The state of retail, and the global economy as a whole, is entering a time of both hope and uncertainty. As the countries of the world continue to recover from the COVID-19 pandemic and lockdowns begin to end, there’s a push to return to “normal.” But what will that normal look like, now that so many customers have had to adopt digital communication, remote services, and mobile technology on an unprecedented level?
According to a recent study, retail was found to be the leading industry for increased digital adoption by consumers, with remote purchases for goods like apparel increased by 40% and others, like groceries, up to 100%. The digital genie is out of the bottle, so the question isn’t should, or even when should, retail companies invest in new technologies — it’s what is the best way forward?
To assist you in making the best choices for what to focus on, let’s see what’s shaping up to be the most important retail trends for 2021.
1. Omnichannel Approach Requires Online & Offline Coordination
Brick-and-mortar is still an important part of the retail experience, and customers are eager to go shopping again. Ecommerce share actually declined at the end of 2020 as more people resumed in-person shopping. As more people get vaccinated in the coming months, there will be a “snap back” towards brick-and-mortar retail — but don’t expect a return to pre-2020 percentages.
First of all, a full recovery will suffer the long-tail impact of COVID-19 as different countries recover at different rates and some industries take longer to recover. Second, and more importantly, customer have become accustomed to their online migration. In a survey from the UN Conference on Trade and Development, online purchases by consumers were found to have increased by 6%–10% across most retail products. Moreover, those changes in online shopping activities are predicted to continue beyond the pandemic.
Digital adoption for retail has accelerated by several years, but it hasn’t yet completely supplanted the in-person experience. Retail spaces will need to find a balance in their approach because more people are finding that the customer journey isn’t bound to a single experience.
Further advancements in tech, like the continued adoption of 5G for improved wireless access, mean the digital experience will more and more be active within brick-and-mortar stores. Maximizing the customer experience across all areas will require a 360-degree customer view.
2. Gen Z & Millennials Assert Themselves as Digitally Conscious Customers
Every year, Millennials and Gen Z position themselves as primary retail customers over the aging Baby Boomers. Having grown up with digital devices and technology, both generations are more accustomed to digital services and instant convenience. Younger shoppers more easily transitioned to remote purchases and are more likely to make use of digital payment options like buy now/pay later and installment plans through platforms like PayPal. The first two months of 2021 have already seen a 215% growth in BNPL.
Digital technology is only part of the story, however, as both Millennials and Gen Z are inclined to shop according to their personal values. A study by The Center for Generational Kinetics shows that Gen Z will put pressure on brands to take action on causes they believe in – notably climate change, racial equality, and social justice. This, combined with their penchant for being frugal with spending, makes for a potent combination for brands looking to win over the next generation of customers. Eco-conscious consumers will prefer brands that are transparent about using ethically sourced and sustainable materials and support fair factory conditions. Brands that promote themselves as socially inclusive and responsible to their communities will win over consumers who believe in social justice.
Embrace experimentation with different pay models and sell your company’s ethos on social media as younger consumers continue to enter the marketplace.
3. Personalization Shines in All Parts of the Customer Journey
On-demand personalization continues to spread to all retail areas and is only being further refined as new technologies allow customers a greater degree of control. We’re well past the days where personalization constituted having first name fields in your direct emails. The majority of retail companies now offer changing product recommendations, filtered emails that remove previously purchased items, and advanced profile systems that enable customers to create their identity and means of interacting with the business.
Retail Customer Experience looks at how companies like Coca Cola and Kleenex successfully engage with their customers by providing them the choice of custom designs. Retail brands like Vans have plug-and-play options for creative clothing items and Nike has Nike-By-You, which enables sneaker fans to customize a “1/1” design unique to them. These ultra-personal touches engage customers on an emotional level and inspire additional brand loyalty. If you’re looking to give your customers a means of personalizing product or experience, make the following ideas paramount:
- Convenience: The process should be easy to access and simple to use.
- Customizable: Options should be as varied as possible and allow users to be creative.
- Efficient: Any customizable process should reduce pain points for customers, granting them faster access to what they want.
- Experiential: The process itself should be enjoyable and true to the style and message of the brand.
4. Contactless Technology Should Also Be Effortless
Ecommerce is more than just a convenience, it’s become the standard for making simple purchases, and expected to account for a quarter of all worldwide purchases by 2024. here. At this point the real challenge isn’t about breaking into the space, it’s about how you can make the experience as pain-free and consistent as possible. Many retailers adopted contactless technology to facilitate transactions out of necessity during the pandemic. Scanning QR codes through phones isn’t just a promotional feature anymore, it can be the primary way a customer can see your inventory or contact you directly.
