How Retailers Can Win Big by Embracing the Digital Consumer

Was it just a year ago that all the buzz in retail was around “experiential retailing”? When Canada Goose, the clothing company, was creating arctic zones in its stores so customers could feel just how warm a CG parka would keep them? One exceptionally long year and one global pandemic later, the retail landscape has changed vastly, and experiential retail is all but dead. At least for now. Because with no people to experience it, well, it just doesn’t matter.

What does matter to consumers in 2021 is financial security, health, safety, and — especially as working from home becomes the norm — comfort. Consumers are also more concerned, and demonstrating with their wallets, the importance of social responsibility and sustainability. Retailers that embrace these consumer trends will be the big winners in 2021.

2020 Was the Year of the Digital Consumer

With discretionary spending on the decline, some consumers are sticking with trusted brands. Others however, driven by thrift, will switch to store brands from stores they trust. McKinsey research shows that 20 percent of people have switched to store brands, and 50 percent of them plan to stick with them. Retailers with strong private label brands may benefit by extending their own brand into new categories.

The pandemic lockdown did for e-commerce what global warming did for hybrid and electric vehicles. While digital commerce was already on the rise, it caught fire in 2020. JP Morgan states that U.S. consumers spent $211.5 billion during the second quarter of 2020, up 31 percent over 2019. NPD discovered that consumers planned to do 48 percent of their holiday shopping online, up from 41 percent in 2019. Companies that weren't prepared with a shipping partner lost out. In fact, UPS placed limits on large companies such as Nike and Gap to manage the anticipated e-commerce holiday surge.

Technology Enables Safe Commerce

As touching became taboo, consumers looked for touch-free ways of shopping. A study by Accenture shows that 54 percent of consumers had used contactless payments prior to the pandemic, and 87 percent since. In-app ordering increased from 54 percent to 84 percent. Home delivery rose from 47 percent to 82 percent. Many of these consumers don’t plan to go back to their old ways of shopping. And it’s not just millennials. According to the National Retail Foundation, among baby boomers, 58 percent have bought online and picked up in-store, and 30 percent have used curbside pickup. More boomers are also using delivery services. The digital-forward consumer is here to stay.

Companies Leveraging Digital Are Winning With Consumers

As the home has become the center for play, work and socializing, some categories that have grown should come as no surprise. A September JP Morgan study states that sales of hair color in the second quarter were up 30 percent. Technologies that support school and work from home such as high-speed internet, Zoom, and Halo lights have also witnessed explosive growth.

Grocery delivery, which experienced stops and starts for years, finally went mainstream. In fact, 80 percent of consumers surveyed by Supermarket News have bought groceries online since the pandemic began. And finally, with consumers spending a lot more time at home needing to adapt their residences for school and work, it’s been a momentous year for home improvement and home decor retailers.

Digital Content Companies Replace Venues

With the home being the center of everyone’s universe, digitally delivered content became the No. 1 way to get information and be entertained. Online education, from home, is growing rapidly. YouGov states that 35 percent of Netflix subscribers use it for educational content. One of the biggest winners has been digital entertainment, where growth has been phenomenal. According to Phone Arena, Disney Plus achieved in five months what took Netflix seven years. Physical-based entertainment venues such as AMC and Regal are trying to hang on by offering at-home streaming, but the digitally native services are just far nimbler and already possess huge customer bases. Finally, with lots of time at home, people are playing more video games than ever. WePC estimated the gaming market at $159.3 billion in 2020, which is an increase of 9.3 percent from 2019. Content companies must optimize for digital delivery or risk going the way of Blockbuster, which failed to acknowledge and respond to digital.

House Calls and Home Gyms Abound

Telemedicine grew tenfold in just 15 days during the early pandemic. Online fitness has exploded despite companies like Peloton being unable to keep up with demand. At-home fitness newcomer Mirror is expected to do over $100 million in 2020. Consumers are enjoying the convenience of working out at home, where they can exercise when they want and select the specific fitness regimen they want. After investing in high-end equipment, many likely won't go back to paying gym memberships. Fitness experts, yoga studies, personal trainers and others who previously worked with clients face-to-face must transition to digital.

What Retailers Must Do to Win Digitally in 2021

To say that retailers should focus on digital would be to state the obvious; it goes deeper than that. For short- and long-term success, retailers should:

• Offer incentives for first-time shoppers.
• Digitally enable every step of the buyer’s journey and post-sale relationship.
• Devise tools that provide an in-store like experience such as MAC Cosmetics' lipstick color app.
• Where appropriate, utilize chat, SMS and video chat platforms.
• Respond quickly to customer issues and enable customer service across channels.
• Rethink media mix to include virtual reality, video games and over-the-top TV, and shift away from out-of-home and print.
• Facilitate curbside pickup and contactless delivery.
• Offer free shipping and easy returns, if financially viable.
• Leverage digital tools in-store such as contactless payment, QR codes for product information, and augmented reality.

Bottom Line

The COVID-19 pandemic accelerated consumer adoption of digital retail by years, not months. Companies that were already digitally enabled were able to quickly serve consumers. Some experienced unexpected and explosively high growth. To win in 2021, retailers who haven't yet digitally enabled the entire customer journey must do so. From marketing to merchandising to delivery and customer service, retailers must meet customers on their terms or risk being the next victim of the retail apocalypse.

Beth VanStory is a partner and chief marketing officer with Chief Outsiders, the nation’s leading fractional CMO firm focused on midsize company growth.