The State of Retail in 2021

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The pandemic rewrote the retail playbook in just a few months. Those who thought ecommerce was far from mainstream and the ones who thought traditional retail was dead were proven wrong. 

In fact, the number of companies investing in omnichannel retail (selling both online and off) has jumped from a mere 20% to more than 80%...just since 2020.

As a result, a new era of business has unfolded. From an ecommerce surge and new shopping habits to supply chain and fulfillment challenges, businesses need to adjust and embrace the future of retail. Here are some things to consider for the rest of 2021.

2021 Retail industry outlook

If the last year has taught us anything, it’s that businesses that stick to one sales channel often put themselves in a vulnerable position. 

For example, retailers that relied heavily on in-store sales were rattled during lockdowns. On the other hand, digital-only brands were in a challenging situation if they did not offer BOPIS (buy online, pick up in-store) delivery methods or virtual consultations. 

Retail is ubiquitous; it’s not just going to the store. You can make a purchase from a website while scrolling on social media or with a few clicks through a third-party marketplace like Amazon. This new reality has forced businesses to invest in omnichannel.

While many companies postponed their digital transformation, focusing instead only on brick-and-mortar, the COVID-19 outbreak forced a mad dash to figuring out their online presences. Ecommerce skyrocketed during the pandemic, and it’s still climbing: It accounted for 19.5% of total retail sales in Q1 2021. 

The pandemic caused a rapid shift to online commerce—even for those who’ve never used it before. According to Statista, 9% of U.S. consumers bought a product online for the first time during 2020. What’s more, 31% of U.S. citizens ordered groceries online for the first time when COVID-19 started. 

Now the question is: Will these new consumer shopping habits stick?

It remains to be seen. As noted by the EY Future Consumer Index, 77% of consumers are still changing the way they shop.

The havoc caused by the pandemic has made it difficult to predict what will happen in 2021. However, dissecting the trends in the retail industry and analyzing customer behavior help us make educated guesses of what the future holds. 

Big changes are here. Here are seven emerging trends that may hint at the next retail battlegrounds. 

‍7 trends that will reshape retail in 2021

The new retail world is all about customer experience, speed, and convenience—and it’s already here. Let’s look at some of the biggest trends impacting the retail industry and highlight how forward-thinking players are responding.

1. Ecommerce is booming, and it’s here to stay

The significant and unforeseen shift towards online shopping due to the COVID-19 outbreak has accelerated 10 years’ ecommerce growth in just three months. Let that sink in for a minute.

The lockdown has pushed companies to figure out how to pivot their business online. As a result, the competition in the digital landscape is fierce. But what started as a necessity due to the pandemic has slowly transformed into a behavioral shift.

New habits were cemented. Once consumers discover the convenience of online shopping, it’s likely to stick. Data from EY Future Consumer Index shows that 39% of consumers will shop more often online for products they once bought in physical stores.

One industry, despite being nonessential, that gained from the circumstances brought on by the pandemic was home furnishings. For example, the Canadian DTC furniture brand Article witnessed a significant surge in demand. In fact, in 2020, their sales went up 70% year-over-year.

Back in 2013, when Article was founded, furniture ecommerce was still a greenfield. However, their focus on convenience, higher value proposition, and customer obsession has put them among top furniture players worldwide. 

2. Focus on customer experience, not discounts

Customer experience is on the tip of the tongue of every marketer today. However, the pandemic made businesses realize that empty words are not enough. Creating a memorable customer experience should be at the core of everything you do. 

Today’s most successful DTC businesses are widely adopting a no-discount strategy, focusing on delivering top-notch experience customers are willing to pay for. As reported by Forbes, 86% of buyers are ready to pay more for a great customer experience.

The shift from price-oriented to experience-oriented has forged a new retail world. As the landscape keeps evolving, businesses are competing by offering a world-class customer experience instead of going down the price war rabbit hole.  

Take the ethical fashion brand, Everlane, for example. They’re aware that customers will appreciate transparency over discounts, so they built a transparent pricing model. Everlane believes that customers have a right to know how much their clothes cost to make. 

