How to conquer the challenging retail landscape in 2021
Adapt to the new climate through enriching the digital experience, promoting financial wellness and rethinking the store of the future.
What’s waiting for retailers on the other side of the most chaotic year in recent history? Based on overarching themes that have emerged, we compiled five major areas to watch for in 2021. From social commerce to the future of the digital and physical landscape, read on to prepare for this brave new world.
As always, our product specialists are on hand to show how to use EDITED’s Market Intelligence Platform to inform your strategies for 2021. Get in touch to see how it’s done.
Enrich the digital experience
Why take note
The future of retail will remain anchored by a digital-first approach. Following the boom aided by the pandemic, e-commerce is showing no signs of slowing down with 70% of executives projecting more than 20% growth across their channels, according to BoF and McKinsey & Co. The challenge for brands moving forward is to offer a seamless digital experience and cut through the noise in this crowded space through experimentation. Whether consumers are in lockdown or not, they will be spending more time on their screens as social commerce evolves. This year, Instagram added the ability to shop via Reels and WhatsApp through Carts, enabling users to make an order via the apps.
How to act
Fashion should learn from its slow adoption of TikTok that developing a presence across burgeoning social channels is a priority. Retailers need to establish their engagement strategies across major platforms while keeping their eyes out for the next big thing with Gen-Z’s tick of approval. Following the success of short-form videos, platforms offering longer content is shaping up to be a space to watch – recently e.l.f. cosmetics became the first beauty brand on Triller.
Another area of note, live stream shopping is expected to surge outside of China with US revenues predicted to hit $25 billion by 2023. Walmart recently partnered with TikTok on a live stream event to reach new potential customers.
With uncertainty clouding future access to physical stores, retailers have the opportunity to introduce theatre into their e-comm channels to encourage online engagement. Serving as a form of escapism, gaming has surged throughout lockdown, leading brands to experiment with fusing this concept with commerce to create immersive experiences.
The viral success of Animal Crossing led to Marc Jacobs, Sandy Liu and Net-a-Porter testing pop-ups and collaborations in lieu of temporary physical spaces, which were popular pre-pandemic. Gaming as a selling tool is expected to magnify in 2021 following its use as a popular format for designers to showcase digital runway collections adopted by Balenciaga, Burberry and Collina Strada. No matter how high tech the future becomes, prioritizing customer service and experience will remain crucial to survival now and post-pandemic.
Rethink the store of the future
Why take note
On the eve of 2020, pop-up models and personalization were accessible strategies to reignite interest in physical retail. Advanced tech was slated to play a crucial role in the store of the future, yet full integration was still a ways off. Then the pandemic hit and supercharged the need for AR applications to allow consumers to test products online before purchasing – something the beauty industry was already equipped for with Sephora and MAC Cosmetics offering such services. While AR will still be relevant for bricks-and-mortar, retailers first need to reassess physical store strategies as their traditional and future models simply weren’t built to operate during and post a global pandemic. According to Bain & Co., most stores worldwide are no longer the right size, shape or scope for the times we live in now and require a total redesign.
How to act
Retailers need to rethink the purpose of their physical outlets and rapidly action change. Slow-performing sites can evolve into distribution centers and cater to the ever-growing online demand. Look to experiment with QR codes and AR to transform stagnant store windows into selling tools and introduce the element of fun to connect with a broader audience. Those that continue to trade in the New Year need to factor in automation and safety. One-way traffic and social distancing measures will become ingrained in the new normal, while the contactless and drive-up collection services implemented peak-pandemic will stay relevant out of convenience. Hygiene technology such as Saks’ ultraviolet lighting to sterilize handrails on escalators will also bode well. Location for physical stores are crucial moving forward. With footfall in malls waning, retailers may want to scale back their presence in traditional high-traffic areas and concentrate on serving smaller communities as consumers opt to remain within neighborhood bubbles.
Look to the east
Why take note
Despite being the first region affected by COVID-19, China remains a retail hotspot. With tourism on hold, Western brands can’t rely on the Chinese consumer to boost sales in their local market, making it a region safer than most from store closures as retailers continue to court this buyer. China remains resilient in the luxury market where it’s the only region to experience a growth in sales for 2020.
