December 9, 2020
5 min read
Opinions expressed by Contractor the contributors are theirs.
The current global health crisis has fundamentally changed the world of retail. Businesses of all sizes find it difficult to keep up with dramatic changes in day-to-day operations and anticipate the next. Consumer spending has rebounded to more than 90% of pre-pandemic levels in the United States, according to Opportunity Insights, but it is headed in different areas. Spending on restaurants, hotels and transportation is down, while groceries and home entertainment are up. Total retail spending for the week ending November 1 was about 8% higher than in January.
In this disruption, opportunities exist for entrepreneurs. Consumers behave differently and retailers are eager to adapt through digital transformation and by diversifying their partners in order to meet new consumer demands. Four trends have emerged that are important to businesses wanting to be successful in retail now and beyond the driving influence of Covid-19.
1. Decrease in physical space, increase in product assortment
Over the past year, the physical presence of retail has evolved into new shapes, sizes and experiences. More stores have become distribution centers, investments in large physical formats have declined, and retailers have focused more on niche products and local suppliers that are shortening their supply chains. Many retailers are looking for new partners to increase their product assortment or meet a demand exposed by the pandemic, such as masks, partitions and other items that consumers cannot live without.
Manufacturers and suppliers who wish to establish a successful partnership with retailers should be aware of the requirements of retailers for detailed and accurate product information. This data plays a key role in ensuring that the right product is available when the consumer needs it. Almost 70% of consumers said lack of product information was the number one reason they had abandoned a product page, according to a Salsify study.
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2. More urgency for consumer knowledge
The current state of retail flows is also an opportunity for tech startups that support buyer access to information and analytics. There is a greater sense of urgency to understand and anticipate consumer interactions with products. Every face-to-face interaction, as there may be less, should count and serve the purpose of engaging the consumer in the long term.
Startups like Adrich, which provides real-time analytics of product usage, help retailers and brands strengthen their relationships with consumers. She has developed a thin, flexible sensor that is attached behind a product’s regular label, creating a feedback loop for brands and retailers to track consumer interactions with the product via the cloud and Bluetooth. Retailers will know when and how consumers are using various products, which can help with inventory planning, merchandising, and localized promotions.
3. New ways to try products
Augmented Reality (AR) technology can support “try before you buy” experiences, which will become more common. Today, consumers prefer less contact with people and products that others may have touched. While there is no doubt that more and more consumers will return to stores as health protocols loosen, there will also be a lasting increase in online shopping. A Salesforce survey in May found that a majority of people across all income brackets expect to shop more online in the future, including 71% of high-income people.
AR was already showing signs of growth before the pandemic and offers solutions to today’s challenges in retail. According to a 2019 Nielsen survey, around half of consumers are willing to use AR to rate products. Due to the pandemic, jewelry, fashion and designer footwear brands are offering new virtual trials or seeing growth in existing apps that help customers shop at home or in stores more securely. Ulta’s GLAMlab launched in 2016, but its use has quadrupled in recent months, with the virtual trial app becoming a big part of reopening stores, where customers could no longer test makeup before the purchase.
What could make or break the maturation of AR is the ever-rampant occurrence of incomplete and inaccurate data leaking through retailer systems. For a virtual product experience to be successful for retailers, product information must be standardized to ensure a smooth flow between the physical and digital worlds. Not only will retailers waste time and resources trying to retrieve information during the setup phase, but consumer confidence will collapse if key product attributes are missing or unavailable when testing new technology offerings. Entrepreneurs can expect a continued demand for solutions that address these data challenges and help retailers create digital product experiences for customers who cannot sample physical products.
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4. Growing sustainability and transparency
Buyers around the world are feeling more connected to each other due to the shared experience of the pandemic, and there has been an increase in conscious consumption and a desire to buy more locally, according to Accenture. Many retailers are launching sustainability initiatives and re-examining the environmental impact of their supply chains. In May, Walmart announced a partnership with clothing retailer ThredUP, which combines Walmart’s interest in sustainability with the need to deal with tight budgets for consumers hit hard by the pandemic recession.
Along with the increased interest in reuse, more consumers want to understand where products come from and how they were made. This kind of transparency forces brands, retailers and online marketplaces to align their requirements for unique product identification. For example, obtaining authentic barcodes and ID numbers should be seen as an essential part of product launch for small brands that have a viable chance of reaching a larger audience.
COVID-19 has created an inflection point in consumer behavior. Despite the challenges they face today, small brands and entrepreneurs can see an opportunity. Their courage to travel uncharted territory is more vital than ever to the retail industry. Successful collaborations will need to innovate quickly while keeping in mind retail’s steadfast rules of engagement for data standardization, completeness and accuracy.