With 2010 marking the beginning of retail’s digital revolution, the tone was set for the next 10 years. By 2019, retail sales had increased 188% from the beginning of the decade ‘ accounting for 18.7% of all UK retail sales last year. In fact, the last 10 years has been one of the most disruptive and fast-paced in living memory, and as we enter 2021 this pace of change is set to continue.
Whilst the rapid growth of eCommerce has provided retailers with an opportunity to capitalise on a host of new revenue streams, it has also opened up additional factors, threats and concerns for retailers to consider. Here, we explore the influence digital transformation has had on the retail sector, whilst delving into the sector’s additional defining trends.
Balancing digital with the in-store experience
Much of the pressure and tension that online retailers have battled since 2010 has centred around providing customers with more convenience and an improved shopping experience, compared to the traditional brick-and-mortar store offering. However, this caused something of an internal conflict for many. A transformation of this magnitude required considerable investment, but retailers still had to consider the needs of the huge numbers of consumers still purchasing in-store. The high street or department store hadn’t died ‘ consumers just liked having options.
This forced businesses to consider the extent of their diversification. Should they invest whole-heartedly into online to maximise the opportunity, but risk losing traditional existing customers? Or should they double-down and focus on their current offering, but risk losing consumers to digital competitors? The answer was to find a balance between the necessary early investment and the prospective income. This balancing act frequently led to poorly executed investments into omnichannel retail offerings and often resulted in poor inventory visibility, as companies struggled to manage the new art of data collation, insight-driven supply and demand business models.
A personal touch
Struggling against the rise of retail giants like Amazon, differentiation manifested in the form of personalisation as retailers sought to out-compete the relative coldness of such a massive and digitised conglomerate. Brands tapped upon something that the consumer seemed to be missing ‘ the human touch. This isn’t to say they wanted to abandon Amazon’s convenience, but there has also been a stronger sense of favourability towards brands who strike a chord with consumer wants and needs.
Amid the digital deluge, consumers wanted to be seen again. There’s been a sense over the past few years that ‘if you have my details and all of that data insight, then there’s no excuse not to meet, or even pre-empt, my retail demands’. Online and Instagram new favourite Function of Beauty, for instance, has taken personalisation to a new level, not only tailoring promotions to users based on their hair desires, but also allowing them to add their name to packaging. Meanwhile, health and beauty brand Birchbox has seen success through personalised subscription boxes ‘ providing customers with five mini make-up, skincare, body and hair care products based on the information gathered in the beauty profile, completed upon registration. By anticipating wants and needs, and targeting customers as individuals with bespoke offerings, brands can build a deep-rooted relationship. No longer is brand identity enough to inspire loyalty. Instead, service, convenience, experience and a personalised offering have become the new differentiator for retailers.
Perhaps the culmination of this 10-year period has been the rise of augmented shopping experiences, blending the digital and physical realms to offer consumers the convenience and immediacy of online retail without the risk of regretful purchases. It transcends numerous verticals too. The notion of picking out a new sofa without attending a showroom. The ease of buying new sunglasses without physically holding them. Today, augmented, and virtual shopping trends are continuing to surge, enabling online brands to provide a tactile experience often missed when shopping online. A trend the industry will track well into the next decade.
The conscious consumer
What personalisation has really proved over recent years is that no matter how innovative or outlandish trends become in the retail space, consumer expectation and demand will always overrule.
Businesses have faced increasing societal pressures to become more sustainable. Ignited by regulation, national policy and carbon emission agendas as a result of heightened climate change awareness, the determining factor is consumers increasingly filtering their preferred brands according to ethical concerns. In fact, recent research conducted by PFS and LiveArea revealed that during lockdown consumers had the opportunity to reflect and re-evaluate their shopping habits. In fact, 64% of UK and Irish consumers, and 71% of millennials, are now actively looking for ethical or sustainable features in the products they buy online.
It’s led to a cry not just for face value compliance, but in a lot of cases, complete transparency. According to further PFS research, consumers are actively seeking online brands that can stand by their sustainability credentials. People want to know how products are made, how materials are sourced, what those materials are, even how workers are remunerated or cared for across the circular economy and social value chain. In fact, over a third of consumers now say that when making a purchase a product must be naturally or locally sourced, or sustainable.
Arguably, not adhering to this consumer demand is even more dangerous than underestimating the digital transition. Failing to prepare your omnichannel presence successfully would result in a lost customer. To be outed as unethical, unsustainable or damaging to the environment is likely to result in social media uproar, long-term reputational damage and an uphill battle to retain consumers no matter how many personalised e-promotions you plant in their inbox.
The pandemic: what we’ve learnt
If the changes faced by retail over the last 10 years hadn’t been challenging enough ‘ 2020 certainly put brands to the test. The COVID-19 pandemic not only tested the consumer relationships established by brands, but also forced many to close their stores, placing some of them on the verge of financial ruin.
From the pandemic, we have seen an accelerated demand for retailers to ensure that both their in-store and online experience suit consumer needs. In order to compete, both experiences must reflect the brand’s core values, offering the same personalised and tailored offerings akin to the traditional high street store.
Now, as we enter 2021, and with the UK in a third national lockdown, an online offering is no longer a ‘nice to have’ ‘ it is essential to survival. However, this time brands will also have Brexit-induced supply chain disruption to contend with. Agility will be crucial to keeping up with online demand in the months ahead. Retailers must take learnings from the trends witnessed over the last decade and carry these forward in order to see success in this new world of retail.