The Brands and Media Defining the Next Era of Retail
We all know how much the effects of the COVID-19 pandemic have altered consumers’ buying and shopping habits. As a result, brands have spent the past 16 months changing their business approaches, operations and delivery models to meet constantly shifting expectations.
Retailers have had to first abandon and then reinvent their brick-and-mortar stores. Consumer goods brands have had to find ways to meet consumers directly when unable to rely solely on retail partners. And products that were predominantly purchased in physical stores are now being bought online in droves.
As we move forward into retail’s next era, here are some of the brands and industry sectors that are poised to skyrocket, as well as several media that will be more prominent in everyday life.
Food, Fitness, and Everything Direct
It doesn’t feel right to use the term “winner” in reference to the pandemic, but if there was a sector that benefited the most from the shift to e-commerce in 2020, it was the grocery industry. Millions of people who had never ordered groceries online did so last year, and it’s safe to say they loved it.
And while some customers will return to their pre-pandemic purchase behaviors or buy online occasionally, many who developed a regular habit of buying groceries online will carry this behavior forward.
Another sector that saw profound trends sprouting from the pandemic was digital fitness. With gyms closed or at limited capacity, many consumers enhanced their home gyms, thanks to brands like Nike, lululemon, Peloton, and Apple. All four are aspirational brands with devoted followings; they produce top-quality, high-margin products; they have sophisticated media capabilities; and they provide community-oriented retail experiences.
Finally, direct-to-consumer (D-to-C) brands have been the darlings of e-commerce over the past couple of years. Now, long-established brands are creating their own D-to-C channels in order to own a direct relationship with their customers at every step of the purchase journey.
With rewards pushing established brands to advance their D-to-C strategies, next year's landscape will be more competitive, which could lead to a rise in pay-per-click rates. The disruptor brands that utilize this time to get into fighting shape will be the ones that advance.
Media and Marketplaces
On the media side of the retail revolution, Google and Facebook have long been the dominant duopoly. However, much like the D-to-C space, competition is rising. Amazon.com has been the clear No. 3 player for a while now, but the giant is not alone. The two big up-and-coming retail media platforms are Walmart and Instacart, while the next tier includes large digital marketplaces such as eBay and Etsy, and multichannel retailers Kroger and Target.
Retail media has a key advantage over Facebook and Google. Retailers’ platforms are powered by a combination of high-intent keyword searches and first-party shopper data, giving them an even better ability to target the right consumers with ads.
Meanwhile, online marketplaces have proven to be among the most profitable retail business models. Amazon and eBay were the primary players in e-commerce for a long time, but the next crop of marketplaces are now carving out their segments of the market.
With stiff competition from Amazon, the only possibility for scaling a next-generation retail marketplace is through differentiation regarding the products being offered and the experiences created. For example, Etsy found a niche with specialty homemade gifts that tapped into a previously disaggregated supply side of amateur craftspeople.
So much is still unknown about what the next few months and years will bring, but some signs are becoming clearer. There will still be a place for brick-and-mortar stores, but e-commerce will remain a dominant force for retail amidst a digital transformation that's being led by the Apple, Amazon, Walmart, and Starbucks of the world. Where retail goes in the next three years to five years will be determined by the types of experiences these industry leaders are able to create.
Jon Reily is senior vice president of global experience and commerce at Merkle, a data-driven customer experience company.
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Jon Reily is senior vice president, Commerce Center of Excellence at Bounteous, the digital innovation partner of the world's most ambitious brands.