What will retail look like in five years? Top industry executives share their predictions

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Illustration by Christina Locopo

Retail has seen unprecedented upheaval over the last several years.

Some of the industry’s key decision-makers expect even more evolution ahead.

Covid-related shocks have upended retail, after clogged ports and merchandise shortages gave way to excess inventory levels and shifting consumer demands amid persistent inflation. 

Those disruptions accelerated transformations in the industry that were just hitting some companies before the pandemic, such as the growth of curbside pickup and increased use of mobile apps.

As retail leaders enter 2024 hoping the turmoil is now behind them, they’re building businesses for the future and making changes that will transform the industry.

Over the past few months, CNBC has spoken with a dozen of the retail industry’s top executives and leaders to get a sense of what’s next.

So what will retail actually look like five years from now, and how will it change? 

The following is a sampling of their insights, which were edited for brevity and clarity.

In five years, what will the role of stores be and how will brick-and-mortar locations change?

Michelle Gass, Levi Strauss CEO: The role of the store needs to be much more experiential than it is today. I think consumers are going to raise the bar, and they’re just going to expect that because when you can just shop and do a transaction a click away, there has to be a higher purpose for a store. It’s not just about the consumer-facing aspect, but the back end of the operation becomes even more important. The store becomes a mini distribution center. Perhaps what it does is it lessens the need over time to put up the next distribution center, because you’re using your store footprint as these mini fulfillment centers.

Jens Grede, Skims CEO: Higher concentration [of stores] in better locations. Trends come and go, but Fifth Avenue by the park will be Fifth Avenue. It was that a hundred years ago, it will be so in another hundred years, right? So important locations are only becoming more important. I don’t know where that leaves the B and C location, but I think the B and C location will struggle because they’re not offering the experience. I think when people go shopping, they go to an A location or they go online, but there really is very little need for B and C locations. 

Geoffroy van Raemdonck, Neiman Marcus Group CEO: Five years from now, there’ll be even bigger what we call “retail-tainment” — when you come in the store and you have a multisensory experience that really takes you in a space that has a theme, where the brand or the retailer is expressing something that re-transports you in another world and that transport is a physical experience, not a digital experience.

Trina Spear, Figs CEO: Stores just acting kind of as a transactional thing in the world is going to become less and less relevant, and what’s going to become more relevant is having an experiential destination for our community to come together, to meet and be connecting with not only the brand, but also each other. 

What are the most disruptive forces in retail? And how will those shape the industry’s future?

Abercrombie’s Horowitz: The biggest change that we have seen — and it’s a very important part of our business — is what I would refer to as our affiliate business. We have longstanding partnerships with affiliates [such as social media influencers] who are brand lovers and spend time selling your brand for you [online]. As the world continues to evolve on digital, anything is possible, so perhaps there’s even a transaction that takes place through them, as opposed to sending them back to our website and processing the sale, maybe it’s a dropship.

Figs’ Spear: Turning physical stores into a real true hub. For many brands, this is going to be the shift, right? Where people want a place to gather and to learn, they want to be part of something bigger than themselves. Especially the younger generation, Gen Z, it can’t just be about transacting, everyone wants to believe in something bigger than themselves and be a part of something bigger than themselves and that I think is going to be the most disruptive force.

Marc Lore, former CEO of Walmart U.S. e-commerce and founder of Jet.com: Conversational commerce — I think it’s one of those things that takes time to evolve. … In five years’ time, people will understand that that’s the future. I think we’ll be far enough along that people will be able to connect the dots to a future where the world evolves into more conversational commerce where people can use voice or text to have a conversation with a digital assistant that knows you as well as your best friend.

Mickey Drexler, former CEO of Gap and J.Crew: Social media has had enormous, enormous influence on retail. When I was growing up, you put an ad in The New York Times. You put it in Time magazine. You had maybe TV ads. Look, Gap and Old Navy were built with fantastic, creative TV ads. Now, the ads are on social media, they’re on Instagram. They’re on emails. Instagram is hugely powerful in influencing consumers. And TikTok also.

In five years, what tech will transform retail and how? How do you see artificial intelligence and automation shaking up the industry?

