Retail is facing a period of unprecedented change, as a focus on sustainability and having an authentic purpose become more important to brands and consumers while digital disruption continues.

Most retailers have sustainability on their agenda, but those who don’t prioritise it now are at risk of not surviving the next five to 10 years. Why? Climate and environmental issues are rising up both the consumer and corporate agendas.

At the World Economic Forum in Davos in January, a WEF survey of business leaders showed that the top-five business risks were all environmental.

WEF also published a consumer survey that showed 42% of millennials have begun or deepened a business relationship because a consumer company has had a positive impact on the environment.

Unfortunately, the retail industry is a major contributor to global carbon emissions and climate change, and therefore retailers have an important role to play. Although there is a big moral aspect to this, there is also a significant business opportunity for those businesses that make a meaningful impact.

Ethical shopping

As consumers are becoming more interested in climate change and environmental issues we have seen them consciously reducing the amount that they consume; cutting back and buying less because they care more. This change has fuelled the growth of resale and rental models as well as a greater focus on ethical recycling.

In resale we have seen the emergence of a number of platforms that enable peer-to-peer sales of second-hand and vintage clothing. These businesses have moved quickly from online only, first adding pop-up stores and now offering resale as a service (RAAS) to other retailers.

Rental models, both B2C and peer to peer, are also proving popular, with a growing number of consumers looking to either rent rather than buy items that they may only use once or looking to make money from renting out their own wardrobes.

“Brands that have a cause have more meaning in the eyes of consumers”

This gives a whole new meaning to the term ‘investment pieces’. In fact, resale and rental are fast becoming some of the most dynamic and exciting areas of the market. Therefore the consumer’s growing focus on sustainability is both a challenge and an opportunity for retailers.

Meanwhile, the reinvention of retail continues. 2019 was another tough year for UK retail, with more than 9,000 store closures, a number of high-profile CVAs and administrations, and unfortunately a high number of job losses on the shop floor, in head office and also in the boardroom.

Digital and the growth of ecommerce have driven structural change in the industry, with online accounting for 21% of all retail sales in 2019. Digital has also fuelled innovation and enabled the growth of new competitors. The big online marketplaces now account for 40% of ecommerce sales in the UK.

However, we are also seeing growth driven by the niche players and digital natives enabled by the growth of platforms such as WooCommerce and Shopify, which saw gross merchandise value (GMV) rise by 49% to $61bn (£47bn) in 2019.

Connected Spaces

Over the next 12 months, with the arrival of 5G, we expect to see more connected retail spaces and a focus on how retailers can use virtual and augmented reality to create more immersive experiences, both in-store and online. We also predict the growth of curated marketplaces offering consumers an edited selection of products and a community based on their interests.

Over the next decade, brands will have to regard purpose as the new digital, and it will be as influential in the next 10 years as digital has been in the last 10.

Brands that have a cause have more meaning in the eyes of consumers. We can already see consumers starting to change their behaviour, choosing to favour brands and retailers whose values align with their own.

As retailers start putting purpose at the core of their business, they will have to rethink what they stand for and redefine the commercial model required to deliver it.

Ian Geddes, is lead retail partner at Deloitte.