Trends 2021: Retail

Stephen DeAngelis

February 8, 2021

Everyone knows the retail sector has experienced some tough going over the past couple of years. Last year was particularly difficult in light of lockdowns spawned by the COVID-19 pandemic. Unfortunately, the pain is likely to continue. According to Susan Reda (@Susan_Reda), Vice President for Education Strategy at the National Retail Federation, “The U.S. can expect the long tail impact of the COVID-19 pandemic to be felt in the retail industry for months to come.”[1] She adds, “The biggest takeaway from 2020 is the shift to ecommerce; consumers have embraced online shopping with vigor and retailers have responded with the speedy rollout of new technologies, new apps and new ways of meeting shoppers’ needs. The words ‘contactless’ and ‘frictionless’ have quickly become part of the vernacular and companies that have managed to break the mold and adapt are winning.” Below are some of the retail trends identified by the National Retail Federation and other subject matter experts that could impact the sector this coming year.

 

Retail trends in 2021

 

Even more stress on omnichannel operations. The rise in e-commerce during the pandemic has been widely reported. Online holiday sales were so extensive that shippers had a difficult time keeping up with the volume. Futurist Bernard Marr (@BernardMarr) predicts the line between offline and online retail will blur; or as he puts it, “Omnichannel — Offline is online, online is offline.”[2] He explains, “[The new omnichannel experience] involves the coming together of several different trends, including AI, robotics, IoT, and extended reality (XR) — which includes virtual and augmented reality (VR/AR). Connecting these technologies is enabling retailers to bring the convenience of online shopping to offline shops and stores, and the richly interactive environment of offline shopping to the world of e-commerce.” Tara Johnson, a Senior Editor at Tinuiti, sees social commerce playing a larger role in omnichannel operations. She explains, “Social commerce — native shopping experiences on a social media platform — offers shoppers an even more seamless way to shop online. Instead of clicking through to a third-party website, users can make purchases right from the social media app or site. And social commerce is on the rise.”[3]

 

Continued examination of supply chain operations. The pandemic shined a bright light on supply chain operations revealing many supply chains were more fragile than people imagined. Reda notes, “The pandemic spawned a series of recalibrations throughout the global supply chain as retailers and manufacturers reexamined every step from procurement to sourcing and from reduced lead times to improved speed, resiliency and responsiveness. And those shifts will be ongoing over the next 12 to 18 months. Along with increased investments in all things related to logistics, expect more experimentation, particularly in dark stores, ghost kitchens, micro-fulfillment centers and malls masquerading as distribution centers.” She goes on to note that reverse logistics processes will also garner more attention since e-commerce is associated with higher return rates than physical retail sales. She writes, “Spending on global reverse logistics technologies will spike in 2021 — forecast 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.” Some retailers are simply telling consumers to keep small items they want to return and offering them a full refund because the cost of returning the item exceeds the value of the product.

 

Increased technology adoption. Catherine Erdly (@ResRetailClub), a small-business retail consultant, predicts, “In 2021, technology will continue to enable a shopper who wants to research and search online and then purchase in store.”[4] Reda predicts technology will also play a larger role in-store. She writes, “Adoption of robotics technology, food delivery robots and autonomous vehicles are no longer considered a novelty, but it’s still shy of primetime status: Experimentation needs to accelerate, and costs need to come down.” She also predicts touch-free technologies will go mainstream.

 

Ethical and values-based brands on the rise. Johnson notes, “Transparency, values, and ethics have never been more important to shoppers — which means brands need to prioritize them ASAP. 71% of consumers prefer buying from brands that align with their values. And according to Forrester, shoppers are increasingly evaluating products and brands based on a company’s ethics and values, with 41% of US consumers actively seeking to buy from a company associated with social, environmental, and political ideals.” Erdly calls this trend “conscious consumerism.” She writes, “The desire to buy from businesses that focus on their ethical and sustainable credentials will only grow in 2021. … With this growing desire to shop ethically, the consumer is more discerning and less likely to fall for ‘greenwashing’, or businesses that pay only lip service to ethical considerations.”

