10 Retail Predictions for 2018

2018 will be another challenging year for retail. What trends will captivate consumers? How will the online/in-store shopping dichotomy play out? We chatted with our industry advisors and analysts spanning retail, accessories, apparel, automotive, beauty, books, food, footwear, home, office supplies, sports, technology, and toys, to better understand where retail is headed in the New Year. Read on for their expectations and recommendations for how to win in 2018.

1. Retailers will need to ramp up their in-store, experiential offerings

Marshal Cohen, Chief Industry Advisor – Retail
2018 will be the year that physical stores challenge the proliferation of online shopping. Key categories will try to show more growth in stores than online, giving e-commerce a good fight.

Matt Powell, Vice President, Senior Industry Advisor – Sports
Stores that are unable to entice shoppers will experience closures. I expect further retail rationalization to occur in sports retail due to overleveraged retailers, the extremely promotional environment, and the continued move to e-commerce.

Kristen McLean, Executive Director, Business Development – NPD Books
Brick-and-mortar bookstores will strive for experiential shopping to capture buyers’ attention from online. Independent bookstores will continue to thrive in this environment, as they are well-positioned to differentiate themselves with community and high-touch curation.  Barnes & Noble will move toward this model with smaller stores and a renewed emphasis on books and hand-selling.

Larissa Jensen, Executive Director, Industry Analyst – Beauty
As prestige beauty brands look for ways to enhance interaction with their consumers in the brick-and-mortar space, the number of pop-ups, pop-ins (store-in-store concepts) and experience stores will accelerate, especially in high-volume cities like New York, Los Angeles, and San Francisco.

2. Direct-to-consumer will grow

Marshal Cohen, Chief Industry Advisor – Retail
2018 will be the year when brands must realize and act on the importance of selling direct to the consumer, which becomes more critical for brands as there continues to be fewer retail outlets to sell in. And the retailers that are left are selling more of their own product.  So brands that want to maintain volume will need to find others to sell, or sell it themselves. Another key benefit of direct-to-consumer is the ability to showcase your brand rather than a select representation of it.

Beth Goldstein, Executive Director, Industry Analyst – Accessories and Footwear
In fashion footwear and accessories, direct-to-consumer efforts will ramp up, and start-ups will increase their share of mind and wallet.

3. Digital commerce will accelerate

David Portalatin, Vice President, Industry Advisor – Food & Beverage Consumption
Almost 8 percent of NPD’s measured universe of $1.8 trillion in U.S. consumer purchasing is now online. In some industries, online penetration is as high as 30 percent. In both retail food and foodservice, e-commerce penetration is far lower than the average across industries, but the gap is shrinking fast as Americans turn to e-commerce for groceries, restaurant meals, and subscription meal kits. The manufacturers, retailers, and restaurant operators that best leverage digital will win in today’s challenging environment.

Tia Frapolli, President – Office Supplies
Office supplies growth will continue within e-commerce at the expense of brick-and-mortar; the e-commerce channel has consistently gained 1-2 points of share from brick-and-mortar, and we expect this trend to continue in 2018.

Nathan Shipley, Executive Director, Industry Analyst – Automotive
A slow migration to e-commerce for automotive products will continue to be a hot topic in 2018. One of the industries with the lowest online penetration is the automotive aftermarket. Manufacturers and retailers alike will continue to find new ways to compete in this space, most notably in the “buy online/pick up in-store” offering for consumers. Identifying and executing on new ways to drive foot traffic, which should be treated as a non-renewable resource, will prove key to long-term success.

4. Private label also will win

Marshal Cohen, Chief Industry Advisor – Retail
In 2018, private label will take a giant leap forward again, cycling back in vogue with retailers as they try to build unique assortments and control their pricing more closely.  When a retailer carries a brand that gets promoted elsewhere, needed or not they must match pricing, which erodes their profit.  But with increased private label product comes increased risk, as the retailer owns it from start to finish.

Juli Lennett, Senior Vice President, Industry Advisor, Toys
With the constant pressure brick-and-mortar toy retailers experience from the online channel, they will be looking for more exclusives and will produce more private label offerings to differentiate.

Tia Frapolli, President – Office Supplies
Private label presence in the office supplies industry is becoming increasingly strong. Finding the right mix of branded product and private label will ultimately drive category and industry growth.

5. Retail will remain very promotional

Maria Rugolo, Director, Industry Analyst – Apparel
As online continues to steal dollars from in-store, 2018 will be the year for promotions to better align across both platforms.  Consumers are demanding seamless purchasing whether online or in-store, yet we still see some retailers offering better deals on their websites.  With retailers looking to increase in-store foot traffic and grow impulse purchasing, their incentives need to appeal to the omnipresent consumer.

Matt Powell, Vice President, Senior Industry Advisor – Sports
I expect the sports market to remain very promotional in 2018, but it points to another disappointing year for sports retail. Brands and retailers will not be able to offset the off-price sales they generated in 2017 with full-price offerings in 2018. This type of extremely promotional environment will lead to further retail rationalization.

