DIpil Das
Deborah Weinswig, Founder and CEO of Coresight Research, presented at the Dallas-Fort Worth Retailers Association September Meeting on September 17, 2020. We present key insights from the event in this report, including the rebound of US and China retail following Covid-19, how the crisis has impacted the retail experience in the long run and the actions that retailers can take to leverage new trends. Weinswig also outlined expectations for this holiday season.
Rebound for Retail in US and China
In the US, retailers have seen glimmers of hope for the end of the coronavirus crisis. According to Coresight Research proprietary surveys, consumers are becoming increasingly willing to spend on discretionary products. In the apparel sector, we have found that the proportion of consumers purchasing goods in-store has increased by 32% (a percentage on a percentage) since mid-June. This large increase reflects customers’ growing comfort with visiting brick-and-mortar locations. In fact, many retailers, in fear of a demand shock, canceled orders at the beginning of the pandemic. Now, as the retail industry undergoes a rebound, they are finding themselves with a lack of inventory.
In China, August marked a major milestone for retail recovery, being the first month of positive year-over-year growth (+0.5%) in total retail sales since the beginning of the outbreak. During the worst of the pandemic, retail spending shrank by 20%.
Five Post-Crisis Trends
Weinswig outlined five trends that Coresight Research believes will reshape the retail industry as we move forward beyond the Covid-19 crisis.
1. Retailers will implement contact-light retail.
Contact-light retail, initially implemented on a wide scale during the pandemic to assuage consumers’ fears of contracting the virus, is here to stay. This includes in-store apps, from which customers can make purchases, and the use of self-checkout, curbside pickup and contactless payments—such as tap-to-pay and smartphone wallets.
2. Brick-and-mortar retail will shift back to product, rather than experiences.
Retailers will aim to use their brick-and-mortar stores to complete the omnichannel experience, investing in convenience and customer service to streamline the in-store experience. Furthrmore, retailers may actively explore re-purposing underutilized space to support e-commerce fulfillment, offering services such as BOPIS (buy online, pick up in store) and curbside pickup.
3. Experiential e-commerce will emerge as a key selling tool.
With the shift to online shopping and expansion of contact-light retail, retailers can better engage shoppers and drive sales by offering more experiences, services and interactions as part of their e-commerce properties, in addition to typical, functional shopping. Retailers can look to leverage augmented and virtual reality technologies on their platforms to offer an immersive shopping experience. We also expect livestreaming commerce, which is well-established in China, to take off in the US.
4. Retailers will turn to demand forecasting powered by machine learning.
Retailers will need to have faster, more accurate, automated updates with the ability to analyze greater amounts of data in order to optimize inventory efficiency and make dynamic forecasts.
5. Retailers will shake up sourcing.
Apparel companies will look for new sourcing destinations to achieve greater cost control and efficiency. This can include micro-fulfillment, in order to reduce the shipping burden of large-scale warehouses. Furthermore, the pandemic has made many consumers reassess what is most important to them, leading to a renewed focus on sustainability in retail. Weinswig believes that sustainable retail strategies will become the new norm, with retailers relying on circular models and optimizing all aspects of their operations.
Five Ways To Drive Share
In addition to the above trends, we have identified five actions that retailers can take to drive market share in the post-crisis world:
1. Spearhead new shopping festivals.
Building on Amazon’s Prime Day, shopping festivals will become a significant driver of sales in the US. Festivals appeal to consumers by integrating a gamified shopping experience with great deals and engaging livestreaming content. Coresight Research has partnered with Shopkick and Fashwire to introduce the 10.10 Shopping Festival this year, which will enable retailers to pull holiday shopping forward and drive traffic online and in-store (which we discuss in the next section).
2. Leverage new categories and on-ramps to work with different designers and brands.
Brand collaborations help to generate demand across a wider customer demographic. For example, Starbucks teamed up with streetwear brand Undefeated to create a new line of Starbucks merchandise.
3. Take the lead with inclusivity in clothing, footwear and accessories.
Adapative clothing is an underserved community. With one in seven Americans identifying with some disability, there is huge market potential. More mass-market brands and retailers are therefore seeing inclusion as an essential factor shaping their product offering, rather than as a desirable marketing add-on. Footwear retailer Zappos now allows customers to order a pair of shoes made up of two different sizes. In apparel, we are seeing increased offerings in the plus-size market, and gender-fluid clothing is also on the rise, with the market growing by 300% in 2020 and expected to continue expanding.
4. Partner with select retail tech startups to accelerate innovation.
Retailers and brands should recognize the enormous potential offered by highly specialized startups. For example, technology solutions can provide real-time insights into shopping patterns to help retailers optimize the location and stocking of inventory, or provide insights into consumer activities, whereabouts and contexts through smarphone data.
5. Increase omnichannel personalization and loyalty.
People respond positively to loyalty programs, particularly around the holidays. Customers are more likely to spend more this coming holiday season due to decreased big-ticket expenses and the average consumer having more money in their pockets.
Looking Ahead to Holiday 2020
This holiday season, we expect radically different consumer behavior in light of the coronavirus pandemic. Major upcoming shopping festivals will therefore be essential to driving demand—namely, Alibaba’s Singles’ Day, Amazon’s Prime Day and the new 10.10 Shopping Festival. These events present huge opportunity for brands and revenues to generate sales following lost revenues during coronavirus-led lockdowns. For example, Alibaba’s 2019 Singles’ Day event generated about $38 billion in a 24-hour period.
In addition, these holidays will likely pull forward holiday shopping, from the typical Thanksgiving and Black Friday start we have seen in prior years. As consumers remain cautious in the wake of the crisis, they are more likely to do their in-store holiday shopping earlier, to avoid large crowds. They may also look to take advantage of earlier deals online to reduce the need to visit stores in the peak holiday rush in December.
Key Insights
- The retail industry is China is on the up, with August marking the first month of positive year-over-year growth in total retail sales.
- The US retail industry is expected to see demand surge as we enter the holiday season—which is set to begin early this year through shopping festivals such as Amazon’s Prime Day and 10.10.
- New trends such as contact-light shopping and experiential e-commerce are expected to continue their momentum in a post-crisis world.