 

The future of malls. With more and more anchor stores closing, the future of malls remain in doubt. Reda writes, “‘Evolution’ is the word for shopping malls. Shoppers will return after the pandemic, but malls need to be reimagined from multi-level boxes anchored by department stores to more enticing, smaller environments in sync with consumers’ needs. … Distressed malls appear to be an attractive target for companies such as Amazon and FedEx that are eying the empty spaces for micro-fulfillment. But flipping the model will require the properties to be rezoned and, in many instances, the shift from commercial to industrial is likely to be met with pushback from local residents. Other ideas that have been floated to repurpose mall spaces include senior citizen housing, health care facilities and community colleges, but the same challenges persist. Another bitter pill to swallow: The shift toward experiential tenants that began in earnest just a few years ago is disappearing.” Andrew Cox (@andrewcox40), a Senior Retail and Market Analyst, agrees with Reda. He writes, “Mall visitors want to do more today than just shop. With new brands across sectors looking for offline homes, malls have an opportunity to think creatively about the types of tenants they host. By transforming struggling retail spaces into offices, schools, fitness centers, or medical centers, malls can create engaging experiences that attract traffic and enable these locations to thrive. These tenants also bring malls something that has eluded them: consistent traffic. … These are just a few of the examples of mall repurposing ideas. Others have included pop-up shops where DTC brands can create a unique in-person connection with their customers.”[5]

 

Future of experiential shopping remains unclear. Reda notes, “Nothing beats the experience of shopping in person.” In the past few years, retailers counted on that sentiment to draw consumers into their stores. Beauty and wellness writer Emma Sandler (@EmmaSandler) explains, “Retailers and brands have spent the last several years perfecting the art of immersive environments that showcase a brand’s lifestyle and culture.”[6] She adds, “Experiential retail was once heralded as a savior to sluggish brick-and-mortar sales. But Covid-19 places in-store experiences in peril.” Johnson believes it’s not yet time to deliver a eulogy for experiential retail. She writes, “For companies maintaining physical locations, it’ll be key to distinguish themselves from online retailers by providing unique in-store experiences. Though the reality is that brick-and-mortar stores will sell less, they have the opportunity to provide value by strengthening customers’ relationship to the brand. Immersive, Instagrammable experiences, aka ‘retailtainment,’ can bring the brand alive in a way that digital means can’t.” Marr suggests that augmented reality technologies will part of future experiential retail activities. He explains, “AR will be deployed by offline retailers to allow customers to access information about products they find on the shelves. While this pandemic continues, retailers are using tech-driven solutions to allow customers to virtually try out clothing and makeup, reducing contact between shoppers and in-store items. This convergence means offline and online retail both benefit from advances in technology and changing patterns of behavior.”

 

Concluding thoughts

 

There is no doubt that the retail sector is changing; however, we know people will continue buying things. How best to accommodate consumer buying patterns will be the biggest question retailers have to answer. Two consumer characteristics will remain in constant tension — the desire for convenience and the enjoyment of shopping in person. This constant consumer tension should be enough to motivate retailers to adopt and master omnichannel strategies. Finding the right balance won’t be easy. As Erdly concludes, “With an increasingly demanding, and cautious customer base, and consumer confidence at a low ebb, it is clear that there are tough times ahead.”

 

Footnotes
[1] Susan Reda, “Retail in 2021: What will endure and what’s going to change?” National Retail Federation, 2 December 2020.
[2] Bernard Marr, “The 5 Biggest Retail Trends In 2021,” Forbes, 16 November 2020.
[3] Tara Johnson, “12 Innovative Retail Trends to Watch in 2021,” Tinuiti Blog, 4 January 2021.
[4] Catherine Erdly, “Four Trends That Will Shape Retail In 2021,” Forbes, 18 December 2020.
[5] Andrew Cox, “5 predictions for retail supply chains in 2021,” FreightWaves, 4 January 2021.
[6] Emma Sandler, “Is experiential retail another Covid-19 casualty?” Glossy, 30 December 2020.