On their website, they dedicate a page that explains the costs associated with every step in their production process. As a result, they have loyal customers who appreciate the fair price. 

At the end of the day, success comes down to obsessing about customer experience. The reward: Customers are willing to pay full price for unique products and the experience to match.

3. The role of physical stores has shifted

Despite ominous mentions of a retail apocalypse, brick and mortar stores will remain one of the core pillars of retail. However, the role of the store will change. 

What used to be measured as sales per square meter will now be replaced with experience by square meter. If you want to attract consumers to visit your store, it needs to be about more than just the transaction. 

According to EY, 38% of consumers intend to do more shopping online and only visit stores that provide great experiences. In other words, you have to create a store that adds to the entire buyer journey and makes the experience both seamless and engaging.

DTC brands are, again, taking the lead on this one. While many DTC brands start as digital-only, they soon realize that having a brick-and-mortar store is really all about offering a unique customer experience. For example, the beauty brand Glossier has raised the bar by providing a multisensory experience that keeps customers coming back. 

Glossier stores are well-designed and on-brand: Think stores filled with “Glossier pink” flowers and mirrors, carefully thought-out product displays, and more, making each store a full-on brand experience. This helps Glossier create a “halo effect” and transfer the positive impact from their stores into the digital world by leveraging the user-generated content across their channels. 

With the influx of traditional retailers in the digital landscape, customer acquisition costs have reached an all-time high. According to Profitwell, CAC is up 60% compared to five years ago. In fact, digital advertising costs are getting closer to the cost of traditional rent. This motivated retailers and DTC brands to open more brick-and-mortar locations as another touchpoint in the customer acquisition journey. 

Companies looking for ways to future-proof their businesses found another role of the store—a fulfillment center. But this trend deserves its own section. Let’s look at it more deeply. 

4. Last-mile delivery is the new battlefield

The onset of the pandemic only proved what we already knew: Speed and convenience will be crucial for the future of retail. 

More shoppers order same-day delivery from both web-only and store-based merchants. Research from Digital Commerce 360 shows that 26% of shoppers ordered online for same-day delivery from a physical store and 36% for same-day delivery from a web-only merchant.

Another trend that businesses should keep an eye on is offering different fulfillment methods such as buying online, picking up in-store (BOPIS), and buying online pick up at curbside (BOPAC). 

Consumers want flexibility and bigger control of the overall shopping experience. Besides this, retailers increase their store traffic and can improve inventory management while reducing shipping costs. 

Numbers only prove that consumers want alternative fulfillment methods. 59% of consumers are interested in BOPIS-type shopping options, and by early 2021, more than half of Top 1000 retail chains offered curbside pickup.

One of the disruptors in the DTC realm, mattress retailer Casper, offers BOPIS. Consumers can place an order and pick up their mattresses from one of Casper’s Sleep Shops. Besides its E-Zzz Pickup, Casper also offers nap appointments and lets customers try the mattresses or even take one home to test. 

According to their trial policy, the body needs 30 nights to adjust to a new mattress. So if the customer is not satisfied with the mattress during the 30-Night Adjustment Period, returns are free and easy. This approach makes the shopping experience enjoyable while building brand credibility. 

5. Mobile-first experiences are already on the doorstep

Today’s consumers carry the world in their pockets. Literally. The always-on and connected consumer is more informed than ever before and is equipped to make informed decisions. 

Mobile devices have become an integral part of our daily lives. The number of smartphone users worldwide today surpasses three billion, and it’s estimated to hit 4.3 billion by 2023.

Despite the assumption that people would use their laptops more than their phones while being stuck at home, using mobile phones is already a habit for many.

More than 50% of all web traffic is coming from smartphones and tablets. This was one of the main reasons why Google shifted their site indexing to mobile-first. 

But people aren’t just browsing. They are also buying from their mobile devices. By 2021, mobile ecommerce sales are expected to account for 54% of total ecommerce sales, according to Statista. 

