Marketing

How retailers can win big by embracing the digital consumer

Beth VanStory, a partner and CMO with Chief Outsiders, explains why retailers, from marketing to merchandising to delivery and customer service, must meet customers on their terms or risk being the next victim of the retail-apocalypse.

Photo by istock.com

January 28, 2021 by Beth VanStory — Partner & CMO, Chief Outsiders

Was it really 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 stores so customers could feel just how warm a CG parka would keep them? One very 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 2020 and will 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 wallet, the importance of social responsibility and sustainability. Retailers who embrace these consumer trends will be the big winners in 2021.

2020 has been 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% of people have switched to store brands and 50% 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 lock down 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 U.S. consumers spent $211.5 billion during the second quarter of 2020 — up 31% over 2019. NPD discovered that consumers plan to do 48% of their holiday shopping online, up from 41% in 2019. Companies that were not 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% of consumers had used contactless payment prior to the pandemic and 87% since. In-app ordering increased from 54% to 84%.

Home delivery rose from 47% to 82%. 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 October study, among Baby Boomers, 58% have bought online and picked up at the register and 30% 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 substantially should come as no surprise. A September JP Morgan study states that sales of hair color in the second quarter were up 30%. 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, nearly 80% 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 at home, it's been a great 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 number one way to get information and be entertained. Online education, from home, is growing rapidly.

YouGov states that 35% 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 5 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 more nimble and already possess huge customer bases.

Finally, with lots of time at home, people are playing more video games than ever. WePC estimates the gaming market at $159.3 Billion in 2020, which is a sizable increase of 9.3% 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 regime they want.

After investing in high-end equipment, many will not likely 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: 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 have not 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 CMO with Chief Outsiders