Neiman’s van Raemdonck: Right now if you look at a product, you have to try it on to know if it’s your size, if it fits, and I think there’s so many technologies that are going to be able to show you the product in 3-D to see how it would fit on you and if it’s the right fit. There’s so many ways that companies will be able to interact with you, recognizing you and anticipating what you may want. There’s so much friction in helping the customer buy the product that is right for them, and technology is going to remove a lot of that, and I think we’re going to see the return rate go down and customer satisfaction go up. 

Levi’s Gass: If you think about the technology today, broadly speaking, a lot of what you might see in the personalization is, okay, if you’re an avid buyer of [Levi’s] 501s [jeans], you might get a recommendation on the next exciting wash of a 501, or something similar. But I think where the technology is going to go is it’s going to be able to leap into something like, to go from you’re a 501 shopper to this is going to be the perfect denim skirt for you and make bolder leaps, but do it in a way that’s informed based on your shopping history and who you are … and by the way, this doesn’t mean that this is just all being served up in a digital world. I think the most powerful and exciting way this will be served up is when it’s with the stylists, because if you’re spending time with the stylist, they’re getting to know you, they know your purchase history — bringing that all together, it’s kind of the art and the science.

Figs’ Spear: AI is going to be super helpful in terms of, I need this style, I need this size, I need what will fit best on me. AI is going to be really transformative as it relates to fit and people getting what they need very quickly, and getting support and answers very quickly, whether that’s online or in stores. How does it create a more personalized experience around product discovery, around face recognition? We know you, you’ve been here before, we know what you like, what’s going to work best with where you work, what you do, your body type, your style. And so that’s going to be incredibly helpful. I think long term, it will be game-changing.

Yael Cosset, Kroger’s chief information officer: The biggest transformation related to AI is going to first be around our associate — not to replace the work that our associates do, but quite the opposite, which is to augment and amplify what they do. How do I help our associates in our stores engage with our customers by simplifying some of their activities and giving them more time to interact? If they’re in the cheese department, the cheesemonger could have a better experience with our customers to help answer a question or answer a pairing question with wine or bread. That’s going to be the low-hanging fruit for us. 

Ulta’s Kimbell: AI more broadly has been a big focus for us for a while in personalizing our guests’ connection with us. The power of our data and the ability to unleash that in ways that makes the communication we have with our guests more meaningful and more relevant and more timely, we think is really exciting. We’ve made progress in that, but we see a lot ahead of us as we personalize our experience, with the ultimate goal of getting to true one-to-one personalization. 

Five years from now, where will the consumer do the majority of their shopping – online or in stores? 

In five years, which retailers and brands will be the most influential and dominant players? Which are most at risk of not existing? 

Skims’ Grede: It’s hard to disregard the strength of the business models of Temu and Shein. They have a supply chain model that is impossible to replicate for a U.S. or European retailer, so it gives them a structural advantage. It’s hard to see that fall away, but that’s on the real mass end. Generally I think every brand in the mid-price segment is going to hurt. The market’s polarizing between luxury or premium or value, and I think general retailers at the mid-price are going to face extinction. If you would say Nike’s mid-price then I really believe in Nike, I believe in Lulu, I believe in Alo [Yoga], I believe in Skims, I believe in Inditex, I believe in all retailers that either offer great value for money or at a great price, or just simply the lowest possible price. All retailers in the mid-price segment, I would be nervous if I were them. I would predict that we’re gonna have a really high turnover of brands in mass retail over the next five years. I think it’ll look unrecognizable to today.

Ex-Gap and J. Crew boss Drexler: TJX Companies. Look at the growth. Look at the volume. Look at the earnings. Zara. Their goods are right on, style-wise. They get it with trends. They’re worldwide, a zillion stores, and their operations and execution, aside from their merchandising, I think they’re always on top of the game. The other name I’ll mention is LVMH. What they have done is extraordinary. Every single one of their businesses speaks to quality and integrity. 

