Welcome to 2021, retailers. Don’t expect it to get easier.
The year about to unfold will likely be a manifestation of all the changes consumers and retailers endured in 2020. That means all the merchandising and fulfillment lessons learned then, and all the new practices retailers introduced, are expected to be applied with improved efficiency and value.
Much of those practices will require new investments – 90% of retail executives believe their technology strategies and investments must change in 2021, in light of COVID-19, according to a report by Toshiba and Retail Dive. In physical stores, as well, retailers acknowledged the need to better manage inventories and maintain (or recapture) foot traffic.
Let’s hope their resolve to make these changes is as iron-clad as the shopper’s willingness to change stores, brands and channels that fall short on fulfillment. Consumers are making resolutions for a healthier 2021; retailers can be doing the same.
7 Resolutions For A Leaner, Meaner Retail Industry
Resolutions that last tend to recognize how past mistakes were made, and the lessons learned. Looking back on some of the most consequential shopper behavior shifts of the past year, these seven resolutions could lay the groundwork for a better shopper experience in 2021.
1. Make the return process easier. Nearly $70.5 billion in holiday purchases are expected to be returned this season, according to real estate services firm CBRE. That’s a 73% increase over the five-year average, with many being online orders. As a result, shoppers will expect the return experience to be just as easy as their free, fast online deliveries. Amazon AMZN -0.2% planned ahead by inviting customers to make returns at its Whole Foods stores (in addition to Kohl’s KSS +6.8%, UPS and other locations). Retailers can further turn their return policies into opportunities to be more environmentally positive, with messaging that ensures returned goods will “find a new home,” and not be tossed in the trash.
2. Reward loyalty points based on new shopping behaviors. Online sales rose 47.2% between Nov. 1 and Christmas Eve, year over year, according to research by Mastercard Spending Pulse. Much of that newly adopted digital shopping will become habit, so retailers should use their reward programs to their benefit. They can offer bonus points to move excess inventory, for example, and to entice in-store visits for more discretionary spending. Retailers also can borrow from hotels and airlines, such as Hilton Hotels, which has accelerated how fast members can earn “Milestone Points” and cut the number of stays needed to reach Gold status in the program. Retailers can do the same – recognize the underlying challenges their shoppers face and whether extending qualification periods for status levels (and not expiring points) will improve engagement.
3. Use customer data more effectively through personalization. All of this cross-channel shopping is producing layers of shopper data that will enable retailers that use it smartly to more accurately predict emerging preferences. This is an area where technology investments should be made. For example, some retailers are taking advantage of artificial intelligence to analyze chatbot messages on online reviews, while also recognizing the significance of real-time location data. Target’s shopping app, for example, can use Bluetooth technology to help shoppers find products and to send offers in real time, while collecting information that shows how its customers shop its stores.
4. Further evolve the dynamics of the in-store/digital experience. The better integrated digital and physical shopping options, the higher sales will likely be. Best Buy +0.8%BBY got a handle on emerging behaviors early in the pandemic through a seeming step-by-step plan. First it closed all stores and offered curbside pickup only, enabling it to gauge online fulfillment needs by location. When it reopened stores, it did so by appointment, helping it measure in-store demand. Now Best Buy plans to convert hundreds of stores into fulfillment hubs. This model could enable shoppers to order goods via a mobile app while in the store, at home or on the go – and have orders delivered however they choose.
5. Spot opportunities in new real estate venues. Retailers should scout for affordable options to be wherever the mid-pandemic shopper is, and stores that have been vacated present such opportunities. Traditional and online-only retailers can use these venues to test new markets as pop-up or seasonal shops. But dark stores aren’t the only opportunity for short-term shops – any unexpected places where people safely convene should be re-envisioned as showroom spaces. Ideas range from tents in parking lots to displays within “essential” retailers, as footwear chain DSW is doing through a partnership with Hy-Vee supermarkets.
6. Make cleanliness a hallmark. The pandemic has simply underscored the reality that store cleanliness has been a key factor in where people choose to shop for a long time, because it shows the retailer cares about its customers and workers. Even before the health crisis, two-thirds of shoppers said they left a store without making a purchase due to poor appearance and disorganization, according to 2019 report by ServiceChannel. Appearance is particularly important in supermarkets, where marked-up floors and carts give the impression the food is not fresh. Cleanliness is one of the key features of the best-rated supermarkets in the U.S., according to Consumer Reports’ 2019 ranking. Among the top-rated: Wegmans and Trader Joe’s.
7. Rethink the format. Shoppers, in their urge to get in and out of stores fast, have sharpened the quick trip. Smart retailers learned early on to put high-frequency items closer to the door, both to enhance shopper trust and improve store productivity. Those who have longer lists can fill them with more ease (fewer crowds) while quick-trip shoppers can be in and out in a jiff. Yes, this planning is completely contrary to old-school grocery thinking of putting the milk in the back corner so shoppers have to traverse the store, or Ikea’s floor plan that force feeds customers through its market. But new formats are necessary. Indeed, Ikea is testing small-format stores in urban locations such as New York and Chicago.
With so many consumers having adapted to so many options to fulfill their needs, earning loyalty will require fresh commitments. The late-pandemic retail experience will need to be tentacular – gripping the shopper’s attention across all senses (including emotional) and across all channels, with recognizable force.
No, it isn’t going to be easy. But it will be worth it.
Bryan Pearson is a Featured Contributor to The Wise Marketer and currently serves as a director and strategic advisor to a number of loyalty-related organizations. He is the former CEO of LoyaltyOne.