What Did 2020 Mean for Retail?
2020 has been a rollercoaster ride for the retail industry. Business began as usual in January, only to succumb to panic and pantry filling once the pandemic hit in March. While activity began to recover over the summer, it has since experienced renewed volatility as new restrictions were implemented. Now, we are in the middle of an unusually long holiday season as many retailers have advertised extended shopping periods in order to jumpstart sales and attract cautious customers.
While COVID-19 has certainly disrupted the retail landscape, it has also accelerated trends already in motion. This holiday season, and looking forward to 2021, here are four trends we can expect to continue to shape the retail industry.
As retailers forge a path ahead, they must either offer great value or high-quality luxury.
Department stores are losing ground
Even before this year, department stores have been struggling. Today’s consumer no longer needs everything under one roof and the halcyon days of visiting the mall and its anchor department store makes less sense to shoppers who can peruse items from the comfort of their own homes. The pandemic has laid bare this trend, as many department stores cap what has been a painful year with catastrophic holiday revenues. Macy’s, for example, experienced a same-store drop of more than 20% in Q3 of this year.
However, luxury retailers, like Neiman Marcus and Saks Fifth Avenue, are better positioned to weather the storm. While other department stores—such as Nordstrom and JC Penny—have curbed inventory in the pandemic’s aftermath, these retailers remain attractive to consumers who are no longer able to do their holiday shopping at luxury brands during travel abroad. Since luxury retail requires acute curation of merchandise, these retailers are able to offer more custom products that better reflect current tastes and trends.
Online shopping is on the rise
Holiday shopping has taken on an entirely new meaning, as retailers market extended shopping windows in order to boost end-of-year sales. Experts predict more than 25% of this shopping will take place online, compared to just 16% in 2019. Unsurprisingly, foot traffic has dramatically decreased as consumers continue to consolidate or avoid shopping trips. On Black Friday, in-person shopping was down a staggering 52%.
So where are these shoppers now turning? In Q3, Walmart reported a 79% increase in online sales, while Target reported an increase of 155%. Nearly a quarter of all US ecommerce, however, comes from Amazon, which reported an increase in sales of 37% and a 200% rise in its quarterly profits.
But while the pandemic has certainly accelerated the transition to ecommerce, the appeal of online shopping has long predated the events of this year. These ecommerce giants do not attribute their remarkable success to this unusual year but rather to an enduring change in how consumers prefer to shop.
Home is where the heart (and the money) is
Retail has been a tale of two industries in 2020. Discretionary categories—such as apparel, footwear, accessories, restaurants, and parts of beauty—have suffered a major blow, while retailers that emphasize in-home experiences have fared much better. These retailers are part of the new “At Home” economy, which has benefited companies like Zoom and Peloton. Grocery, home improvement, and home décor are just a few of the subindustries that are benefiting from this trend.
While restrictions will inevitably be lifted as vaccinations are more widely administered, the emphasis on nesting will likely continue for some time as people remain cautious for the near to medium term. Individuals will continue to seek out high-quality ingredients to replicate dining out experiences, splurge on that new stationary bike to maintain their fitness regimen, and invest in costlier furnishings and other equipment to make their time at home as comfortable and pleasant as possible.
BOPIS is a make-or-break advantage
The concept of BOPIS (Buy Online Pick Up In Store) is not new this year. It enables shoppers to avoid shipping costs, see their purchases before taking them home, and easily make returns. But as consumers opt for safe and convenient ways to procure their favorite items, more and more retailers are investing in this increasingly popular model. Nearly 67% of shoppers have used BOPIS during the pandemic, with 50% citing the availability of BOPIS as a make-or-break factor when determining where to shop. For retailers looking to boost sales this holiday season, BOPIS often leads to shoppers making additional purchases once they are in stores to pick up their items.
Still, BOPIS is not without its faults. Given its record-fast rise in popularity, aided by the pandemic, many brands are still struggling to get BOPIS right. Retailers cite issues with tracking inventory and logistics as well as customer information security. Additionally, more than a quarter of shoppers have reported issues when picking up items up in store.
The pandemic has demonstrated all too well that, in times of challenge, the strong often emerge stronger. As retailers forge a path ahead, they must either offer great value or high-quality luxury. Those in the middle that provide neither low prices nor more custom, differentiated products and services will continue to struggle throughout the duration of the pandemic and beyond.