December 9, 2020 5 min read
Opinions expressed by Entrepreneur contributors are their own.
The current global health crisis has fundamentally changed the retail world. Businesses of all sizes are struggling to keep up with dramatic changes in day-to-day operations and to anticipate what is next. Consumer spending has rebounded to more than 90% of pre-pandemic levels in the US, according to Opportunity Insights, but it is being directed to different areas. Outlays for restaurants, hotels and transportation are way down, while grocery and home entertainment are up. Total retail spending for the week ending November 1 was about 8% higher than in January.
In this disruption, opportunities exist for entrepreneurs. Consumers are behaving differently and retailers are racing to adapt through digital transformation and by diversifying their partners in order to satisfy new consumer demands. Four trends have emerged that are important for businesses who want to succeed in retail now and beyond Covid-19’s driving influence.
1. Decreasing physical space, increasing product assortment
Over the past year, retail’s physical presence has morphed into new shapes, sizes and experiences. More stores have become fulfillment centers, investments in large physical formats have decreased, and retailers have become more focused on niche products and local suppliers that shorten their supply chains. Many retailers are looking for new partners to increase product assortment or fill a demand exposed by the pandemic, such as masks, partitions and other items that consumers now can’t live without.
Manufacturers and suppliers who want to partner successfully with retailers should be aware of retailer requirements for detailed and accurate product information. This data plays a key role in ensuring the right product is available at precisely the time the consumer needs it. Nearly 70% of consumers said a lack of product information is the top reason they’ve abandoned a product page, according to research from Salsify.
2. More urgency for consumer insights
The current state of flux in retail is also an opportunity for technology startups that support access to shopper insights and analytics. There is a greater sense of urgency to understand and anticipate consumer interactions with products. Every in-person interaction, because there may be fewer of them, needs to count and serve the purpose of engaging the consumer long term.
Startups like Adrich, which provides real-time product use analytics, are helping retailers and brands strengthen relationships with consumers. It developed a thin, flexible sensor that is attached behind a product’s regular label, creating a feedback loop for brands and retailers to track consumer interactions with the product via the cloud and Bluetooth. Retailers will know when and how consumers use various products, which can help with inventory planning, merchandising and localized promotions.
3. New ways to try products
Augmented reality (AR) technology can support “try-before-you-buy” experiences, which will become more commonplace. Right now, consumers prefer less contact with people, and products that others may have touched. While there is no doubt more consumers will return to stores as health protocols relax, there will also be a lasting increase in online shopping. A Salesforce survey in May found that a majority of people across income brackets expect to do more online shopping in the future, including 71% of high-income earners.
AR was already showing signs of growth prior to the pandemic, and it offers solutions to today’s retail challenges. According to a 2019 Nielsen survey, about half of consumers are willing to use AR to assess products. As a result of the pandemic, brands in jewelry, designer fashion and footwear are offering new virtual try-ons or seeing growth in existing apps that help customers shop from home or more safely in store. Ulta’s GLAMlab launched in 2016, but usage quadrupled in recent months as the virtual try-on app became an important part of re-opening stores, where customers could no longer test makeup before purchase.
What could make or break the maturation of AR is the still-rampant occurrence of incomplete and inaccurate data that filters through retailer systems. For a virtual product experience to yield successful results for retailers, product information must be standardized to ensure it smoothly flows between physical to digital worlds. Not only will retailers lose time and resources trying to track down the information during the setup phase, consumer trust will break down if key product attributes are missing or unavailable when they test out new technology offerings. Entrepreneurs can expect continued demand for solutions that address these data challenges and help retailers create digital product experiences for customers who cannot sample physical products.
4. Growth in sustainability and transparency
Shoppers around the world feel more connected to one another as a result of the pandemic’s shared experience, and there has been a rise in conscious consumption and a desire to buy more locally, according to Accenture. Many retailers are launching sustainability initiatives and taking another look at the environmental impact of their supply chains. In May, Walmart announced a partnership with clothing re-seller ThredUP, which combines Walmart’s interest in sustainability with the need to address tightening budgets among consumers hit hard by the pandemic recession.
Along with the increased interest in reuse, more consumers want to understand the origins of products and how they were made. This kind of transparency requires brands, retailers and online marketplaces to align their requirements for unique product identification. For example, obtaining authentic barcodes and identification numbers should be considered an essential part of the product launch for small brands that have a viable chance to reach a wider audience.
COVID-19 has created an inflection point in consumer behavior. Despite the difficulties they face today, small brands and entrepreneurs can view this as an opportunity. Their courage in navigating uncharted territory is more vital than ever for the retail sector. Successful collaborations will need to innovate at speed while keeping in mind the immovable rules of engagement for retail around data standardization, completeness and accuracy.