Despite Pandemic,
Opportunity in Retail
Remains ‘Exceptional’

Despite Pandemic,
Opportunity in Retail

Remains ‘Exceptional’

December 2020:

Despite Pandemic, Opportunity in Retail Remains ‘Exceptional’

A tectonic shift shook retail in 2020, but what’s in store for 2021?

On a quarterly earnings call in April, Microsoft CEO Satya Nadella said: “We’ve seen two years’ worth of digital transformation in two months.” As we now know, April was just the beginning. McKinsey has called this phenomenon “the quickening,” and claims e-commerce jumped 10 years forward in just 90 days. In fact, according to this analysis, it took a decade (from 2009 to 2019) for e-commerce penetration in the U.S. to jump 11 percentage points, from 5.6% to 16%. But in 2020, it took just one pandemic for e-commerce penetration to jump another 11 percentage points, from 16-27%.

2020 has been the year of many things, and one of those things has been digital transformation—often out of sheer necessity. The shift to digital this year has been thanks in part to consumers’ need to stay home. It has also been a result of businesses’ need to transition their workforce from in-person to remote. In retail, the year has been a mixed bag, depending on how prepared a business was for the tidal wave of change that took place beginning mid-March in the U.S. For online retailers like Amazon, it’s been a wildly successful year. For many smaller retailers, it’s been a fatal one.

Some are calling what happened in retail in 2020 “a tectonic shift” that will usher in a new normal. COVID-19 accelerated trends that were already in the retail pipeline while also creating new trends—some that reek of ruin and others that smell of sweet success. If the COVID impact on retail could be boiled down to one point, however, it’d be forcing tech integration. And while there’s been a lot to complain about in 2020, advancing 10 years in 90 days just isn’t one of them.

Retail Trends to Watch

Rod Sides, U.S. retail and distribution leader at Deloitte, says even before the onset of the pandemic, retailers struggled with stagnating profits due to challenges on multiple fronts, including increasing discrete expenses such as rent and wages, declining foot traffic and overall spend on apparel, heightened competition, and consistently declining earnings. “The impacts of COVID-19 accelerated cost increases and changes in consumer shopping preferences already underway,” Sides says. “Demand shifted dramatically from stores to online sales, compressing profits further.”

Source: Deloitte 2020 Retail Industry Outlook

COVID-19 accelerated trends that were already picking up in retail, like the growth in e-commerce. “We expect to see online sales grow by 25-35% year-over-year during the 2020-2021 holiday season, compared to sales increasing by 14.7% in 2019,” Sides says, referencing data from Deloitte’s Holiday Forecast. “Customers have also been drawn to contactless formats, with demand for curbside pickup more than doubling year-over-year. We expect these trends to continue after COVID-19 and reshape how retailers approach convenience in the future."

Michael Obal, associate professor of marketing, entrepreneurship, and innovation at the University of Massachusetts Lowell, suggests retailers closing their doors is one unfortunate trend that will continue in 2021. “Unfortunately, we are going to see more and more retail closures. That will be the big trend in the next year,” Obal says. “Of course, the stores that survive will be the ones who can operate most of their business online, but that may be tough for mom-and-pop shops.”

But difficult times can bring out the creativity in businesses. “I also think we will start to see a reimagining of physical spaces (e.g., moving more of the retail experience outdoors, retail trucks, etc.), but that may take a few years to truly come to fruition,” Obal adds. “I can imagine a sort of Westernized version of a bazaar becoming more common in the U.S. This exists in some rare instances across the U.S., like Philadelphia’s Italian Market, but I can just imagine more and more cities and towns embracing this retail model.

I can also see more retailers embracing a ‘retail truck’ concept. This would essentially be a food truck but for retail. Again, this exists in some rare instances, but I believe retailers will embrace this model more seriously in the coming years.”

Source: 2020 Deloitte Holiday Retail Survey

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Barbara Stewart, coordinator of retailing and consumer sciences and professor of human development and consumer sciences at the University of Houston College of Technology, says as we head into 2021, three major trends will shape retail: increased online shopping, consumer/retailer emphasis on physical health, and innovation/agility. Stewart points out that a huge number of consumers changed their shopping behaviors in the early stages of the COVID-19 pandemic. “About 40% of consumers over 60 shopped online for the first time,” she says. “While the changes overall were driven by short-term necessity, many consumers, both young and old, found that they liked the convenience and other positive attributes of online shopping and will continue to shop online. While initially, retailers such as those in the general merchandise and grocery categories experienced increases of two to three times in volume, current rates are now less, yet still greatly exceed pre-pandemic levels in most product categories.”

