The great consumer shift: three factors for retail
As thousands of retail stores closed their doors for the last time in 2020, Amazon doubled its quarterly profits in Q2 – thanks in no small part to scores of locked-down shoppers who drove sales up forty percent from the previous year.
McKinsey calls it ‘the great consumer shift’, and with good reason. The facts are:
As recently as December 2019, only 12% of US retail shopping was online (a mere fraction of the prediction for this year).
There was a 21% increase in online shopping from March 2019 to March 2020, when COVID-19 was declared a global pandemic.
Almost half of the people surveyed in this May 2020 study said they were shopping online for items they would typically buy in-store.
US online sales in September 2020 rose by 43% from September 2019.
Boredom, caution, and store closures have pushed people to shop online more than ever before—and with Amazon Prime Day, Black Friday and the Christmas season back-to-back, there’s no reason for that trend to slow down.
Consumer behavior and expectations are also changing rapidly, moving the focus to digital shopping and online experiences that offer convenience, ease, and—depending on the product—a digital “personal touch.” Here are three trends that retailers should keep in mind as they lean on digital in the coming months:
#1 Convenience-conscious: lockdown habits leading to a long term shift in consumer behavior
People intend to retain their lockdown habits after the pandemic is over
Half of surveyed Americans in a Kantar study said they would prioritize “increased hygiene, healthier eating, spending time with the family and personal development.” Accordingly, consumers in the UK are spending up to 3,000 times more than they did in 2019 on goods for their homes, like plants, office furniture, and exercise equipment—often, items they would usually buy in-store. Data from McKinsey also reports that consumers intend to continue shopping online instead of in-store. Although this could be a passing trend, the evidence suggests otherwise.
Changes in consumer behavior accelerating move away from retail to e-commerce
People are likely to be more ‘hygienic and convenience-conscious’ even after a vaccine is available, and retailers will have to adapt to these sharp changes in consumer behavior. A WisePlum survey of retail loyalty before and after the pandemic restrictions also found that customers are ‘significantly less loyal to retailers in a time when retailers are themselves struggling to survive.’
You can imagine that this isn’t great news for retailers. The pandemic is pushing consumer behavior to change rapidly, much earlier than most brick and mortar stores expected: according to IBM’s US Retail Index, the move to e-commerce has been accelerated by as much as five years in 2020.
# 2 Curbside pickup: retailers rethink what it means to be available for their customers
Some American retailers found one way in which they could still get customers to come to them. With thousands of stocked stores across the country, Target and Best Buy transformed their physical outlets into ‘mini e-commerce fulfillment centers’ where customers could use curbside pickup to get their orders directly.
Curbside pickup: how it works, why people use it
It’s exactly what it sounds like: you place your order and pay online, then drive to the store and pick it up. If you’re wondering why anyone would do that instead of just having packages delivered to them, the answer is immediacy (which is convenience in a hurry).
Curbside pickup gained momentum in the early months of the pandemic, when Amazon first struggled with demand management: a gap that major retailers were able to fill with the merchandise they already had in stock.
A game-changer for big-box retailers
This has been a game-changer for big-box retailers. Target’s curbside sales were up 700% from last year, and almost half of Best Buy’s online revenue from Q2 was from curbside or in-store pickup. There are obvious perks for retailers: for one, it takes care of the most complicated leg of the journey, delivery. Walmart increased workforce by 14% to handle click and collect orders; Target reports that their curbside order fulfilments are actually 90% cheaper than orders fulfilled from a warehouse. This model can also make room for retailers to reassess their costs, and assign worker responsibilities to deliver service without cutting into their margins.
Consumers to keep using curbside pickup post-pandemic
As the NYT reports, consumers may like curbside pickup because the act of running errands restores a sense of normalcy, which will be difficult to go back to for a long time. Almost 70% of consumers in a recent CommerceHub survey also say they intend to continue using the service post-pandemic, compared with 59% at the beginning of the pandemic.
