U.S. retailers faced a serious blow last spring when many stores were forced to close due to the COVID-19 pandemic. As stores eventually reopened, retailers realized their customers were changing how they shop—and many are adapting their brick-and-mortar spaces in response.
Physical stores are not a thing of the past, retail store owners say, but they are quickly evolving to meet the needs of the new digital customer.
“The pandemic has accelerated retail’s transformation,” said Tony Shan, head of Tmall Global, the Americas with the Alibaba Group, an e-commerce marketplace based in China, during a Tuesday session on the evolving retail landscape at CES 2021. “It’s more important for businesses to have a digital mindset and both a digitally enabled experienced online and offline.”
Dick’s Sporting Goods—which has big-box retail stores across the country—saw its sales jump 23% in 2020, said President Lauren Hobart, demonstrating that the pandemic hasn’t pushed out her company’s need for brick-and-mortar stores.
“Our stores are absolutely critical to our digital business,” Hobart said. What’s helped, Hobart noted, is that their stores have become the hub of an “omnichannel ecosystem,” where customers can shop in person, use curbside pickup of in-stock items, or make ship-to-store pickups of online orders. The physical store presence, she said, plays an important support role in their e-commerce business.
Deborah Weinswig, CEO of Coresight Research, says the following trends to watch that could impact retail moving forward:
- Consumers will change the way they spend. “The economic and social impact of the pandemic has changed the way people live and made lower-income consumers more cost conscious,” Weinswig said. U.S. dollar stores have seen a 6% or better year-over-year growth every month since May 2020. Also, an increased interest in health care since the pandemic started has driven an uptick in wellness products and businesses. While Dick’s Sporting Goods noticed a decrease in business coming from team sports during the initial months of the pandemic, consumer interest grew in outdoor activities, which Hobart says brought in new customers who were looking for ways to stay active.
- New technologies and tenant mixes will reshape the retail landscape. A trend of digitally integrating new, diverse retail tenants is taking shape, Weinswig said. For example, mall owners are increasingly adding health care and residential tenants to their mix. Interactive advertisements and games at physical retail locations can boost shopper engagement, she said. Also, some retailers are turning to augmented reality and virtual reality in the retail industry to find new contactless ways to interact with customers. The creation of virtual retail stores with AR visualizations of product catalogs are on the horizon. Some retailers may even offer 3D product previews to let customers “try,” virtually, before they buy, Weinswig said.
- Digital-first retail strategies will be key to success. Livestreaming and social media with e-commerce likely will continue to gain traction with retailers who are looking for new ways to engage customers. Online sales will continue to climb, Weinswig said. She expects livestream selling—which is already popular in China—to reach $25 billion in the U.S. by 2023. Livestreaming is a way for shoppers to research new products and get a visual demonstration before they decide what to buy. Salespeople, online influencers, or even celebrities may livestream shopping tips, demonstrate a product, or respond to questions from a digital audience, all in real-time. In May 2020, Facebook indicated it will experiment with livestream shopping functionality through its Facebook Marketplace and Instagram Shops features.
- “Doing good” becomes a greater focus for retailers. “All retail stakeholders—consumers, investors, and employees—appear increasingly committed to sustainability and inclusivity, sparking the growth of new markets like ‘recommerce’ [the selling of previously owned or used products] and adaptive apparel,” Weinswig said. Fifty-six percent of consumers report a willingness to pay, on average, a 35% premium for sustainably made products, Weinswig said. More retailers may look to add sustainability into their businesses to attract new customers, but she said the connections must be authentic to the company’s point of view to resonate.
- Retailers will find new ways to transact with customers. “Seamless payment systems, loyalty programs, and personalization will be key to attracting and retaining customers in the increasingly competitive retail space,” Weinswig said. Social media may be one area of growth. After all, nearly 78% of U.S. consumers who use social media to shop, report sometimes abandoning a purchase due to a lack of built-in functionality. Dick’s Sporting Goods was able to grow its business during the pandemic—even as the physical stores were temporarily shut down—by adding curbside pick-up for its online customers. It also is also planning contactless in-store checkouts for added convenience for its in-store customers. The company is placing greater focus on their loyalty programs, such as offering a special week of exclusive member discounts.
- Resilient, flexible supply chains will be vital. The pandemic shed light on the vulnerabilities of many supply chains, Weinswig said. Demand for industrial real estate could require an extra 1 billion square feet by 2025, predicted JLL, a commercial real estate firm, in late 2020. Retailers and suppliers will likely invest heavily in technology and infrastructure that can be leveraged to adapt quickly in times of crisis. Warehouses are becoming a critical aspect of the commercial sector to support retailers’ growing e-commerce and omnichannel business models.