The retail industry may be transitioning to a 'post-modern' consumer-centric era triggered by the speed of technological advancements, globalization and hyper-competition, both online and offline, according to a new report from PwC US and Kantar Retail, titled Retailing 2020.  The report includes analysis and findings from PwC's retail & consumer practice and Kantar Retail, reviewing key factors for retailers and suppliers alike, to manage complexity in a changing retail landscape and drive profitable growth.

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According to Retailing 2020, successful retailers will need to transform themselves to grow in an increasingly polarized world of greater channel fragmentation that will result in greater non-store retail growth and smaller retail formats. In addition, retailers will need to cater to a future retail landscape, driven by income polarization, where income classes will define retail channel dynamics resulting in a disproportionately large impact in the future development of the US retail marketplace by 2020.

"As we enter an increasingly complex retail landscape with accelerating competitive pressures and digital shopping options, retailers will need to prepare for a wall-less omnichannel retail world, one where shoppers will come to expect a seamless brand experience online, in-store and across multimedia touch points," said Susan McPartlin, PwC's US retail & consumer industry leader. "This multi-format portfolio combined with the proliferation of small, urban, alternative retail formats will pave the way for future growth, dismantling the mass homogenization and scale assumptions that propelled two decades of retail growth."

According to the report, the US retail industry will have entered the post-modern period by 2020 with the end of the growth of Supercenters being a large change across the retail landscape. Non-store retail, driven by online today, and mobile and tablet commerce in 2020 is expected to be the fastest growing retail channel.  Large chain retail growth through the decade is anticipated to remain very close to the early 2010s recessionary rate, with one-third of large chain growth projected to come from online sales.  Discounter channels will capture larger growth while food, drug and mass channel retailers are expected to face a tougher growth environment through 2020.

In its analysis of shopper behavior changes, Retailing 2020 finds that the older generation, having lived through several recessions, is more financially conservative than the younger generation. By 2020, this generational difference is creating two mega-cohorts – the 'over 50's' and 'under 30's' – dividing the US into two distinct shopping nations. 

"The demographic and income gaps between shopper segments are expected to widen creating more shopper segments with different expectations for product offerings and shopping experiences," said Bryan Gildenberg, Kantar Retail's Chief Knowledge Officer. "Retailers must do away with the 'one size fits all' approach and consider the ever-diverging needs of both the 'Have' and 'Have Not' consumers to remain viable in the future.  Forward-thinking retailers should diversify format portfolios, test smaller footprints and offer niche products targeted to specific shopper segments."

According to the report, by 2020 the speed of technology innovation will further transform the retail landscape. Retailers will leverage the use of 'big data' to gain a deeper understanding of individuals.  In the future, retailers will have a more granular comprehension of product movement. Tracking technologies like Radio Frequency Identification (RFID) and other innovations will enable seamless checkout while also ensuring that shoppers can understand everything from product origin to brand legitimacy on a mobile device. 

In addition to addressing the impact of income polarization and the need to prepare for a wall-less omnichannel retail world, Retailing 2020 also addresses global implications. "Increased consumer connectivity and a rising middle class in emerging markets will drive demand for global retailing," said Lisa Feigen Dugal, PwC's North American retail & consumer industry advisory leader.  "Retailers must rethink where and how they sell and operate for future growth. Brick-and-mortar retail operators will be under pressure to balance localization and personalization in an increasingly global world. Retailers will need to seek a balance between global skill sets that can be applied everywhere and a need to adapt to the local market."

To drive future growth, Retailing 2020 outlines some of the success factors for retailers and suppliers to manage the complex and diverse realities of the retail landscape in 2020:

• Total value chain management: Retailers will need to integrate themselves seamlessly into their shoppers' replenishment processes, and best-in-class retailers will find ways to act as a bridge between this real-time consumer data and the rest of the supply chain.
• Dynamic clustering to optimize fragmented growth: Forward-looking retailers will reframe the way their teams think about retail by consistently experimenting with structure and adapting it to shoppers' cultures.
• Competing on a truly global scale: Best-in-class retailers will operate using the concept of trading ecosystems, capable of understanding how those ecosystems require different competitive strategies.
• Branding in omnichannel space: Leading retailers will need to build key capabilities and new multimedia, omnichannel-enabling tools to allow customers to interface through any channel of their preference on a 24/7 basis.
• Managing data security and privacy: Retailers will need to master building digital engagement segmentation, cost/benefit/risk management and reputation recovery processes.
• Managing diverse retail models: Leading retailers will need to address the challenges to their economic models and adapt their frame of mind on store formats, employment models and return on investment.