Nike is one brand that recognizes the power of mobile. This channel is a vital part of their overall strategy, and they look to mobile to maintain one-to-one relationships with customers. In Q1 2020, Nike saw a 150% increase in product demand on its mobile app. What’s more, they also witnessed a “triple-digit” growth in monthly active users.

6. Flexible payment options open brands up to a broader customer base

Finances are a delicate topic for many customers. That’s why having flexible payment options gives customers a sense of relief. This way, consumers feel encouraged to go through with their purchases, especially big-ticket items. 

One of the increasingly popular payment methods is “buy now, pay later.” Retailers partner with companies such as Klarna, Affirm, and Afterpay, to let customers split purchases into installments and charge them either simple interest or no interest at all. 

The Financial Brand reported that more than half of U.S. consumers (56%) had used a buy now, pay later service, up from 38% in July 2020, which is a 50% increase in less than a year.

Another retail business model that’s on the rise is rental. From fashion to home furnishings, consumers have embraced this trend that’s democratizing high-priced retail products. However, rental is not a new concept in the retail industry. Rent the Runway was founded in 2009 and enables customers to rent designer apparel and accessories. 

Home goods are another retail category leveraging the rental business model. The pandemic brought on loads of uncertainty for many. As a result, a growing number of Americans have been moving back to small towns and rural communities. 

Since moving to a new home can get expensive quickly, furniture rental companies such as Feather, Brook, and Fernish are a great solution for consumers. These types of businesses are also appealing to those looking for a temporary setup away from busy cities. 

Another promising aspect of the rental economy is the positive impact on sustainability. 

According to EPA reports, nearly 9.7 million tons of Americans’ furniture and soft furnishings, and 9 million tons of clothing and footwear ended up in landfills in 2018.

Even though we can’t expect that renting will completely replace purchasing new products, this model can reduce the environmental footprint.

7. Authentic content creation is key

The number of digital channels has mushroomed in recent years. With that, companies are constantly struggling with content creation. 

Nowadays, customers are exposed to so much information, and brands need to engage them across various touchpoints before they buy. This requires high-quality, authentic content that will capture their attention. 

One of the ways to stand out from the competition is by leveraging user-generated content. As reported by Forbes, more than 86% of companies today use user-generated content as part of their marketing strategy.

Besides repurposing customer-captured content across social media, forward-thinking companies use this content on their websites as well. 

Traditional advertising that boasts “buy, buy, buy!” isn’t cutting it. People are hungry for authentic stories and firsthand experiences. 

Enter creator marketing. 

People engage with creator content seven times longer than digital ads. So when customers get a product recommendation from a person they follow and trust, it’s more likely they’ll want to try the product as well. On top of this, companies that partner with creators for content can also leverage their profiles for content distribution and reach the right audience with the right message. 

“Creators help show the context surrounding your products—who it’s for, when it’s used, how it’s used, when it’s used—and all of that highlights why you’re different.” -Roger Figuredo, VP Marketing at #paid

One company that partners with content creators in this way is PhilipsHue—the producer of color-changing LED lamps and white bulbs that are controlled wirelessly. With these campaigns, PhilipsHue gives the audience contextual inspiration on how they can upgrade their home lighting. Using creator marketing, PhilipsHue can promote its products in a non-intrusive way by choosing creators with an audience that is constantly looking for tips and tricks for improving their home. 

Omnichannel is retail’s post-pandemic future

The new decade is all about creating a seamless shopping experience across channels and platforms. For companies that want to future-proof their business, these seven trends should be top of mind in 2021 and beyond. 

Companies with rigid strategies relying on a single channel were caught unprepared by the pandemic with nothing but chewing gum and baling wire. Those were the ones that went through a rough year. But, on the other hand, forward-thinking companies that had a solid omnichannel foundation were able to cope with the situation and make the most out of it.

The next chapter will be filled with challenges and opportunities, and only those that can adapt and keep up with changing consumer behavior will succeed.