5 TRENDS DEFINING THE FUTURE OF RETAIL
Retail sales in the U.S. have dropped to their lowest point since 2012. Long-standing brands like J.C. Penney and Neiman Marcus have filed for bankruptcy. Pier 1 plans to close all of its doors. And retailers like Home Depot and Walmart are reporting a surge in sales.
What’s next?!? In reality, we don’t know (yet). But there are some undeniable trends emerging that will shape the “future of retail” as we know it.
DIGITAL COMMERCE HAS SURGED…AND IS HERE TO STAY.
Retailers that were reluctant to invest in a robust digital platform or didn’t already have one (like Nordstrom Canada) have had an unpleasant awakening. With stores around the world closed amid the coronavirus pandemic, shoppers had no other way to connect with their favorite brands and find products, except digitally. According to Digital Commerce 360, online sales have surged by more than 25% since March. And while some categories have seen more online growth than others (i.e. grocery), most shoppers have established new buying habits and will forever rely on the power and convenience of a digital cart over making a trip to the store.
RETAILERS WILL NEED TO FIND NEW WAYS OF SERVING THEIR CUSTOMERS.
In a 2019 study conducted by The Harris Poll, researchers found that 99% of respondents had visited a physical store in the last 12 months. The top three reasons given for visiting a physical store were ease, immediacy, and experience. These desires remain, even in the midst of a pandemic. And customers are always buying to solve a problem (either real or perceived) so they place great value on having their “problem solved” easily, quickly, and in a positive way. Retailers that strive to not only offer products to their customers, but do so in a way that exceeds expectations will stand the test of time. Best Buy recently announced plans to revamp their in-home service model with added safety protocols in order to make customers feel comfortable. This kind of added attention and commitment to “meeting customers where they are”, both physically and mentally, will drive new business and sustained loyalty.
CONSUMERS WILL BEAR SOME COST.
Even for stores that have remained open during the pandemic, foot traffic has dramatically declined. But regardless of how many people are visiting their locations, retailers will have to account for increased costs tied to operating physical bricks & mortar locations. More frequent cleaning, specialized disinfecting procedures, additional protective materials, and inflated healthcare coverage will inevitably be passed along to consumers. And while the math isn’t clear yet, some retailers (like tractor supply) have forecasted more than a 100% increase to operating costs. Retailers will be forced to operate on slimmer margins, pass along cost so consumers, or both.
DIGITAL SHOPPERS HAVE BECOME SMARTER.
With a flood of new online shoppers hitting the web in search of everything from toilet paper to their favorite ice cream, supply chains have been stretched past their breaking point. Amazon – the first stop for most digital shoppers – has struggled to maintain integrity for its Prime Delivery guarantee and is frequently listing products as “out of stock” with no restock date provided. All of the uncertainty and volatility has forced online shoppers to become better “digital hunter gatherers” and no longer accept the first page of Amazon results as the end-all-be all. As they say, “necessity is the mother of invention” and many online shoppers have had to get better at finding the products they want at the price they can afford out of pure necessity.
SOME SECTORS WILL BE HIT HARDER THAN OTHERS.
With so many unorthodox behaviors (like stockpiling) and economic factors (like job loss) influencing buyer behavior, it’s hard to predict with certainty how specific retail segments will be impacted in the long-term. But early data from UBS suggests smaller retailers focused on clothing, electronics, and home furnishings will be devastated in the coming years. It’s no surprise that when disposable income for a household shrinks, buyers prioritize essentials and reduce budget for luxury purchases. The concern is that even when disposable incomes return to normal levels, more sustained trends like “working from home” will have forever changed consumer demand for office supplies and clothing.
It’s clear that the pandemic has changed the way consumers shop. And while we don’t know what comes next, we do know that the future of retail continues to look promising as long as brands pay attention to consumer insights and fast growing trends.