But as the weather grows colder and lockdowns are reinstated in some areas, consumers become less likely to brave the winter to pick up their boxes a day or two early—leaving big-box retailers scrambling to once again generate revenue and try to stay afloat.
#3 Click and mortar: brands like IKEA, Suitsupply blending physical and digital experiences for retail
Many retail outlets have found themselves in the same position over the last year. Some have closed their doors; others have looked to digital to create experiences that will keep consumers engaged during an uncertain and trying time.
How IKEA is reimagining the digital customer experience with virtual rooms
IKEA, for example, acquired AI and AR start-up Geomagical Labs in April to ‘bring some of that in-store magic to people’s digital experiences’. The technology allows users to scan a room with their smartphones, and renders it into a panoramic 3D picture with all the furniture removed. Users can then create virtual rooms to visualize furniture in their own spaces, recreating the IKEA experience in their homes.
How Suitsupply used co-browsing to create a virtual shopping experience
Men’s fashion brand Suitsupply is also known for personalized customer service; when helping customers, the sales agents play the role of personal shoppers and the in-store experience relies on an authentic human touch. When retail outlets closed in March, Suitsupply’s service agents turned to Surfly’s co-browsing technology to create a virtual shopping experience. They co-browsed with customers through the Suitsupply website, guiding them to the right decisions through voice and video chat.
The immediacy of co-browsing also helped Suitsupply agents to answer questions and find solutions faster, leading to more sales and satisfied customers. Instead of cutting into retail costs, Suitsupply restructured agent roles to continue to service customers with a new technology, but an approach which consumers were already familiar with. And as stores opened again earlier this summer, Suitsupply continued to use co-browsing with in-store pickup to create what is effectively a personalized click-and-collect journey.
Convenience: one singular focus that will keep retail afloat during COVID-19
Consumers are prioritizing their own convenience at the cost of retail loyalty, and the only way to win them back is to predict their needs before they become aware of them. Retailers have their work cut out for them in the race against waning loyalty, competitive service, and an abundance of options.
Even after a vaccine is available, all the signs say that there’s no going back to the way we used to shop. And that’s why brands like Walmart, Ikea, and Suitsupply are pivoting to offer service that center the customer’s convenience.
As a consumer, you would rather not wait to have your packages delivered, so you use curbside pickup. A visit to IKEA is off the table, but you can use VR to see what your new lounge might look like. And although you can’t try on a suit online, you can co-browse through Suitsupply’s offerings with a personal shopper and get advice on what you’re looking for, all from the comfort of your home.
The way forward: redesigning retail with the customer’s new needs in mind
For Walmart and IKEA, it’s relatively simple. Consumers don’t look for super personalized experiences when they’re buying groceries or a new rug.
But for more meaningful purchases and luxury items, there’s still value in the element of human interaction and a bespoke experience—and that means many brands need to redesign their existing experiences for a digital age.
Tools like co-browsing can be used to build personal connections remotely, but it’s also easy to see why retailers are reluctant to take a risk on digital customer experience technologies: it’s uncharted territory at an already precarious time for the industry. But the bigger risk is clinging to old business models and not pivoting quickly enough to meet customers where they are: on their mobile devices and laptops, not in stores.
This is exactly why Suitsupply’s use of Surfly’s co-browsing worked so well for the menswear brand: by centering both customer experience and convenience, and standing out from countless retailers who were not as adept at doing so.
Focusing on the customer’s convenience and digital experience is an impactful way for retail to weather this time and meet an overgrowing demand for digital presence. And with lockdowns in place for the foreseeable future, empty showrooms and outlets will only drive up business costs. Instead of cutting into cost margins, retailers can look at investing in digital customer experience and letting go of real estate expenses as a strategy that will remain viable even after restrictions are over.
At the end of the day, retailers that are staying afloat in these times are choosing to focus on the bigger picture here: the pandemic will end, but the new expectation of outstanding digital experiences will not.
So how are you predicting what your customers will ask for tomorrow?
To learn more about Surfly’s intuitive features and how we can help you serve customers with our powerful co-browsing technology, visit our website or contact us.