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

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.

Fran Horowitz, Abercrombie & Fitch CEO: The future of retail is small, efficient, omni stores, and they’re located where the customer tells us. [For Abercrombie] these big, massive stores were just not productive and not efficient — the consumer was responding to a much more intimate associate experience, and then economically, they were not productive. You don’t get the kind of traffic through the stores like you did in the past when there wasn’t a digital option, so you have to provide a location that is financially sound, which has X amount of traffic and X amount of digital orders that come together.

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 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. 

Chris Nicholas, Sam’s Club CEO: The most expensive and most difficult piece of e-commerce is that last mile of fulfillment, and if you’re closest to the customer [with stores] and you’re willing to use all of your assets in service of e-commerce then what you get to do is you get to give the customers what they want, which is more convenience and more speed. You need to make sure that stores are great and that they’re well looked after and they’re inspirational places to shop. But there is an ‘and,’ and the ‘and’ is that they are also last-mile fulfillment nodes that allow you to serve those customers in the way they want.

Kara Trent, Under Armour’s president of Americas: Some brands have moved to super experiential, other brands have moved to super transactional. I think you’ll end up with a blend,— and I think the brands that get the blend of experience while driving commerce are the ones that will succeed. I think that does shape how brands will look at real estate and what streets and what neighborhoods are most important, and almost thinking a bit more micro than macro, right? What a consumer in New York City might need versus a city in middle America, versus how you think about the different types of retail locations, even in a massive city like New York.

Levi’s Gass: Technology, data, machine learning, and even AI. I get really, really excited about what this means in the operations of the business, using predictive analytics to help us forecast demand. The power of machine learning, of predictive analytics, as a retail operator is extremely powerful because it is going to help us execute at a higher level to better serve our customers. 

Tom Ward, Walmart U.S. chief e-commerce officer: The most disruptive force is always going to be the customer demand. Wherever customers want to go is where the retail industry is going to follow and the technologies that support that — whether it’s in the front end or the back end or the supply chain.  The customer is always going to be the driving force of change, for sure. If you assume that to be true across everybody, then the technologies that are emerging that are helping retailers follow the customers’ lead most efficiently are going to be the most disruptive. So obviously things like AI are going to be important. 

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.

Ulta CEO Dave Kimbell: It really is this blurring of digital and physical and how we don’t see those as distinct, but really integrated. … The guest is so connected and has tools and expectations that even got elevated over the last three years. It’s really important that we’re understanding how we can leverage the assets that we have — both the physical assets, in our case, almost 1,400 stores, but also the digital tools and capabilities.

Ex-Walmart exec Lore: If you’re going to take anything away from this conversation, it would be my conviction on how transformational conversational commerce is going to be. And it’s unlocked by AI and the ability to process natural language like never before. The search engine is going to be archaic. It’s going to be the cassette tape in 20 years. Younger generations are going to laugh at the idea of using a search engine, because search engines aren’t that intelligent. 

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. 

Under Armour’s Trent: When you’re thinking about malls, and this is a real-life experience, one of the things that brands are going to have to figure out as they think about all these digitally connected tools is the internet. It’s actually quite hard to get the fast … speed internet in some of these big-box locations to enable. That’s been one of the biggest pain points we’ve faced over here in terms of just bandwidth and WiFi speed in terms of being able to enable a smart fitting room, an RFID, a remote POS-type system. So I do think that’s one of the things for the long haul that real estate development teams are going to have to figure out. 

Ulta’s Kimbell: In beauty and at Ulta Beauty, we see the majority of transactions in store as they are today and we think that’ll be the case over the next five years. 

Kroger’s Cosset: In five years, stores will continue to account for the majority of sales, because even for a significant portion of what we sell digitally, it will be fulfilled in the stores. 

Figs’ Spear: I don’t think it’s one or the other. I think the more three dimensional and the more you can have both digital and offline, the more powerful it becomes. I do think the younger generation, they’re kind of coming back out in the world, and you’ve seen offline grow a lot. I think there’s more to come on that.

Abercrombie’s Horowitz: Stores matter. You need a store. I’ve watched a lot of pure plays over the years and they end up opening up stores because you need a store, you need that hub for the return, the exchange, the pickup, whatever it might be that they’re using that hub for. So there were years of the apocalypse of the mall and how stores were ending. I don’t believe any of that. Stores matter. I say it all the time, and I firmly believe they matter. It’s just a balance. It’s a balance between the channels and what works for the consumer depending upon what their lifestyle is and age.

Skims’ Grede: The majority of shopping is going to still happen in store, but the vast majority of intent or the decision to shop will start online. Young customers today always know what they want to buy when they shop in stores, so the transaction happens in the store, but the customer journey starts online, and I think that will go for everybody in the coming five years.

Ex-Walmart exec Lore: The younger generation has a higher percentage of online shopping. As the older generation ages out and there’s more of the younger generation, by definition, you’re going to see a higher percentage of shopping being done online.

Neiman’s van Raemdonck: It’s not going to be one or the other, and I really believe in this notion of integrated retail — that customers will continue to shop differently depending on the day of the week, their mood and what they’re looking for. I do believe that, especially in luxury, the connectivity to a human and someone who knows you and someone who’s got your best interest, that’s going to be the main way customers who are truly involved in luxury will want to shop and, that will be still very much in stores. But I think it’ll be complemented by remote selling. 

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.

Levi’s Gass: I think the ones that will thrive are the ones that stay true to who they are in their heritage but also embrace where the consumer is going and embrace these new tools that will help them personalize and shape their experience with the consumer. 

Ulta’s Kimbell: It’s really pretty clear — making sure you’re meeting the ever elevating expectations of consumers, as they get more savvy, as they bring new expectations. Their willingness to tolerate less than ideal experiences, whether it’s in store or online, is less and less. The options are increasing, the expectations are elevating, so it comes back to delivering great human connection certainly in store, but also online.

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.

Ulta’s Kimbell: The role of retailers’ apps. All of us have them, of course, and they play a role today, but I just see a growing opportunity and a trend of the app as a centralized hub. … In this growing need to personalize experiences, to create human connections, we see apps or some variation of that as a place to deliver great guest experience, to educate, to deliver brand communication, to be a destination around things like loyalty or promotions or help with in-store navigation.