The future of retail: How the industry is changing in 2021: part 2

Evolving technology and an omnichannel revolution

Blending in-store and online retail experiences is the holy grail for today’s retailers. Superb advocates for companies embracing an omnichannel approach – a trend rapidly accelerated by the pandemic. The return to bricks and mortar won’t be as we know it. If technology improves, traditional retail will become a lot more of a browsing experience – somewhere to see the products and maybe take back returns.

A connected online-offline experience will require the development of sophisticated mobile and app experiences. Mobile apps are such a big opportunity for retailers. If you can get customers to use them, you can use push notifications rather than emails, meaning you have a direct connection and can merchandise to them.

This will be driven by data and if retailers have access to everything you’ve browsed online and in store, everything you’ve purchased in either location as well as when, why and any defining habits, they can introduce you to new products and make ever more relevant recommendations. Automation will become increasingly relevant and will be able to make instant trending decisions based on algorithms.

The most exciting part is using technology to enable merchandising. This could take the form of apps utilising GPS corridors and Bluetooth beacon technology, first trialed nearly a decade ago, to trigger notifications based on proximity. Here, the opportunity to highlight offers based on browsing history, send voucher codes, alert consumers to product availability or even help them navigate department stores are endless.

A better connected online/offline retail experience might also shape retail spaces themselves. Our client Boxpark is an interesting example of a marketplace model. It’s really expensive to have a retail store but if you could centralise distribution and have a smaller offering retailers could afford to have a Boxpark storefront in far more locations around the country.

Customers could go to collect products or browse lots of retailers’ offerings in one place, so you could provide that retail experience without the need for much inventory to be held there. And if centralised distribution can get to the level everyone was predicting it would in the next 10 years, they would potentially offer same-day delivery as well so customers could go in store and the items would be waiting for them when they get home.

Social growth and brand loyalty

For a glimpse of the near future, look to China, which is about five years ahead of the UK e-commerce market, with about 80% of all retail sales via mobile. What’s exciting about China is that all retailers push consumers towards using their apps, while adoption of social media and user-generated content is huge. Social networks such as WeChat also double up as retailers. Over here brands have to hire influencers and get them to work for you; over there people do it because they want social standing.

The predictions seem to point to a major shake up in the app market with Tiktok in particular as a growth area. Everyone talks about TikTok but up until now the sales experience has been pretty poor. I think we’ll see that change. Are we going to see brands asking people to start dancing with their products on? I can imagine we might. It only needs one brand to start running with these trends for it to evolve and TikTok would welcome the commercial opportunity.

A brighter future

For now, though, it’s likely that most innovation will be based around recovery and attempting to catch up with the audience. All of the workflow blockers that challenge us right now will force the direction of tech change. Many retailers need to increase agility by centralising product data with improvements to their ERPs and Product Information Management systems. Besides, the industry needs to become more carbon aware and prioritise employee wellbeing following the detrimental effect of the past year on people’s mental health.

Ultimately, a lot will depend on how our economy recovers, but we have to go with the cards we’ve been dealt: keeping stock levels low and reconsidering pricing to ensure a decent margin. Luckily we’re good at making stuff in this country – we have incredible brands and stuff that’s wanted worldwide.

The future of retail: How the industry is changing in 2021: part 1.

With 2020 delivering a seismic shock to the world as we know it, retail was one of many sectors facing an existential challenge like never before. Some companies thrived, many struggled to survive.

Now, with a semblance of normality on the horizon, retailers of all stripes are witnessing a shifting global landscape characterised by altered customer behaviours as well as rapidly evolving technology, infrastructure and supply chain trends accelerated by the pandemic.

Among our clients, we spotted two distinct types of retailer: those that shut up shop and panicked, and others who adapted. The latter are up year-on-year by an incredible amount – they’ve probably moved forward two or three years in terms of revenue. For others, it’s nearly killed them. We know companies that have had to sack their entire teams and have moved back five years.

