who are looking to trim the fat in the coming years.

Traditional retailers will be left behind as they struggle with excessive staff costs linked to long trading hours and the high fixed-costs associated with their property leases. 

Wholesalers might opt to bypass the retail channel altogether in the future, and focus on low fixed-cost distribution channels instead. 

A high-street presence will be much less important by 2020, once manufacturers and wholesalers realise how simple – and lucrative – direct online sales can be.  

And it’s not just wholesalers that will benefit from the growing popularity of internet-based shopping. The internet will also provide a new platform for retailers in the form of strategic partnerships. Whether retailers choose to work with specialist sites such ASOS or social media giants such as Facebook, the “virtual” side of high street shopping will grow and grow.

Historically, retailers have measured footfall as a key success indicator. As we head towards 2020, new metrics such as click-throughs will become more important.

Will all of these developments mark the end of the high street as we know it? Probably not. But they’ll force the retail sector to consider how the latest internet and mobile technology can be used to maximise profits, forge new alliances and improve the customer experience.

Even though the economic downturn has been blamed for the failure of many high-street brands, it’s worth remembering there are still many successful “traditional” retailers out there: John Lewis; Poundland; Greggs; Ted Baker. Strong brands with a deep understanding of customers (and a firm grip on cash flow) will continue to thrive during the next decade. Expect those with outdated operating models and unclear propositions to struggle.

Dan Coen is business development director at Zolfo Cooper.

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