Stemming from last year’s push toward personalized experiences, this year’s hottest retail trends will elevate the customer experience with superior quality products and build closer relationships with consumers so companies can confidently deliver what shoppers want.

The following predictions reflect what retail and consumer goods companies need to know to prepare for the year ahead to captivate shoppers, drive sales and triumph in this competitive sector.

  1. Artisan and culinary products

Growing consumer demand for upscale, authentic goods means more retail companies will offer artisan and culinary products in 2017. These premium, high-quality products are produced by experts who are passionate about their craft. To satisfy consumers who are ravenous for refined culinary experiences, coffee giant Starbucks recently launched the premium Starbucks Reserve store format. These stores offer exclusive micro-lot coffees paired with artisanal food offerings from Princi, a chain of Italian artisan bakeries, which earned Starbucks’ investment. 1 2 In addition, hand-crafted breads, pastries, chocolate, cheese and other foods made with fine, fresh ingredients will sell well this year. 3 Beyond foods, big retailers like Nordstrom have approached small artisans to entice new shoppers with locally made, handcrafted items.

  1. Retailtainment

To stand out in 2017 by inspiring Instagram-worthy shopping experiences, more brick and mortar retailers will embrace “retailtainment,” a thrilling fusion of retail and entertainment. To encourage shoppers to linger longer in stores – and tell their Facebook friends –retailers will cater to consumer lifestyles with premium offerings like boutique coffee shops and prosecco bars.5 6 Shopping malls will also woo health enthusiasts and experience-seeking millennials with indoor skydiving and climbing walls.7 Even the world’s largest retailer is investing in retailtainment: Walmart recently asked suppliers to help transform stores into exciting destinations for shoppers. Walmart uses product demonstrations, samples and headline-making promotions and events (like meeting professional bull riders) to boost store traffic, sales and word of mouth.

  1. ‘Phygital’ expansion

Since omnichannel started to take off last year, retail companies will invest more in both physical stores and digital channels to improve the customer experience. Experts predict online sales will rise 15% in 2017 due to consumers’ increasing willingness to embrace the convenience of 24/7 online shopping10. More retailers and manufacturers of all sizes will build closer relationships with consumers by selling directly to them online. Last year, U.S. shoppers smashed sales records by spending nearly $7 billion in online purchases on Black Friday and Cyber Monday. 11 The growing popularity of online shopping prompted Walmart and Williams-Sonoma to invest in transforming their supply chains for e-commerce success12. Other companies like Macy’s are using cross-border e-commerce to expand into lucrative foreign markets like China to satisfy pent-up demand for U.S. products.13 Meanwhile, online retail leaders like Amazon, Birchbox and Warby Parker all opened physical stores last year to offer omnichannel options to make shopping easy, convenient and immediate. Why is ‘phygital’ so important? As Harvard Business Review reports, omnichannel shoppers spend 4% more in store and 10% more online than single-channel customers.

  1. Predictive analytics

In 2017, retail companies will increase their use of big data analytics to translate shopper data into meaningful insights, and create relevant, personalized marketing campaigns to prompt purchases.15 In addition, predictive analytics will give retail companies greater certainty of what customers want so consumers feel understood.16 Amazon masters predictive analytics to effectively anticipate which products an individual shopper might buy and Kroger recently acquired a predictive analytics firm to gain an edge in grocery with detailed insights into consumer tastes.17 According to Forrester, “Predictive marketing analytics use correlates with better business results … [it] pays off.”

  1. Retail tech innovation

Technology will continue to reinvent how people shop by making shopping more experiential and exciting in 2017. For instance, the newly announced Amazon Go grocery store format uses artificial intelligence (AI) technology to save shoppers time with checkout-free shopping. The e-commerce giant’s “Just Walk Out” technology uses AI and in-store sensors to deliver an easy, seamless customer experience19. Also, virtual reality (VR) immerses consumers in a simulated world, allowing consumers to try on apparel or makeup without the need to visit a store. 20 VR will also help retail companies sell major items like furniture by reassuring shoppers that a particular piece will fit and look perfect in their home.

  1. Small is big

This year, smaller store formats and independent retailers will grow in importance. To appeal to Millennials, big box retailer Target is opening new, smaller store formats. For instance, near the University of Minnesota campus, Target opened a store less than 15% the size of an average store for a more intimate, relevant shopping experience.22 Meanwhile, to gain a competitive advantage against massive retail brands, smaller retailers will try to build brand awareness and trust by satisfying consumers’ desire for a personal touch, excellent customer service and local community involvement.

How to set your company up for success.

To make shopping fun and engaging in 2017, retailers and manufacturers will invest in impressing shoppers with artisan and culinary products, retailtainment and retail technology innovation. Businesses will also get closer to shoppers through e-commerce and deeper consumer insights for a more meaningful, convenient and relevant customer experience. Stay tuned as we will take a closer look into each of these trends and what they mean to your business.

What other retail trends do you predict for 2017?

By Lisa Goller 5th January 2017