Fortune has played its part in this, with certain verticals. Yet the pandemic has also highlighted the failures of certain sales strategies. There are a lot of large companies who rely very heavily on traditional retail and a split of 90% offline sales to 10% online can be pretty standard. For these firms, that meant 90 percent of their business suddenly vanished and share price is falling through the roof. It’s made us all realise how much things need to change.

Adapting to new consumer behaviours

As well as providing a dramatic wake-up call to retailers, the inevitable surge in e-commerce during lockdown has had a major influence on consumer shopping habits. The biggest growth was among older users – there has always been a group of high-earning sceptical purchasers who would rather go out shopping but they’ve been forced to change their habits. This demographic has realised how easy it is to purchase online and they may never go back. Overall the audience now is much bigger and confidence is a lot higher.

E-commerce has moved forward 10 years in the course of 12 months. This increased volume has brought with it challenges, though, with many retailers’ customer services facing pressure to adapt. Elsewhere, increased online activity from an older demographic who value research prior to purchase may mean some retailers need to enrich the product information currently online.

Supply chains have also been tested to their limits. Behind the scenes, the big challenge has been implementing efficient and fair returns policies to match up to customer expectations. A lot of companies don’t offer free returns and that doesn’t go down very well. To replicate an in-store retail experience free returns need to be part of the model.

The rising power of subscription services

The subscription economy has boomed in tandem with a rise in e-commerce demand. From hygiene products to software to speciality foods, subscriptions are available for just about anything.

Subscription-based companies have grown more than 300% over the past seven years, and are outpacing traditional companies percentage revenue growth by 5X. With all of the changes occurring in commerce, the digital-first approach to commerce has been the catalyst for success of subscription-based models.

Subscription businesses have adapted to mobile and social commerce far faster than traditional retailers, which has resonated with their core demographic.

But standalone subscription-based companies aren’t the only ones contributing to this movement in retail; the ongoing Covid-19 pandemic has changed the way we shop, with customers flocking to the internet for everyday items they’d usually purchase in-store.

As consumer behaviour rapidly shifted, industries within fast-moving consumer goods saw spikes in traffic and orders, putting a strain on supply chains, logistics, and website performance across the globe. In many cases, subscription services entered households as an assured way to replenish commodity items with automated purchases, avoiding sold out signs and online queues.

Within the last year, manufacturers have increasingly launched direct-to-consumer (DTC) models, opening up new revenue streams in a challenging commercial environment. Adding a subscription service into a new DTC offering is a great strategy, although giving customers the ability to auto-replenish won’t just sell itself. Businesses need to understand their new B2C customers and develop a mutually value-driven relationship. Let’s take a look at the different ways of achieving this:

Create a highly personalised experience

Subscriptions shouldn’t just be used to fulfill supply and demand, in fact, that’s not even the top reason people sign up. Curation accounts for 55% of total subscriptions, indicating people like to be surprised and delighted by new items or highly personalised experiences. As customers experiment with product ranges, their preference profile is built digitally, giving retailers a valuable understanding of what products and promotions are most popular.

Sell via niche marketplaces Packages can be compiled from a mixture of brands, sold via niche digital marketplaces, or standalone curation companies. Niche brands in apparel, beauty, and food are also mushrooming into this category.

Offering access to lower prices or member-only perks via a monthly fee is another tactic to gain subscribers. The majority of subscribers sign up after getting referred by a friend, with the bonus of a clear financial incentive. The best brands have jumped on the back of societal trends and developed a cult following.

Stop the Churn!

Churn is the biggest challenge facing subscription e-commerce companies. Even a small percentage of shoppers cancelling their subscription each month can have a significant impact. Nearly 40% of subscribers of any service type​ cancel in less than three months, and over half cancel within six. These stats are consistent across replenishment, curation, and access subscription services.

So, retaining customers is paramount for any subscription business, and the good news is that consumers can be sticky once they find a service they like. How can newcomers to the subscription model retain customers? By underpinning the strategy with creativity, technology and data:

Take a digital-first approach

Investing in a top-notch digital platform that provides an exceptional customer experience. Simply put, if customers don’t enjoy logging on, they’ll move on. Ensure usability is of a consistently high standard across all devices.