No matter how that technology is used, the customer’s experience must be frictionless across all access points, especially on mobile devices. That means ensuring support for mobile technology and SMS is more relevant than ever. Logins and preferences need to be shared across all channels, including web portals, mobile apps, and shopping carts. This would also include support for contactless touch points including touch-free, hands-free, and voice-driven devices. This not only applies to purchases but is equally important for returns and exchanges. The more simple and seamless the process, no matter for which part of the customer journey, the more likely you are to win a customer’s loyalty.
5. Employees Are Empowered to Provide Good Customer Service
No matter how much digital technology you employ for your business, THE major consideration of the customer experience should be customer service. A true omnichannel presence requires omnichannel support not only for your customers, but for you employees as well. The questions you should ask are “How can I reduce stress for your employees?” and “In what ways can I make my employees’ jobs easier?”
Business News Daily has looked at upcoming technology trends that businesses will need to consider investing in for their employees:
- Remote onboarding systems make it easier for WFH employees to get up to speed and saves time for managers and supervisors.
- Chat bots allow for 24/7 response to customers and can more easily filter inquiries to real agents.
- Centralized human resource systems move beyond simple systems of records and empower employees to make requests or adjust schedules
- AI automation makes data input much less of a headache, saving significant time and enabling employees to focus on more high-level tasks.
With the adoption of these newer systems, there also needs to be an architecture that supports everything across multiple departments. The old ways of siloed data systems just cause delays and headaches as information requests take time to process, or worse, might be incompatible with other on-prem systems. Beyond just managing your data, businesses need to offer every department access and utilization. Once everyone’s on the same page, it will be easier to provide targeted messaging for sales, branching and merchandising info for marketing, and develop new resources for in-store associates.
6. Social Community Includes Social Commerce
The online community space continues to grow and expand into new channels. Developing online areas and custom apps for consumers to communicate and advocate is only the start for your brand. Consumers become “prosumers” as they use your products to promote their own brands and channels. Here’s what to look for as more customers take up the mantle of influencers:
- Introduction of Older Demographics: Influencers aren’t just Gen Z anymore. Older customers in their 40s, 50s, and 60s are also developing their own brands. This opens up opportunities for all varieties of products.
- Channels of Influence Increase: Streaming service Twitch and video app TikTok join Pinterest, Instagram, and Facebook as digital social communities. Promotion isn’t video only, as podcasts on platforms like Spotify can also be used to discuss, review, and advocate for brands.
- Live Streaming Expands: Live streaming content had a big moment in 2020 as it proved to be a powerful means of creating connections and growing communities. Platforms like Amazon Live Creator and Instagram’s Live Shopping will look to take advantage of this growing medium.
According to the Interactive Advertisement Bureau directly "shoppable media" — which includes livestreams, social commerce, virtual consultations, and shoppable ad formats — will be the fastest-growing advertising category for the foreseeable future. Larger companies, including L'Oréal and General Mills, are already making the shift to take advantage as global livestream-generated sales are expected to double to $120 billion in 2021.
7. Prepare for the End of Third-party Cookies
Google has made the announcement that it will phase out support for third-party cookies within its Chrome browser over the next two years, and Safari and Firefox are taking similar actions. While companies are still able to use first party-cookies (for the foreseeable future), the deprecation of third-party cookies means there will be fewer opportunities to track customer’s actions online and log the sites they visit. This loss means a drop in the amount of information that businesses can use to better target ads and check their performances.
Currently $100 billion in advertising spend is powered by third-party cookies, and it’s predicted that only six out of 10 businesses will be ready for a cookie-less future. The question that marketers need to ask is where their information gather capability is going to be at end of year. Is it more important to increase spend, or optimize existing resources in order to get the same results?
What’s especially likely is that impending end of third-party cookies means that the businesses which develop their own customer data platforms will likely come out ahead in gathering information about their customers and personalizing their content.
8. Take Steps to Overcome Disruption in the Global Supply Chain
Perhaps the biggest lesson of the COVID-19 pandemic for retailers is that the global supply chain is not immune to disruption. Many countries are still figuring out restrictions on travel and exports, so businesses should be proactive in making their supply chain more resilient. Look to multisource product from different providers or consider near-sourcing to move your supply chain closer to home. Review freight and carrier costs to see what can be optimized or adjusted to be more efficient.
An outlook by the National Retail Federation predicts that the supply chain’s transformation will be ongoing over the next 12 to 18 months. Many still have the memories of empty shelves and lack of products during the early days of the pandemic. Businesses will need to reconsider which parts of their inventory they use for ecommerce, which parts they use for brick-and-mortar customer, and which parts they use for both. Along with increased investments in all things related to logistics, expect more businesses to experiment with different models, particularly in creative use of retail spaces as dark stores, ghost kitchens, micro-fulfillment centers and distribution centers.
