8 pandemic-accelerated trends shaping the future of retail and e-commerce
Holiday season shopping certainly looks a lot different in 2020 than it has in previous years. With many shoppers limiting in-store visits due to COVID-driven concerns and restrictions, e-commerce sales are expected to increase growth this year to a record $221 billion—nearly a third of all seasonal spending for the year. Omnichannel retailers offering in-store or curbside pickup are expected to grow online holiday sales by 90% this season.
Although the pandemic has accelerated this dramatic shift, the trends driving this transformation have been growing for years. This year, however, may have been the tipping point, one where old retail models (such as the shopping mall) move toward extinction and new trends in e-commerce and omnichannel retail become widespread. In particular, these are the key trends that will define the start of a new era in retail and e-commerce in the years to come:
The democratization of retail enters a new era of brand building
Driven largely by advances in technology and new platforms, sellers can now more easily reach buyers in more geographies and across more channels than ever before. Trends are no longer dictated by a small number of gatekeepers that decide who and what gets shelf space. Rather, they are more consumer-driven than ever—the real-time feedback loop caused by social media means that sellers can anticipate and create items that consumers are already looking for.
This has fueled the rise of direct-to-consumer (D2C) brands over the last decade, as companies like Warby Parker, Dollar Shave Club, and Casper have catapulted into leading brands within their categories. Starting a new D2C business has never been easier or less expensive, but as more and more D2C brands have proliferated into the mainstream, the increased competition has made it much more difficult for brands to grow and scale.
To stand out in this space in 2020 and beyond, companies will need to consider and adapt new approaches to brand building that strengthen their customer interactions and build long-term loyalty. Specifically, these principles include:
Livestream shopping. The modern update to the QVC broadcasts of yesteryear, livestreaming allows brands and influencers to make entertaining pitches directly to consumers and drive immediate online purchases. It’s already a $63 million business in China, and the pandemic lockdowns have helped to boost its popularity in the U.S.
Omnichannel CX. The forward-thinking brands today are reimagining the customer experience both online and offline. Omnichannel retailing in the future will not just about being able to buy online and pick it up in-store, it will be about how a brand interacts with its customers across both online and physical touchpoints, from livestream consultations and augmented reality catalogs to pop-up shops and private sales events—and tying that all together in real time.
Building community. Brands are finding creative ways to create communities with their customers, something that former branding agency Gin Lane (now Pattern) dubs “direct with consumer,” a model designed to “build intimacy at scale” through deeper consumer relationships. One example of this is activewear brand Bandier’s lineup of live daily workouts on Instagram. The classes are free, but feature popular instructors and trainers that have huge fan bases on their own.
Brand activism. Companies have long supported charitable organizations through cause marketing, but usually shied away from supporting overtly political causes. But in today’s world, it can be even more damaging not to speak out. Today’s consumers expect brands not only to speak up for social issues, but also to take action in a meaningful way. It’s much more than PR stunts; it’s about living your values. And no performative activism either—your company should stand for something before taking a stand.
Revenue models for a more sustainable, circular economy
Both producers and consumers alike have become much more cognizant in recent years of the environmental and social damage that unchecked consumerism and over-consumption has brought upon this world. And with 2020’s pandemic and surge in social unrest, interest in social impact is at an all-time high, with consumers reporting that they are more willing than ever to pay premium prices for socially conscious or environmentally friendly brands.
Just as direct-to-consumer models democratized and revolutionized the retail industry 10 years ago, the future will be dominated by newer models that aim to reduce waste, improve social and environmental impact, and create a more sustainable and circular economy. Some of these new models include:
Upcycling and reuse. Partly driven by some supply chain issues during the pandemic, some of the world's biggest luxury brands have begun to embrace upcycling, transforming “deadstock” into exclusive, limited-series pieces. Other programs like Patagonia’s Worn Wear and The North Face Renewed are buying used, slightly worn clothing from customers and refurbishing them for resale.
Recommerce. New online marketplaces like ThredUp, Poshmark and Depop are revolutionizing the world of consignment, thrift and secondhand shopping, creating vast shopping communities where consumers and retailers alike can resell items quickly and efficiently through mobile devices. The “recommerce” industry, currently valued at $28 billion, is expected to grow to $64 billion in five years, driven in part by consumer demands for cost-friendly options and more sustainable fashion.
Rental/subscription retail. The concept of shared ownership has gained widespread acceptance in the Millennial and Gen Z generations, which has largely fueled growth in the sharing economy and led to the rise of rental platforms such as Zipcar and Rent the Runway. While fashion rental platforms may have struggled during the pandemic due to a decrease in events, home and furniture rental platforms such as Fernish and Feather have seen an uptick from customers who are working from and spending more time at home. As more consumers embracing renting vs. owning, traditional retailers have starting experimenting with rental models, using platforms like Joymode to assist with forecasting and inventory management.
On-demand manufacturing. The traditional model of design and production in retail is typically a long process, sometimes requiring a year to plan and put products to market. But new developments in on-demand manufacturing are now allowing retailers to get quick turnarounds, keep smaller inventories, and reduce waste (ultimately minimizing the need for markdowns and discounts). New technologies and analytics are also enabling personalization at scale, which could redefine the idea of “made to measure” in fashion.
Small and medium-sized businesses positioned to lead the future of retail
At Creative Business, we are excited about what the future holds for our clients in the retail and e-commerce space. During the tumultuousness of 2020, consumers became more digitally savvy than ever, and shifted toward brands that were more local and had a clear purpose. Consumers have adopted new perspectives on how to live, consume, and work differently, and will demand more community, convenience, and social impact from the brands that they buy. Small and medium enterprises that understand and adapt quickly to these new ideals will be the ones to dominate over the next decade.