A straightforward and helpful user-journey with a clear path to purchase is key. Strike the right balance with an insightful admin suite, offering updates, user guides and tailored product suggestions. The public-facing interface is just the beginning; the customer’s dashboard, mobile app and level of support are the real factors to keeping subscribers happy and onboard.

Personalisation is everything

One of the biggest benefits of selling DTC is having direct access to first-party data, so use it wisely and don’t miss an opportunity to wow. Because subscriptions are built on recurring relationships with customers, it’s important to gain a deep understanding of their needs, wants and motivations. Start with building a user-profile in an engaging way that doesn’t feel like a monotonous task. For example, use an image led-quiz instead of a written form to help them find their preferences. Be intuitive and interactive. Stitch Fix, for example, increases retention by creating a linked Pinterest board with a stylist and logs feedback to help them constantly evolve.

Build a community that people want to be part of.

When customers have signed up for repeat service, they don’t want to forget about it until it renews each month; value has to be delivered incrementally. Engage subscribers with impactful content in all formats. Take inspiration from trends within your industry; let your products take a back seat and don’t underestimate the power of social media influencers to spark buzz.

Key predictions on the challenges faced by businesses in 2022

As we begin 2022, drawing on the latest research findings here are some key predictions on the challenges to be faced by businesses in 2022, as well as how the eCommerce market will fare this year.

Importance of first-party data

One of the most important things for businesses this year will be first-party data due to the lack of cookies and third-party data available to them. This means that many businesses will need to go back to the basics of building a customer-first strategy, as well as adapting their practices around transparency and choice, as well as ensuring they are always adding value to their customers.

Personalization and audience building

Because of the lack of third-party data, personalized content and audience building will be a clear strategic focus for marketing in 2022. Content in the future is likely to have to work harder for businesses to gain access to customers’ zero and first-party data and creating a tailored and transparent value proposition is a good strategy for achieving this.

This will also cause a greater focus on campaign reporting so that businesses can truly understand their audiences and how their campaign is performing. In fact, according to our latest research, businesses that see themselves as very strong at campaign reporting, are on average three times as likely to be very strong at personalized content or audience building.

Manual data wrangling

Manual data wrangling will become a greater problem for businesses as the number of data rows increases. Our data shows this was a key challenge for marketers in 2021 and we expect this to become the number 1 priority for the majority of marketing departments to fix with automated data integration in 2022.

Predictive analytics

Throughout 2022, predictive analytics will come more to the fore than ever before. According to our latest research, marketing teams already see the value of predictive analytics with almost two-thirds planning to implement predictive modelling next year.

However, before marketers can do this, they need to ensure that their data is fully accurate and integrated. Neither of these things can be achieved in a meaningful way without having a certain level of analytical maturing. Unfortunately, very few marketers have truly achieved analytical maturity and far too often marketing teams are still relying on manual data processes to get insights from their data.

Fulfillment will depend on data tracking demand

Companies that fail to meet consumer expectations regarding fulfillment are likely finding it so difficult because they are not using data to properly track customer demand. Businesses may well struggle as more operationally sophisticated competitors continue to excel. Especially as customer expectation is so high, the rise of quick commerce strategies (whilst coming at a premium price point) has meant that customers can be more choosy about alternative businesses that will fulfill their orders.

Shifting demographics within e-Commerce

One of the things we are certainly seeing in the e-Commerce industry is that executives and key decision-makers are far more closely aligned to target consumers in terms of their age.

In turn, because they understand the constantly evolving digital landscape more natively, it means they’re more open to taking risks and experimenting with new platforms, channels and strategies to deliver growth.

The impact of this? The mindset has shifted from ‘let’s take our brand’s physical retail experience online’ to putting their e-Commerce strategy at the fore of their marketing and overall business rather than being purely supplemental to real life offerings. A prerequisite to that shift being possible is the successful marriage of data, experimentation, and real-time analytics.