Peter Sheldon, senior director of strategy at Adobe
We live in unpredictable times. Digital technology is advancing at a furious rate while a global pandemic continues to change the way consumers live, communicate, work and shop. Hardly a day goes by without a new wrinkle, complication or obstacle for retailers, challenging their ability to adapt to an ever-changing “new normal” swiftly.
Yet, where there’s disruption, there’s opportunity. Adobe Analytics predicts that 2020 will be a banner year for ecommerce, with $189 billion being spent online during the holiday shopping season (up 33% year over year). And 2021 also promises to be a profitable year for digitally native merchants. Several key business and technology trends are emerging or have already taken shape and it’s wise to consider them as 2020 ends. Here are five top retailing predictions for the coming year and why you should keep an eye on them.
Delivery becomes the new normal
Delivery services have become all the rage. The likes of Uber Eats, GrubHub and Instacart have fundamentally changed the way people get restaurant food or receive grocery store deliveries. But why stop there? FedEx, UPS and Amazon have found themselves straining to meet demand during the pandemic. As a result, partnerships with last-mile delivery companies increasingly make sense as retailers seek to leverage their physical stores to fulfill locally placed online orders. It also complements curbside pickup by giving customers more options.
Last-mile services are ideally suited to commerce during the pandemic—and they are highly scalable using gig economy workers. If there’s a back seat or trunk of a car available, they can deliver merchandise. For example, Bed, Bath & Beyond recently announced a partnership with Shipt to offer same-day deliveries for orders from both companies’ ecommerce platforms. The service is available for a flat fee of $4.99 for orders above $39. Shipt has also established partnerships with Costco, CVS, Office Depot, Petco and Target.
Alternative business models ring up gains
Once upon a time, retailers sold products to customers. But digital technology is driving fundamental changes to the old-fashioned transactional model and making consumers more comfortable with paying for value over time. A growing array of brands are making products available on a subscription basis. Some retailers are exploring ways to use things like smart speakers and IoT to replenish items automatically.
Also, many companies are blurring the line between rentals, sales and subscriptions. Consider the way Apple sells its gear. It allows consumers to break up purchases into monthly allotments, which makes large sales more palatable. But it doesn’t stop there. It also makes trade-ins drop-dead simple.
Retailers such as Nordstrom, Macy’s, Eileen Fisher, Walmart, and Patagonia are now adopting these same methods for clothing, tools and more. A rent-buy model—and even selling used and refurbished goods—is particularly attractive to consumers on the fence about a purchase, only need an item for a single use or lack funds. This also builds brand stickiness because customers transact with the company throughout a product lifecycle.
Fulfillment hubs eclipse storefronts
Shifts in consumer behavior will have repercussions in 2021. As leased storefronts in malls underperform due to a lack of foot traffic, retailers are looking to convert them into fulfillment hubs. There’s remarkable synergy in using these spaces for ecommerce—in some cases, transforming them into mini-distribution centers—particularly when paired with last-mile delivery services.
Amazon has already begun to eye this model to expand its footprint and same-day delivery network further. It has reportedly engaged in talks with mall operators to take over empty space as retailers like Sears and J.C. Penney vacate. Apple is another retailer that recently started taking advantage of its retail stores, turning them into distribution centers for faster shipping of products to consumers. Although this trend predates the pandemic and is a part of a broader shift, it’s clear that COVID-19 and the resulting uptick in ecommerce are accelerating the move.
New store designs appear
Despite a massive shift to ecommerce, physical stores aren’t going away anytime soon. They’re just going through a corresponding transformation. Several prominent retailers focus on blending online and in-store shopping, emphasizing creating a more engaging and socially distanced shopping experience. For instance, Walmart recently grabbed headlines when it announced that it would overhaul 200 of its supercenters into airport-inspired stores, complete with more prominent signage, contactless checkout and other innovations.
Brands are pivoting away from the traditional concept of aisles and fully stocked shelves. The physical store should no longer be considered the final destination in the purchase journey. Combining the strengths of both online and physical stores makes it possible to introduce a more compelling hybrid model that transforms a retail space into an experience center.
This might mean offering sales appointments so customers can experience and try products and then order online (thus eliminating high-pressure in-store sales). Retailers also could build demo environments such as Canada Goose’s arctic room that goes to -20 F and allows prospective customers to test the jacket’s credentials in real-world arctic conditions. Augmented reality and virtual reality are also making their mark.
Online gets personal
Video calls have already gone mainstream in the business world. People see each other, share screens and exchange information. Retailers are also beginning to recognize the value of video chat as a consultation and sales tool. Whether a consumer is buying a car, furniture or upscale clothing, why not offer an option of connecting to a sales associate or product expert whenever it’s convenient? This can be after work, on the weekend, even late at night.
Besides the convenience factor, online consultations make it possible to share product videos, review technical specs, walk consumers through features and functions in a demo, and boost trust via face-to-face interaction. Today, most car buyers already know what they want when they arrive at a dealership because rich online tools have removed the need to kick tires. Retailers are beginning to realize that this same sales model can work wonders for many other products and services.
Buckle up. 2021 will be a wild and interesting year!
Adobe provides web analytics technology to 218 of the retailers in the 2020 Digital Commerce 360 Top 1000. The vendor also provides site design and development services to 106 of the Top 1000.
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