This disruption also applies to the global reverse logistics technologies. Spending is expected to spike in 2021 — forecasted just last year to hit $604 billion by 2025 — as retailers seek to alleviate a major pain point in the shopping journey and minimize the costs of returns.
9. More Businesses Move Beyond the Single Purchase Model
Consumers are increasingly looking for alternatives to the pay-in-full model for services and products. Over the past few years, subscription models have been on the rise and the trend looks to continue. It’s not that subscription model is inherently more popular; it’s usually sought out by consumers interested in a personalized end-to-end experience that provides convenience and unique benefits. McKinsey categorizes ecommerce subscriptions into one of three categories:
- Replenishment: service that meets the need of purchasing commodity items, providing convenience while saving time and money
- Curation: provides a variety of products, with personalization based on customer preferences
- Access: exclusive access to materials and services; can also provide VIP perks
Customers expect different benefits from different services. Curation and access subscribers expect the personalized experience to become more tailored over time. Access subscribers highly value convenience, as do replenishment subscribers. Value is also a very important factor for replenishment subscribers if they’re going to stay with the service.
How subscription services build customer loyalty is an excellent lesson for any business. Since customers are likely to come to a service from many different angles, there should be a holistic understanding of the different loyalty experiences that build a brand.
- Transaction Loyalty: This is the first consideration, where a customer buys from a service more often and, as a result, builds a sort of momentum where they will continue to solicit the brand.
- Attitudinal Loyalty: Here the customer trusts the brand, enough to actively recommend to others. There’s a “feel good” sense when a customer solicits the brand.
- Fundamental Loyalty: This is concerned with the fundamental basics of value: good quality, reliability, competitive price, and ease of use.
10. BOPIS / BOPAC is Here to Stay
Buy online and pick up in store (BOPIS) and buy online and pick up at curbside (BOPAC) are now a fact of retail life. While businesses were already experimenting with it over the past few years, the necessities of the lockdown accelerated its adoption. As much as 43% of the top 500 U.S. retailers now offer BOPIS, up from 7% last December. Consumers are very unlikely to go back to before this convenience was commonplace. According to the Interactive Advertising Bureau, Target’s same-day delivery grew 350% during COVID, while its BOPIS sales grew 700%.
Retail considerations should be how to make it easier for customers to shop BOPIS/BOPAC, how to properly staff for this service, and how to streamline it internally. One of the ways that traditional brick-and-mortar stores can get a leg up on the new DTC companies is to leverage their retail space to better support a BOPIS/BOPAC model. Businesses will consider making use of third-party shopping services like Instacart and Shipt, which are also likely to evolve over time with a move from full-time employees to contractors.
11. Consumers Are Rethinking Their Own Home Needs
Consumers had to make investments into their home as an office/gym/childcare/kitchen during the pandemic. While there’s expected to be a return for most people to the office, a Morningstar study projects that by 2024 13% of the workforce will be working remotely and 9% will be following a hybrid WFH model. This means continued growth for the technology sector and associated retailers. In comparison, while there was an initial pandemic “boom” for home improvement and home business supplies, the demand for those products is likely to normalize back to pre-pandemic levels. Dining and travel are expected to see slow recovery for the near term, with the larger restaurants and food delivery services who were able to take advantage of the increased demand for home delivery likely to continue that service in the immediate future.
Depending on geographic location and industry, some retailers can look support customers who want to continue household investments, while other retailers can cater to customers eager to return to the “old” outside normal of restaurants, services, and hospitality.
12. Data-driven Decisions Are More Important Than Ever
By far the biggest takeaway of the times we’re in is that no one can account for massive disruptions like the pandemic. Trends can point in a direction, but unprecedented or unforeseen events will always cause seismic shifts in all industries. The only way to be sure about what might be the past path forward for your retail business is to make effective use of real-time data across all available channels.
Democratize your data — all parts of your business enterprise need equal access to the same data. Break down those silos and foster better communication across channels and departments. Getting a clear idea of who your customers are and what they want, and how to best deliver that to them, starts with organizing your data infrastructure for a more unified and holistic view.
Implement the Latest Retail Trends
Microsoft Dynamics 365 integrates cutting-edge customer relationship management and enterprise resource planning capabilities with cloud technology to provide a comprehensive, multi-channel management platform that grows along with your business. Interested in learning more about these retail industry trends and how to use Dynamics 365 to implement them in your business? Get in touch with Hitachi Solutions and get started today.