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The future of retail: How the industry is changing in 2021
March 3, 2021
With 2020 delivering a seismic shock to the world as we know it, retail was one of many sectors facing an existential challenge like never before. Some companies thrived, many struggled to survive. Now, with a semblance of normality on the horizon, retailers of all stripes are witnessing a shifting global landscape characterised by altered customer behaviours as well as rapidly evolving technology, infrastructure and supply chain trends accelerated by the pandemic.
Last January, sales had been extraordinary and looked likely to set retailers up well for the year ahead, but no one was prepared for March. Among our clients, we spotted two distinct types of retailer: those that shut up shop and panicked, and others who adapted. The latter are up year-on-year by an incredible amount – they’ve probably moved forward two or three years in terms of revenue. For others, it’s nearly killed them. We know companies that have had to sack their entire teams and have moved back five years.
Fortune has played its part in this, with certain verticals – nutrition, wellness, yoga, leisurewear – benefitting from bored consumers contending with lockdown while others, travel in particular, facing an inevitable freeze. Yet the pandemic has also highlighted the failures of certain sales strategies. There are a lot of large companies who rely very heavily on traditional retail and a split of 90% offline sales to 10% online can be pretty standard. For these firms, that meant 90 percent of their business suddenly vanished and share price is falling through the roof. It’s made us all realise how much things need to change.
Adapting to new consumer behaviours
As well as providing a dramatic wake-up call to retailers, the inevitable surge in e-commerce during lockdown has had a major influence on consumer shopping habits. The biggest growth was among older users – there has always been a group of high-earning sceptical purchasers who would rather go out shopping but they’ve been forced to change their habits. This demographic has realised how easy it is to purchase online and they may never go back. Overall the audience now is much bigger and confidence is a lot higher.
E-commerce has moved forward 10 years in the course of 12 months. This increased volume has brought with it challenges, though, with many retailers’ customer services facing pressure to adapt. Blay notes several of his clients have taken steps to rectify this with enhanced FAQ sections and online user guides and manuals, while he also predicts a potential resurgence of live chat to address the issue with a call-back option to assure the tech-averse. Elsewhere, increased online activity from an older demographic who value research prior to purchase may mean some retailers need to enrich the product information currently online, which has become streamlined over time, with UX and UI improvements likely to improve conversion of the sceptical.
Supply chains have also been tested to their limits. Over Christmas, Hermes had a seven-day wait on collections as it was so backed up and it wasn’t the only one. Food delivery slots became incredibly scarce and even the Royal Mail was forced to prioritise parcels over Christmas cards. Behind the scenes, the big challenge has been implementing efficient and fair returns policies to match up to customer expectations. A lot of companies don’t offer free returns and that doesn’t go down very well. To replicate an in-store retail experience free returns need to be part of the model.
Evolving technology and an omnichannel revolution
Blending in-store and online retail experiences is the holy grail for today’s retailers. Superb advocates for companies embracing an omnichannel approach – a trend rapidly accelerated by the pandemic. The return to bricks and mortar won’t be as we know it. If technology improves, traditional retail will become a lot more of a browsing experience – somewhere to see the products and maybe take back returns.
A connected online-offline experience will require the development of sophisticated mobile and app experiences. Mobile apps are such a big opportunity for retailers. If you can get customers to use them, you can use push notifications rather than emails, meaning you have a direct connection and can merchandise to them.
This will be driven by data and if retailers have access to everything you’ve browsed online and in store, everything you’ve purchased in either location as well as when, why and any defining habits, they can introduce you to new products and make ever more relevant recommendations. Automation will become increasingly relevant and will be able to make instant trending decisions based on algorithms.
The most exciting part is using technology to enable merchandising. This could take the form of apps utilising GPS corridors and Bluetooth beacon technology, first trialled nearly a decade ago, to trigger notifications based on proximity. Here, the opportunity to highlight offers based on browsing history, send voucher codes, alert consumers to product availability or even help them navigate department stores are endless.
A better connected online/offline retail experience might also shape retail spaces themselves. Our client Boxpark is an interesting example of a marketplace model. It’s really expensive to have a retail store but if you could centralise distribution and have a smaller offering retailers could afford to have a Boxpark storefront in far more locations around the country. Customers could go to collect products or browse lots of retailers’ offerings in one place, so you could provide that retail experience without the need for much inventory to be held there. And if centralised distribution can get to the level everyone was predicting it would in the next 10 years, they would potentially offer same-day delivery as well so customers could go in store and the items would be waiting for them when they get home.
Social growth and brand loyalty
For a glimpse of the near future, look to China, which is about five years ahead of the UK e-commerce market, with about 80% of all retail sales via mobile. What’s exciting about China is that all retailers push consumers towards using their apps, while adoption of social media and user-generated content is huge. Social networks such as WeChat also double up as retailers. Over here brands have to hire influencers and get them to work for you; over there people do it because they want social standing.
The predictions seem to point to a major shake up in the app market with Tiktok in particular as a growth area. Everyone talks about TikTok but up until now the sales experience has been pretty poor. I think we’ll see that change. Are we going to see brands asking people to start dancing with their products on? I can imagine we might. It only needs one brand to start running with these trends for it to evolve and TikTok would welcome the commercial opportunity.
A brighter future
For now, though, it’s likely that most innovation will be based around recovery and attempting to catch up with the audience. All of the workflow blockers that challenge us right now will force the direction of tech change. Many retailers need to increase agility by centralising product data with improvements to their ERPs and Product Information Management systems. Besides, the industry needs to become more carbon aware and prioritise employee wellbeing following the detrimental effect of the past year on people’s mental health.
Ultimately, a lot will depend on how our economy recovers, but we have to go with the cards we’ve been dealt: keeping stock levels low and reconsidering pricing to ensure a decent margin. Luckily we’re good at making stuff in this country – we have incredible brands and stuff that’s wanted worldwide.