Source: Deloitte 2020 Retail Industry Outlook

The second trend, according to Stewart, is consumer/retailer emphasis on physical health. “COVID-19 brought fear and panic to the retail landscape. The closure of non-essential retail stores to stop the spread of the virus, while mandated for public health, brought intense financial ramifications,” Stewart explains. “At the same time, the focus on health accelerated the development and application of technologies to allow consumers to shop safely. While many innovations were in the development pipeline, the pandemic greatly compressed the application timeline. In part, these technologies include those that facilitate touchless retail, including customer interfaces, virtual testing and try-on of products, payment systems, and hygiene strategies.”

Stewart argues the pandemic has also created positive change and innovation in the space. “Retailers, faced with loss of revenues that might and did cause permanent store closures, and supply chain professionals showed ingenuity and agility in adapting,” she says. “Initially, retail shelves were devoid of certain products, including hygiene items and food staples as a result of consumer panic and distribution challenges. Yet, very quickly, logistics and supply chain innovations provided remedies. Similarly, in-store retailers showed creativity and flexibility in increasing consumer comfort within stores and getting products to them.”


Source: 2020 Deloitte Holiday Retail Survey

Amit Mangwani, director of partner marketing for APJ (Asia Pacific Japan) at Intel, says one trend to watch as consumers start returning to physical stores is the need for more compelling in-store experiences through the use of technology. “While most customers value the feel of holding a product and assessing it before making a purchase, they are getting a similar experience online (and) on mobiles,” Mangwani says. “So, retailers have to keep in mind that when customers walk through their doors, they will have to truly attract and retain attention with unique and compelling experiences. And this is possible with the right use of AR (augmented reality) and VR (virtual reality).”

With AR, retailers can give shoppers the option to digitally try before they buy, get product information without picking up products, and even get directions to navigate a large store. “All of this will not only excite customers but also help move the store to a more contactless experience,” adds Mangwani. “VR can be key in providing shoppers unique experiences like previewing and preordering a product before it reaches the market, a trip to the manufacturing unit where their favorite product is being developed, or even fun and imaginative ways to use a product.”

Retailers are also realizing the importance of meeting their customers where they are. This means leveraging data and technologies like AI (artificial intelligence) and ML (machine learning) to create personalized experiences. It also means proving they are focused on sustainability, because, increasingly, that’s what consumers want.

Personalization and Sustainability

Consumers are overrun with choices when it comes to picking brands. How can retailers cut through the noise and connect meaningfully with customers? Mangwani says brands can accomplish this by leveraging data and harnessing AI and ML to understand their customers’ shopping preferences, behaviors, and patterns.

Source: Retailing Research Council

“According to one study, there is a 110% greater possibility of a customer adding more items to their basket if their shopping experience feels personalized,” Mangwani says. “Retail can capture this opportunity by using AI smartly. For instance, (AI can set them up) to gain new customers, to improve customer retention, to enhance catalogue and inventory management, to simplify shopping, (and) to offer instant support to customers by addressing grievances through chat.”

Markus Stripf, cofounder and CEO of Spoon Guru, a food personalization platform that offers AI-based nutrition and digital health solutions, says of the five big tech trends—AI, robotics, cloud, VR, and the IoT (Internet of Things)—AI is probably the most impactful when it comes to driving personalization and convenience at scale. “AI comes into its own when it comes to making sense of unstructured and highly complicated datasets, but that’s exactly what’s needed to enable true 1:1 personalization,” Stripf says. “It also offers unprecedented levels of accuracy, (because) the models get smarter the more data is being analyzed and processed.”

The need for personalization in retail isn’t new. Ian Fairclough, vice president of EMEA (Europe, the Middle East, and Africa) customer success for MuleSoft, says retailers have long understood that delivering personalized experiences is crucial in building loyalty and setting themselves apart from competitors. “But knowing something isn’t the same as executing it,” Fairclough points out. “And research has shown that only half of consumers feel retailers provide a personalized customer journey.

