With today marking a year since the World Health Organisation (WHO) declared the outbreak of Covid-19 a global pandemic, in the last 12 months retailers have delivered a masterclass in evolution.
As the UK yo-yoed in and out of lockdown, retailers navigated new ways of operating, re-imagined new trading formats and pivoted to meet emerging consumer behaviours and demands borne out of the acceleration of ecommerce.
It’s fair to say a lot’s changed in the past year, but what are the key changes the pandemic’s had on retail – and what’s here to stay as we begin to unlock?
We caught up with Alex Timlin, SVP verticals at Emarsys, to get his take on how retail has changed during the course of the last 12 months and what we can expect as we look ahead. Here’s what he told us:
Retail revolution: 12 months of unparalleled change
Change in the retail industry has taken place at an unprecedented pace, defying expectations of even the most forward-thinking analysts and industry commentators. For many brands, Covid-19 was ‘make or break’, creating pressures which forced businesses to either rapidly evolve, or cease to exist.
The past year has seen a radical shift towards ecommerce, with five years’ worth of growth happening in a single year. At its peak (in Q4 2020) ecommerce accounted for 27% of all retail sales in the US — nearly double the previous year.
More often than not, this growth came at the expense of physical stores, which were forced to close during the various national and local lockdowns. The British high street saw several casualties, with retailers like Topshop and Debenhams closing their brick-and-mortar stores as a result of being snapped up by online retail giants Asos and Boohoo respectively.
But the shift to online has also offered retailers the opportunity to gain all sorts of vital customer insights — both at an aggregated level by audience segment, but also at an individual level in terms of purchase behaviour and product preference. This kind of granular data is hard to come by for retailers operating purely on the high street. For those who have capitalised on the opportunity, this data has been — and will continue to be — crucial for helping to attract old and new customers, as well as to solve the personalisation puzzle.
So what does the data tell us about how the retail industry has changed over the past 12 months?
1. The fashion industry has become “two-paced”
The fashion industry is one of the most interesting industries to observe over the past 12 months.
For consumers, lockdown has overwhelmingly been about being casual, with fashion habits moving away from ‘dress to impress’ and more towards ‘comfort is key’. Both men and women have made fundamental changes to their wardrobes, with 18% of UK shoppers buying loungewear more than any other clothing in the past year.
Athleisure was also among the year’s best-selling products according to Emarsys data appealing to both the ‘comfortable’ buyers – i.e. those who want to be comfortable while stuck indoors — and the ‘self-improvers’, who chose to make the most of the time the pandemic offered by staying active.
We’ve also seen a large rise in “fast fashion”, where retailers produce high volumes of clothing at a relatively low cost. Companies like Shein have taken off over the past 12 months — and the company’s mobile app has become one of the world’s most downloaded apps, reaching more than 100 million people in more than 100 countries.
But while there are huge successes, there have also been major failures. Given that we still have nowhere to go and no reason to get dressed up, women’s apparel became one of the most depressed retail segments, while retailers selling footwear saw a huge drop in sales at the beginning of the first lockdown — and figures still haven’t recovered.
2. Digital innovations for “big-ticket items” are likely to stick around
Most consumers are fairly au fait with buying clothing and electronics online, but few are used to buying big-ticket items like washing machines and freezers online.
Despite this fact, we saw a huge spike in washing machine and freezer sales at the beginning of the first lockdown in March — around +200% year on year. ln the absence of being able to buy these high-priced products in store (where they can ask for advice) shoppers have no choice but to purchase them online.
In response to this, retailers have introduced a whole host of new technologies to make up for the lack of physical store assistants and to recapture the offline shopping experience. From chat bots and virtual agents, through to augmented reality ‘try before you buy’ experiences, brands have increased their technology adoption to recapture this audience’s engagement. Going forward, these technologies will continue to be used as the default online, with multichannel retailers attempt to keep up with digital leaders such as AO.com.
3. Mobile app-first businesses come to the fore
For many, the past year has offered a chance to slow down and focus on acts of self-improvement that we wouldn’t normally have had the time to do. From language learning with Babbel, to mindfulness and meditation using Calm, digital content delivered primarily through a mobile app has seen a massive uptake in users wanting to develop new skills and escape the stresses of daily life. In fact, Calm has doubled its valuation to become one of the most valuable companies in the US.
The challenge now for these brands as the world comes out of this pandemic is how to retain the customers they’ve recently acquired. Babbel, for example, is addressing this issue directly by segmenting their customer base into high, medium and low-intent learning categories, assessing motivation levels and the likelihood that a user would stick with the learning process. Using this segmentation, the company can now calculate how responsive users would be to different levels of push notifications — creating an individually tailored approach. For those with high intent, Babbel now engages with them more about the product and next steps in their learning. For low-intent learners, Babbel takes an entirely different approach, focused on storytelling, inspiration and motivating learners to continue their journey.
This level of personalisation is key, and while traditional retailer have understood its importance for years, it’s interesting to note how different types of businesses are embracing the personalisation challenge.
4. The Direct-to-consumer (D2C) opportunity has been realised
Large consumer product brands in all categories have seen an explosion in their direct-to-customer activities. For those brands who already had strong digital and ecommerce foundations — from PUMA to Charlotte Tilbury and Tupperware and more — online sales saw great success. Direct-to-consumer sales have especially grown within the large consumer electronics industry, with the likes of Apple, Sony, Canon, One Plus and many more seeing strong results.
But again, these brands didn’t just have websites where you could buy products, they had a sound marketing strategy, followed by effective advertising, content, creative, service and merchandising plan — all lined up for “digital-first”, “mobile-first” execution, enabling and attracting consumers to engaging with their brands over their competitors.
5. Appointment based retail is gaining traction
As the world begins to see the light at the end of the tunnel of the pandemic, we’ve seen an interesting trend start to happen in Germany, where the government is keen to allow retailers to open up physical stores once more. But to ensure safety, many retailers will only be allowed to open their stores to customers on an appointment “click-and-meet” basis only — similar to what Apple already does with its Genius Bar reservations. Customers must book these appointments online in advance.
While this measure may only be temporary, it does give retailers an opportunity to personalise the in-store experience in a way that’s not usually possible. Normally when a customer walk into a shop, the shop has no idea who that customer is and what their preferences are. But by mandating customers to book an appointment online before they come to the store, in-store assistants will be able to pull up that particular customer’s profile and deliver a personalised experience, helping to lead to an ultimately happier customer.
The appointment-style experiences also have the potential to solve the issue of fulfilment that retailers are currently facing. With the demand for online products so high, product stock is often an issue and even it’s not an issue, delivery companies are working flat out to meet that demand. But with a simple online “wishlist” feature, which brands like CUE are currently using, brands can get in touch with customers directly when products are back in stock, so the customer can book an appointment to come and buy the product from the store that day.
Operating in this way is big for retailers because while online sales are great for revenue, stores are far better for making a bigger profit. And the online and physical store worlds don’t have to operate in competition. The peak of ecommerce sales during the pandemic accounted for 30% of all retail sales in Q4 2020. But when the doors opened back up the whole sector overall went back into growth, so naturally both can complement each other.
So what does the future hold?
As lockdown restrictions ease and stores subsequently reopen, ecommerce will continue to thrive, alongside brick-and-mortar stores. That said, while lots of customers are now used to shopping online and enjoy the in-store style experience that many brands have recreated online, brands still make most of their profit in-store. We should not assume demand for physical stores will have disappeared, but rather focus on strengthening and supporting the retail sector as a whole, creating the best experiences for consumers, however they choose to shop.