10 years of technology rolled into one: what will retail look like in 2021?

By Tim Carter, director of operations at smp. 

Boxing Day footfall fell by 57% in 2020. The footage of overnight queues that are normally a staple of end-of-year news reports were gone, replaced by shots of deserted high streets and sombre warnings of imminent lockdown. While it’s a bleak picture, it doesn’t necessarily paint a thousand words.

E-commerce isn’t perhaps so B-roll friendly, but online sales are in some cases making up for the shortfall in physical retail. This is true both for traditional retailers shifting their focus to online and for brands choosing to go direct to consumers, for example L’Oreal’s e-commerce sales soared by 53% after it upscaled its digital offering as COVID-19 laid waste to the make-up counter.  

There’s no doubt digital retail came of age last year, but does that mean e-commerce will become the norm whether or not shops remain closed for equal swathes of 2021? 

Shoppers might return to their favourite stores, but habits have changed forever

The first day of trading after China came out of lockdown in April saw the luxury brand Hermes rake in $2.7 million at its flagship store in Guangzhou, its highest daily total ever. This phenomenon has been called ‘revenge spending’, but on paper it looks like hysteria.   

While the picture in the UK may be somewhat different, we saw this type of behaviour even during the height of the pandemic. At the start of the first lockdown panic buying left supermarket shelves bare and, later in the year, people flocked to IKEA – many still queueing at 10pm – to make last minute purchases before it pulled its shutters for tier 4 restrictions. 

We can expect an initial surge on the high street. Shoppers will want to get out again as soon as possible just because they can. This ties into the psychology of wanting what you can’t (or haven’t been able to) have. The bigger question is whether we’ll stick to the new habits formed during lockdown once we’ve got over the novelty of being allowed back into non-essential stores?

The collapse of so many familiar high street brands will only hasten the shift to a digital-first market and cold, hard data implies shopping habits are changing for good. We completed a series of tracker studies between April and September last year to gauge how UK shoppers’ habits were evolving over the course of the pandemic. The number of Brits that suggested the way they shop would change permanently went up from 60% during the April lockdown to 81% in September. With a further lockdown now underway, we would arguably expect this figure to edge higher.

This sentiment was echoed across demographics. Notably, when asked if people would continue to buy things online that they had previously bought on the high street, over a quarter (28%) of over-55s agreed.

How omnichannel platforms can revive physical footprints

Retail is undoubtedly on a digital-first trajectory but e-commerce doesn’t necessarily have to compete with or entirely replace traditional bricks-and-mortar. The next logical step for the big players will be to make the most of omnichannel strategies as a differentiator. 

We can expect to see household name brands reducing their presence on the high street to focus on flagship stores in urban centres. They’ll become experiential hubs capitalising on tech-led shopping experiences designed to make shopping seamless across all channels. In practice, we’ll see online convenience move offline through initiatives like Amazon’s cashless stores and offline interactivity move online, provisioned through tech such as AR and XR.

As such, these stores will be repositioned as brand showrooms for consumers to interact with physical goods, but they won’t hold stock on the premises. Rather we will see these reimagined shopping experiences blend the best of both worlds: we’ll be able to make real-world choices and see the product(s) delivered to our homes on the same day or overnight.   

Kings of convenience

The established retail brands won’t have it all their own way though. There will be greater choice for consumers as emerging brands use social platforms with a low cost-of-entry to find and develop audiences quickly. The benefit of social commerce for brands and customers alike is the shortened – often one-click – purchase journey. 

Moreover, we’re moving into a shopping landscape in which every moment is shoppable through multiple digital touchpoints, whether that’s ordering through a smart speaker from your sofa, or making a snap buy on the commute through Instagram Shopping on a smartphone. TikTok and Walmart even trialled a shoppable livestream: viewers could make in-app, hassle-free transactions of items showcased by influencers. Engaging content is fast becoming the pulse of the purchase funnel.

New and challenger brands, particularly those who’ve never had to rely on physical footprints, will also be able to seize online marketplace opportunities using the likes of Amazon and eBay as platforms to scale their online presence. 

2020 was Darwinian in many ways, while we lost a great many legacy brands this doesn’t mean the retail landscape has contracted. As e-commerce becomes the primary channel, it opens up new opportunities for those established retailers that rose to the challenge to reinvent themselves for the digital age. 

The incumbents will need to build on swiftly learned lessons around agility and data optimisation to retain their privileged positions though. A new generation of digital native retail brands is already emerging, poised to take advantage of this new landscape.

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