6. Consumers will redefine convenience

David Portalatin, Vice President, Industry Advisor – Food & Beverage Consumption
From the 80s through the 2000s we witnessed the “convenience revolution” as Baby Boomers focused on career. For example, families outsourced meal prep to restaurants and turned to convenient foods for time-saving meal solutions. Consumers are shifting from convenient food toward convenient preparation and procurement with appliances, tools, and services that make fresh-food preparation quick.

Joe Derochowski, Executive Director, Industry Analyst – Home
What kinds of kitchen tools and appliances will be hot in 2018? Products that help us prepare, cook, and clean up after fresh meals that include fruit, vegetables, proteins, and flavorings for these foods. This means multi-cookers, spiralizers, cookware, and mixing bowls will continue to prosper in 2018.

Beth Goldstein, Executive Director, Industry Analyst – Accessories and Footwear
Consumers are looking for their footwear and accessories to do more.  Sport Leisure will continue to drive the market in fashion footwear, but even when dressing up, consumers expect comfort and place value on additional features such as waterproofing and year-round wear.  Bags, luggage, and small personal accessories must meet the demands of busy lifestyles, offering fashion along with functional elements such as lightweight materials and pockets to organize tech and other daily essentials.

7. Consumers will want to be real and eat real

David Portalatin, Vice President, Industry Advisor – Food & Beverage Consumption
Consumers want to feel good with healthy food and indulgent rewards. In both cases, they value authenticity, and that will continue in 2018. On one hand, they seek authenticity in the form of real, natural, minimally-altered food. And on the other, there’s an unapologetic honesty about the feel-good aspect of a food – like its taste, nostalgia, or the experience it is connected to – even if that food may not be the most healthful option.

8. People will spend more time at home

Joe Derochowski, Executive Director, Industry Analyst – Home
Consumers will spend more time in their homes in 2018 (more infants/toddlers, more retired people, more working from home) so fundamental life products such as coffee/espresso makers, tea makers, and toaster ovens will continue to be hot.

Consumers will continue to entertain at home, so products like compact refrigerators, portable induction cooktops, and entertaining gadgets that facilitate entertaining will perform well. Products that make post-hosting clean-up easier also will thrive in 2018, including floor care products from robotic vacuums, stick vacuums, bare floor cleaners, hand vacuums, and specialty cleaners.

David Portalatin, Vice President, Industry Advisor – Food & Beverage Consumption
Thanks to a changing workforce, the ease of online shopping, and the boom in streaming entertainment, there are fewer reasons than ever to leave the house. Whether or not they prepare food themselves or purchase it from a restaurant, people are increasingly eating at home. Even 49 percent of dinners purchased at restaurants are consumed at home. Manufacturers, retailers, and operators can win by making it easier to get foods and beverages to the home.

Kristen McLean, Executive Director, Business Development – NPD Books
The increase in sales of high-priced art and photography books points to a desire for serious and expensive coffee-table books for the home. Luxury brands like Taschen and Assouline will capitalize on the hygge trend as these books are home décor – and as growth in the home products industry indicates, we can expect to see consumers continue to invest in their living spaces.

9. High-priced devices will fuel the technology market

Stephen Baker, Vice President, Industry Advisor – Technology & Mobile

We expect the mix of technology products that will sell in 2018 to trend toward more expensive category segments like high-end wireless headphones, larger-screen TVs, and more feature-rich computing and mobile devices; the trend will move away from entry-level products. In a business with a mature and highly saturated installed base, we believe consumers will continue to value product and features over price, offering opportunity for increased revenue growth.

10. 2018 will be the year of voice

Ben Arnold, Executive Director, Industry Analyst – Consumer Electronics

2018 will extend the story of intelligence everywhere as consumer technology embraces the voice-enabled digital assistant. Today the speaker is the major vessel getting these services into the home, but you can be sure devices outside of speakers soon will follow. Already we have seen assistants built in to refrigerators, vacuums, and cameras, and there are plans to build this intelligence into many more products. We will see exponential growth in 2018 in the number of devices comparable to a digital assistant like Alexa, Google Assistant, Cortana, or Siri.

The success of voice-enabled speakers will produce a halo effect for the smart home industry, with consumers finding a more accessible home automation market in 2018.

Kristen McLean, Executive Director, Business Development – NPD Books
Consumers are not adopting new e-readers like they used to. But digital reading is expanding to include chat readers, serial reading apps that deliver daily, bite-sized pieces, and even digital audiobooks. We’ll continue to see innovation in this space with adoption of current models beyond the “traditional” e-book in 2018.

For more on 2018 expectations, visit our 2018 Outlook page. To discover how you can better measure performance for your categories, retailers, regions, or territories, visit our LinkedIn page, contact your NPD account representative, call 866-444-1411, or email contactnpd@npd.com.

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