Andrew Phipps is an expert in retail, property and foodservice, specialising in analysing how consumer behaviour is changing. Here are five predictions that he says convenience retailers need to get ready for.
1) More populist policies will follow Brexit
After the Brexit negotiations are over, I think we’ll see a change in business rates becoming a property tax. At the moment, if you have agricultural land, then merely getting planning permission will increase its value. I think this will change.
Then, I believe that we will see more populist policies passed, stories that read well on the front cover of the Daily Mail. I think we will see a bigger focus on plastics, waste and health. Last year, there were 670,000 hospital admissions for obesity-related illness and I think there will be more taxing on what is perceived to be causing it.
2) Stores must get ready for the elderly
In 1919 life expectancy was 55 and now it’s 80, and even 80 doesn’t seem very old. We’re also seeing more people move into cities, at the moment its 49% of the population, but by 2050 it will be 72%. Older people are moving into cities so that they have more amenities on their doorstep, so convenience retailers will have to be ready. There will also be a rise in assisted living areas from the age of 55 or even 50 so that people don’t suddenly have to move into a home as they get older.
3) Cater for the experience
40% of 25-30-year olds believe they will never be able to buy their own home. In London, it’s 13 times the average salary to buy a house, so it is going to be a long-term rental market. This means that younger people will continue to spend money on experiences and demanding more premium products that satisfy needs in the present.
4) Data will dictate online success
The challenge that online retailers face is that it is incredibly hard to make a profit. In clothing, for instance, 49% is online but 75% of products get returned – as soon as it does, the retailer has made a loss. Primark is saying they won’t go online until they can make it profitable – if they can’t do it, can others?
In an average month there are 42 billion Facebook logins, 60 billion Google searches and 1.7 trillion WhatsApp messages. Every single one of these is a data point, and these all have data such as location, time etc. We’re not short on having data, we’re short on how to use it effectively.
There is a reason that Amazon is buying back into brick and mortar. You can’t consume a store though the screen, the freshness and quality. I predict that in the next five years, Amazon will buy Tesco. The threat then would be Tesco ramping up the delivery and being able to get to consumers in 45 minutes.
5) The rise of emotional intelligence
There’s a trial in KFC in South Korea where a camera scans your face and makes suggestions on what to order based on how you appear emotionally. It’s crude at the moment, but this kind of technology will be able to measure more accurately as time goes on.
However, independents are already doing that well. What they do well that the big chains cannot make their stores have personality and leave the customer feeling emotionally satisfied, which they just don’t do from a very clean, very sterile chain supermarket.
Concierge convenience will become more powerful. People in the store really knowing their customers will make the difference in where shoppers choose to spend. I don’t think the online/offline split will change dramatically in the next five years, the food market has sat around 5% online for the past few years, but what will become more important is shoppers wanting that connection.
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