How to act
Look to this region for lessons learned behind post-pandemic economic recovery.A market already spearheading social shopping, China is the region to look to for best practices in enriching the digital experience and building the store of the future. Live streaming in Shanghai Fashion Week set a precedent for the digital runways that followed, paving the way for see-now, buy-now collections. Brands are selecting this region as an incubator for concept stores. This year, Burberry debuted a social retail experience in Shenzhen – a first of its kind concept in partnership with WeChat, integrating social media and gaming into immersive physical retail. Nike Rise also launched this year in Guangzhou, offering touchless services in store connecting online-to-offline-shopping.
Don’t sleep on rental & resale
Why take note
With events on hold and consumers’ new stripped-back lifestyles, it dealt a blow to the promising rental market, which led to major player Rent the Runway permanently shuttering all stores. Despite this setback, circularity and closing the loop remains a key deliverable within sustainable fashion, poising the rental market for a comeback when events resume. The resale market continues to go from strength-to-strength, slated to reach $64bil in the next five years. H&M recently soft-launched Singular Society, a members-only brand, expanding on subscription-based concepts as an area to note. Those with access can shop timeless, responsibly-made lifestyle products at cost prices.
How to act
Fashion’s ongoing struggle with sustainability combined with growing demand in the second-hand market powered by the likes of Depop and StockX reaffirms these sectors for 2021. Retailers such as Selfridges and Ganni have continued to fine-tune rental programs; however, those struggling can reposition stock for resale, which continues to boom and is seeing a greater uptake in the mass market following platform launches from COS and Zalando. With these initiatives becoming more mainstream within the retail landscape, they will need to adhere to the new normal. Ensure you’re communicating cleaning procedures when reselling or renting garments, as quarantining returned goods remains a common practice.
Promote financial wellness
Why take note
The wellness movement will evolve into mindfulness around money as society recovers from this year’s economic fallout. As individual’s finances come into focus and under care, the rapid and repercussion-free rise of buy now, pay later (BNPL) services will be in the spotlight. While the idea of BNPL is not new, the focus on the fashionably wrapped companies that offer it is. Under a millennial pink or soft mint veneer, Klarna and ClearPay, respectively, these services are largely aimed at younger people, who are those that are likely to have been hit the hardest through Coronavirus. The EDITED Visual Merchandising tool tracked a 54% increase in retailers mentioning Klarna in the UK through 2020 and an even more significant increase in the US – in 2019, just 14 retailers mentioned the service vs. 48 so far this year.
Several retailers have offered additional discounts or bundle deals if products were purchased in conjunction with a BNPL service, with mentions spiked in line with Black Friday hype. BNPL has been firmly in the eye-line of the shopper. Through a year with high employment struggles, major banks saw reasons for concern as many people easily fell into debt and thus began blocking payments to such services. A move that Klarna is aiming to get around by launching current accounts for users in Germany soon. Come 2021 brands need to be considerate, particularly when targeting younger age groups and those in financially vulnerable groups.
How to act
Don’t wait until formal regulation to act as a responsible retailer. ASOS is the first major name to pledge to #regulateBuyNowPayLater, which calls for responsible promotion of these services.
Awareness and conversation around confronting tricky financial positions are mainstream. ITV (UK) had Money Saving Expert, Martin Lewis, in a prime time slot through the early months of the pandemic, while elsewhere Refinery29’s money diaries format was mimicked by other publications. In the same vein, using social media as a way to share information and education was a trend identified in a top Instagram trend of 2020, where a new type of Instagram personality has emerged amongst the financial community. Clare Seal rose to IG fame as @myfrugalyear, documenting her mounting debts, where she has gone on to release books and started The Financial Wellbeing Forum. Look to personalities online who embody empowering movements like this, particularly around dates that emphasize the importance. The idea of financial wellness is part of the bigger tapestry of equality, including social and economic groups. Although Equal Pay Day differs regionally, it is a date to consider responsible promotion and conversation around, particularly those brands that take pride in being progressive.
Contributions by Kayla Marci and Rebecca Milne.
Want more 2021 vision? Stay tuned for our upcoming article covering next year’s defining trends across womenswear, menswear, kidswear and beauty by signing up to our weekly Insider Briefing.