Experts predict Sriracha, mobile payments will heat up retail in 2016

The retail industry is in the final days of a year in which the athleisure trend continued to boom, the off-price category got even hotter and an ever-growing list of restaurants catered to our interest in healthy eating by announcing big changes to their food supply chains.

So what are likely to be the hot topics in retail in 2016? We’ve rounded up some expert predictions.

1. Mobile payments will finally take off — with a little help from chip credit cards. For years now, forecasters have said mobile wallets such as Apple Pay and Samsung Pay are poised to become a commonplace way of transacting at retail checkout counters. But so far, consumers have been slow to ditch plastic cards. Andy Schmidt, who studies mobile payments for CEB, said that could change this year.

Retailers and banks are migrating to chip credit cards, technology that experts say is more secure than the magnetic stripe cards we’re used to. But while the technology is safer, it also makes the checkout process several seconds slower.

Plenty of companies will be jockeying to be your mobile wallet of choice: In addition to services from Apple, Samsung and Google, Walmart has launched its own mobile payments offering that works across most smartphones and operating systems. Target is reportedly working on a similar offering. Those moves, Schmidt said, may mean that 2016 is a make-or-break year for MCX’s mobile payments app. This system, still in pilot mode, was created by a consortium of retailers looking to avoid the interchange fees they must pay on credit card transactions.

“You have seemingly a shift in the market away from trying to reduce interchange at the retailer level to just wanting to be top of mind, to stay relevant,” Schmidt said.

2. The Sriracha craze will push restaurants to go spicy. It’s undoubtedly been a breakout year for Sriracha sauce, the Thai chili condiment. Heinz rolled out a Sriracha-flavored ketchup, while Taco Bell and Pizza Hut offered menu items featuring Sriracha. Technomic, a research firm that studies the restaurant industry, says the wild popularity of this once under-the-radar sauce will likely inspire chefs to bring other assertive, unfamiliar spices onto their menus. In the company’s 2016 trend forecast, these are the items it expects to see more of on restaurant menus in 2016: “Ghost pepper from India; sambal from Southeast Asia; gochujang from Korea; harissa, sumac and dukka from North Africa.”

3. It will be a good year for the (relatively) little guys. The retail industry is finding that millennials are gravitating toward items that they feel are unique and distinctive. (One need look no further than the struggles at heavily logo-ed brands such as Coach and Abercrombie & Fitch to understand that millennials have given a collective eye-roll to highly recognizable, status-badge goods). And that is good news for the niche and specialty retailers. Retailers that have revenue of less than $50 million a year have grown at a faster rate than the industry overall for 44 months in a row, according to Sarah Quinlan, who studies consumer spending patterns as the head of market insights for MasterCard Advisors. Quinlan expects that will continue in 2016, in large part thanks to millennials’ tastes.

For example, Quinlan said MasterCard has found that smaller apparel retailers are doing “extremely well,” even as large department stores and mega-chains such as Gap and J. Crew have struggled to deliver strong sales.

Quinlan expects millennials should generally be spending relatively strongly in 2016, particularly at restaurants and on furniture.

4. We’ll see new tactics from grocery stores and convenience stores. These chains see a business opportunity in changing eating habits. There’s some evidence that older millennials — many of whom are now parents — are pulling back on expensive meals out. Meanwhile, low-price dining destinations such as McDonald’s have felt strain as diners focus on eating healthily.

“There’s a gap in the market as the fast-food industry struggles to reinvent itself,” said Shilpa Rosenberry, a retail strategist at consultancy Daymon Worldwide.

That’s why Daymon is predicting that grocers and convenience stores will unleash a barrage of new marketing, products and services to fill that gap and win your dining dollars. Rosenberry said she expects you’ll see more “hyper-personalized” meals and snacks at these stores, items that cater not only to gluten-free and vegan eaters, but those who are doing so-called “DNA-based diets” that have been customized for their unique makeup.

Rosenberry said she expects these stores will start taking some cues from boutique restaurants by adding secret menus, secret entrances and other special perks for in-the-know customers. The hope would be that this helps build customer loyalty by making a trip to the grocery store feel a bit more like a fun experience instead of a routine errand.

5. At brick-and-mortar stores, we’ll see more dynamic pricing. For years, retailers have been plowing billions of dollars into improving their e-commerce experiences. Now, as retailers turn some of their attention back to stores, we might see wider adoption of some fresh technology that could reshape the traditional shopping experience. Oliver Guy, global industry director for retail at Software AG, said we’re likely to see more real-time pricing in brick-and-mortar outlets, meaning that prices will change on the fly based on factors such as demand and inventory levels. This model is already common online, but has been hard to execute at physical stores.

Guy said we’re likely to see sellers of fresh goods move first in this area, because it could be particularly beneficial to them: Imagine, for example, if a store could price ground beef that had a “sell by” date of Tuesday at a slightly lower price than the same beef that was set to expire Friday. And imagine if you could price each of those items differently throughout its shelf life.

“As a product goes out of date, you can start dropping the price dramatically, dynamically,” Guy said.