  • 5 Retail Trends for 2021

    David Marcotte, senior vice president of Kantar Retail, provides lists five key retail trends to watch in 2021:

    1. Automation of sanitation along with transactional documentation of where and when it is occurring.
    2. Continued redefinition of the interior store into “buying zones” with new arrangements of fixtures and engagement to digital merchandising elements. More vertical signage to overcome current “letterbox” view of mask-wearing shoppers.
    3. Continued integration and improvements of communication tools for employees within stores to improve cross-functional work required by omnichannel changes.
    4. Better geofencing of pick-up in-store or curb with curated promotions to entice into the store for a few additional purchases.
    5. Roll-out of in-building 5G and Wi-Fi 6 edge tools to eliminate dependencies of high-speed cables.

But personalization is more important now than ever before. The fallout of COVID-19 and the subsequent impact on high-street footfall and consumer spending power has left an even smaller window for retailers to stand out and bring in loyal customers.”

In the future, experiences will become increasingly personalized as retailers find more effective ways to unlock and harness their data to create a unified view of their customers. For instance, Fairclough says a retailer might be able to detect when a reliable customer is hesitating over a purchase and respond by instantly sharing personalized discounts or information that helps the customer find what he or she needs.

Lindsey Irvine, MuleSoft’s CMO, adds that during periods of crisis and as companies look ahead toward growth, it’s essential to move with speed, precision, and efficiency, and actionable data is how businesses can do that. “2021 will be the year that data separates organizations from their competitors,” she says. “The ability to unlock, analyze, and act on data will become foundational to growth.”

Source: Retailing Research Council

As retailers look to build their pandemic exit strategy and lay a foundation for future growth, they must consider sustainability and invest in a new message to the customer—one that’s not necessarily about products or services. Consumers have shown a renewed concern and interest in sustainability, especially members of Gen Z, in spite of the pandemic. Intel’s Mangwani says brands need to engage customers in meaningful conversations about sustainability and positive global change. More and more, consumers are basing their buying decisions on the sustainability of a product, and by extension, the sustainability efforts of the brand. “Customers are asking for it,” Mangwani says. “And brands are gearing up to provide it.”

Source: 2020 Deloitte Holiday Retail Survey

How? Retailers are pursuing sustainability by opting for energy-efficient infrastructure, selecting planet-friendly packaging options, and developing products that are environmentally friendly, yet effective. They are sharing their efforts to make a difference on social media, and it works, as long as it’s the real deal. “Many brands are realizing that their efforts cannot be gimmicks or steps that they just talk about,” adds Mangwani. “They have to be sustainable in themselves, and these efforts have to be part of the brand’s long-term strategy and essentially create inroads to more such efforts soon.”

Source: 2020 Deloitte Holiday Retail Survey

As Gen Z begins to make up more of the consumer segment, retailers must be prepared; these consumers engage with brands that move them to change the world around them. They feel strongly about issues like climate change and social injustice. “They expect the brands they purchase from to be similarly courageous and conscious,” Mangwani says. “This means that if given a choice between a sustainable brand that is conscious about the products they use to get their products on the shelves and another brand that focuses on mass production without concern about factors like their carbon footprint, it is highly likely that these young shoppers will opt for the former.”

Sustainability was trending pre-COVID, but as with many other trends in the space, the pandemic accelerated the pace of change and innovation. COVID-19 has certainly highlighted the importance of technology integration in retail, and the University of Houston’s Stewart says some good things will come from this trying time. “While some of the innovations now emerging were in the pipeline prior to the pandemic, the timeline for both execution and consumer acceptance has moved forward more rapidly,” she says. “Some say that timeframe is sped by four years, others by as much as 10 years. Change in retail is typically evolutionary. We are now experiencing revolutionary changes.”

Stewart says despite the hardships, it’s actually a wonderful time for technology-based retail. “Innovations fueled and executed by technologies will create new retail formats and enhance existing channels,” she says. “The opportunities to be involved in the co-creation of that future by technology and retail professionals is exhilarating. Online retail is exploding. Encompassing both online and in-store formats, retail is huge and opportunities exceptional. Retail is thriving and growing and is predicated on the application of diverse technologies.”


Peggy and Neal Meldrum, global business strategy manager in the manufacturing and resources group, Microsoft, talk about the need for a strong supply chain in manufacturing. They discuss how manufacturers have made investments in a digital strategy and have seen success.

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