Abercrombie’s Horowitz: Very specific category stores will have a harder time existing. The companies that cater to a lifestyle and have a balanced assortment are the ones who will continue to thrive. If everyone was dressing very casually and you were completely a dress-up brand, you’re in a bit of trouble. Having a balanced lifestyle brand is the way to be, and I’ve seen a lot of athletic brands evolving into lifestyle brands, I mean that’s a huge trend that’s happening out there, and my take on that is, you can’t be too narrow. 

Under Armour’s Trent: Luxury is a very specific space that adds a ton of value for very different lenses for the consumer. You look at what Dior or Louis Vuitton or Hermes do for a consumer — that space remains quite niche and specific. So I think they stay, and I think they continue to exist and thrive in the space they’re thriving in.

What’s one thing that will become a retail standard that isn’t one today? 

Under Armour’s Trent: Customer service. I mean, I think it’s a lost art, if I’m to be honest. I think if someone’s making an attempt and an effort to walk across your lease line, I think creating relationships with your customer in person becomes one of the intangibles that I think we forget in retail sometimes.

Levi’s Gass: While we today do use traditional cash registers, fast forward five years from now, I don’t think you’ll see those in our stores, right? That’s important merchandising space. … The transactional part of shopping will become just so easy. Even today, with as much technology, there’s a lot of friction once you’re actually going to buy an item, right? Waiting in line, the process, etc. I think the winners five years from now, that just goes away, and so the time spent in the store is all around the discovery, the inspiration, and far less about the transaction.

Skims’ Grede: Inclusive sizing is becoming a retail standard. When my wife [Emma Grede] and Khloe [Kardashian] started Good American, they were really one of the first brands to offer the full size range, from extra small to three or four X, and in the department store, refusing to split the product range between departments. So since then, over the last five, six, seven years, it is becoming more and more commonplace. I mean, when Kim [Kardashian] and I started Skims we couldn’t have dreamt of not doing it. And I think it’d be very hard to launch a brand today that isn’t inclusive in sizing. And I believe in five years, it’s going to become the absolute standard. I think that’s a no-brainer. 

Walmart’s Ward: Customers will expect a level of personalization. Customers will expect that if they spend a lot of time with a retailer like Walmart, that we get to understand you and we get to know you, and we don’t treat you like a stranger every time you come back to us. … If we know you’ve got a pet dog, and you buy dog food from us every single week, we should probably show you great deals on pet beds or leashes or dog outfits, and start to show up in a way that helps you feel like we understand your needs and we can serve you really well.

Neiman’s van Raemdonck: Shopping will not look like shopping. Shopping will feel like an experience that could happen in your home or in the most beautiful space, where the product has a key role, but where everything else around the product, from service and experience, will be at the center. I would imagine a store that actually doesn’t have a lot of visible products, doesn’t have a cash register, but is really an incredible room where you go and you have a moment for yourself, where products are presented to you, where you have the time to step out of the room, have a drink at the bar, come back. I think it’s going to be a real experience where all the artifacts of retail will not be there, so you won’t see product racks, you won’t see sales associates positioned behind a counter and a cash register. I think you’re going to see an interaction with someone in a setting that doesn’t look like retail, but looks like a fantastic experience. Much more akin to: I’m going to a friend’s house and it’s intimate and it’s a dinner with people I love.

Figs’ Spear: Customization will become the new standard. It will apply to everything in retail, right? It will apply to adding a patch or adding a specific detail to your jacket or your scrubs. In other spaces having initials on your headphones, having your fit exactly what it needs to be, not just with apparel, but with kind of everything across the landscape of retail. There’ll be less people, but the people will be more impactful. So they’re not answering questions or helping you with things that the technology has already helped you with. 

Abercrombie’s Horowitz: Just in time inventory … there’s lots of ways you can think about it, whether that’s a digital front, whether that’s drop shipping to a consumer, right? Going directly from a factory to a drop ship, superseding the distribution centers, there’s lots of different ways to think about it.

Nicholas of Sam’s Club: Another retail standard that is really going to be important beyond the customer is energy. Having sustainable, regenerative sources of energy — that is solar, it is wind, it is buying into community solar, it is electric vehicles — all of these things are going to be really important for sustainable operations into the future. And if you’re not thinking about it now, you really ought to be on top of that.

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