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By Anna Clymo and Freya Hansen, Business Consultants at BJSS
By 2020 will be the year many retailers wish to forget. We saw Covid-19 take out some of the oldest names on the high street as retailers came to terms with the impact of the pandemic. However, despite its challenges, 2020 accelerated much needed digital transformation and has reshaped the future of the industry. With 2021 just around the corner, here are our top 5 predictions for the year ahead.
THE RISE OF SOCIAL COMMERCE
Social commerce has been on the rise for some time however, due to Covid-19 forcing us all to stay at home, 2020 was the year social media became the main way for us to communicate, discover and entertain ourselves. Be it through a live-streamed Instagram event or a viral TikTok campaign, there is a huge opportunity for these channels to provide that final step in the customer journey.
We’re already seeing the huge success of social commerce in China where it is predicted the channel could account for a 1/5 of all online sales (or a whopping $166 billion) by the year 2023. Additionally, with brands such as Instagram, TikTok and Facebook investing heavily in the commerce side of their platforms, we expect this area to make real strides in 2021.
To understand which direction to take, retailers need to observe how their customers are currently interacting with their brand and social channels and then determine how and which channel can make those interactions better, increase engagement and drive sales and conversion.
A SUBSCRIPTION MODEL SOCIETY
The spread of Covid-19 and the consequential boom in e-Commerce has made many retailers re-think their loyalty schemes. With increased online shopping comes increased competition, as it is much easier to close a tab and switch to a competitor’s website than to physically travel to a different store.
In recent years we have seen the rise of subscription-based retailing, leading many to wonder - is the subscription model the new loyalty? Subscription models can be a great way of locking consumers in; they have already paid for your services, so are unlikely to shop around in search of a better deal. Think of Amazon Prime; with over 60% of adults in Britain subscribed to the service, it is unrivalled in the perks it provides, leaving other retailers struggling to compete.
In 2020 we saw more players enter the subscription market, for example, Pret A Manager announced their coffee shop subscription YourPret Barista, and Swedish razor brand Hey Estrid launched their female-focused replenishment service, both of which were met with much success.
A recent study estimated that Brits spend over £2 billion a year on subscription services, with food services such as Graze proving most popular. With demand for subscription services rising, we expect to see more retailers reviewing their loyalty programs to ensure the incentive is there for consumers to return or introducing their own service to bridge the gap.
DELIVERY BECOMES THE NEW NORMAL
Home delivery is of course part and parcel of the online shopping experience however, consumers expectations towards retailer’s delivery propositions are starting to shift. What we’re now seeing is a growing demand towards same-day delivery with the global same-day delivery market expected to grow at a CAGR of 20.3% from 2020 - 2027 – because the next day wasn’t good enough.
Lots of consumers might not be demanding same-day delivery just yet however, we are already seeing retailers testing out new delivery methods in order to identify how they can best offer their customers speed, flexibility and convenience. For example, in September Tesco announced plans to trial a new drone delivery service for small items, capable of fulfilling orders in as little as 30 minutes.
In 2021, we expect to see more innovations, routes to market and tactical partnerships in this space as retailers try to keep up with the “Amazon Prime” effect.
OMNICHANNEL: OFFLINE BECOMES ONLINE AND ONLINE BECOMES OFFLINE
As the Covid-19 pandemic spread and lockdowns were imposed around the world, consumers turned to online shopping like never before. The shift towards e-Commerce highlighted the need for a consistent omnichannel experience, with consumers expecting the same service regardless of the channel they are using.
Research shows that omnichannel strategies have been found to drive an 80% higher rate of incremental store visits, with 59% of consumers opting to research products online before travelling in-store to purchase them. Therefore, it is imperative for retailers to build bridges between their channels, consider them as part of a circular customer journey and stop treating them as separate entities.
Off the back of this, we expect to see more retailers asking themselves questions such as;
Taking this approach and asking these questions will enable retailers to capitalise on their channels and provide unified experiences that in turn should lead to extra purchases.
DATA, DATA, DATA
The retail industry is changing at an unprecedented pace, and now more than ever it is crucial for retailers to utilise data to provide an unrivalled customer experience.
Statistics have shown that adopting big data can increase retail sales by 3% - 4%, with the big data in the retail market expected to reach $13.3 billion by the end of 2025. Retailers who shy away from data analytics risk missing out on key benefits such as predicting consumer spend and providing personalised experiences.
Alongside that, the demand for personalisation is rising, with a huge 72% of consumers saying they only engage with personalised messaging. This highlights the need for strong data analytics and marketing strategies that provide consumers with targeted advertisements and recommendations.
Successful use of big data analytics also opens the door for Artificial Intelligence (AI). The use of AI provides companies with a quicker, less manual way of analysing large datasets at pace, allowing insights to be quickly digested and acted upon. When used together, AI can learn from big data to inform areas such as supply chain planning and demand forecasting, increasing revenues and saving employee time in tandem.
In 2021 we expect to see more retailers advancing their data capabilities, with technologies such as AI making the move from back-office operations to the shop floor. As consumers increasingly expect retailers to be utilising the latest technologies and providing personalised experiences, the future winners of retail will be those who are able to meet these changing expectations.