From big-name stores to small businesses, 2020 was a record year of shop closures. Sure, e-commerce saw a boom, but city centers across the world have transformed from bustling streets to rows of empty storefronts.
But is it all doom and gloom? Is there really nothing the retail industry can do to embrace digitalization while also keeping physical shops alive? And should we keep them alive in the first place?
That’s what we set out to discuss together with Jacqueline Windsor, Partner at Strategy&, part of the PwC network, Christoph Rauscher, Industry Cluster Lead – Connected Living at IXDS (Part of the PwC Network), and London-based designer and jovoto creative Asia Chachulska in a webinar on “The Critical Question(s) Facing Retail Today” as part of our collaboration with PWC Germany.
One key thing off the bat: No, it’s not all doom and gloom. Jacqueline pointed out that the negative press around COVID and retail is being oversimplified in the first place. Together with her team at Strategy&, they’ve identified five scenarios that reflect different dynamics for each consumer market sector: accelerated growth, accelerated growth expected to return to normal, decelerated growth expected to return to normal, gradual recovery, and structural demise. In summary: there have and will be winners and losers in every consumer market.
“Excite the mind, and the hand will reach for the pocket.” – Harry Gordon Selfridge
What Jacqueline and Cristoph agree on is that COVID has simply sped up trends the retail industry was already experiencing. Saying physical stores are dying is nothing new after all!
But what does that mean for you as part of the retail industry? We’ve picked five trends for you to follow that are gaining momentum in 2021:
1. Redefine the role of physical stores
Solving challenges is 99% asking the right questions, which is the premise of the “My Critical Question” initiative in the first place. The same is true about physical stores: the focus should not be on saving them but redefining them.
As Christoph points out, the fundamental question is, “What is the role of the store in our ecosystem?”. While we learned to rely on e-commerce during lockdowns, we still flocked back to physical stores when we could. Why?
Stores used to be seen merely as transactional entities, Christoph explains, but now we are realizing they contribute to a brand experience, even to society in general, in a way that can’t be replicated online.
Jacqueline agrees this move from a convenience format to an emotional one is key to redefining the 2021 shopping experience. As examples, she cites how Sephora offers inspiration and play in their stores and Nordstrom launched Nordstrom Local, a neighborhood hub focused on services instead of products.
For designer Asia, this redefining is actually retail going back to its roots. Harry Gordon Selfridge already in the early 20th century said, “Excite the mind, and the hand will reach for the pocket.” For her, the key is a focus on community. Being a space for the community to come together – be it through events, workshops, or simply to hang out – is what will make physical shops thrive.
2. Establish an omnichannel approach
Jacqueline warns that we shouldn’t analyze physical stores in isolation: “We are moving from a single to a multi-channel world.” There are now multiple touchpoints for customers to interact with brands, and shops are only one of them.
As Christoph points out, the important bit is providing a seamless experience. “It’s not about replicating experience between store and online and vice versa.”
The possibilities are only limited by your imagination. Designer Asia shares how, back in 2019 (!), she had already developed a concept to blend online shopping and retail. Today, from integrating mobile shopping with an in-store experience to AI mirrors, there are more ways than ever for retailers to offer customers the best of both worlds.
“We are moving from a single to a multi-channel world. – Jacqueline Windsor
3. Embrace collaboration over competition
Another way for physical stores to stand out? Partnerships. Jacqueline reflects how five or ten years ago, many of the partnerships we see in retail today would have been unimaginable.
Today, many brands are (luckily) realizing that a collaboration-over-competition mindset is much more of a win-win. A local example from Berlin: Japanese retailer Muji partnered with Mochi ice cream brand Chubby Cheeks to offer the treat inside their stores. Grabbing a refreshing confection while shopping? Yes, please!
Christoph pushed retailers to think even further than just doing partnerships within their own stores. If retail needs to redefine its role in city centers, the approach should be to create a collaborative shopping experience for customers. After all, the more you enjoy spending time in the shopping district, the longer you’re likely to stay and buy.
4. Go from a linear to a circular economy
Another way to think of partnerships is by moving away from a linear to a circular economy. As Jacqueline points out, it’s no longer just retail – it’s retail and resale.
As consumer consciousness grows, a cycle of buying and disposing is quickly becoming outdated. Instead, there’s an increased focus on reusing and recycling and brands taking an active part in that process.
Christoph encourages you to integrate services as a way to embrace this trend. For too long, in-store services like alterations and repairs have been seen as an add-on regaled to the basement. Now is the time to bring them front and center – to invest in making products last a key brand value.
5. Realize values matter
Speaking of brand values, realizing those matter now more than ever is vital. As Jacqueline shares, we’re moving away from pushing products to pulling in customers. How do you do that? By listening and interacting with customers throughout the whole supply chain.
As Christoph states, “retailers and brands need to understand why they exist for the customer.” This means rethinking their value and purpose. Ask yourself: What is your retail brand’s contribution to society and the future?
If “turning a profit” was your answer, that’s not enough, all of our experts agree:
“We need to stop thinking about just transactions. It should be the consequence of the experience and not vice versa,” says Christoph.
Jacqueline echos that: nowadays, there is a spotlight on brands with purpose.
Finally, designer Asia as someone working in fashion can confirm customers (including herself) want transparency.
Where products come from matters. Your values matter. What you are doing to achieve your purpose matters.
Your takeaway? In 2021, plan to fail
Jacqueline and Christoph disagree if long-term yearly planning is still a good strategy for retail brands. What they do agree on is that agility needs to be built into planning. As Jacqueline half-jokingly says, the one thing you can be sure of when creating a strategic plan is that it never goes to plan.
So how do you build agility into your plans? Involve customers more and create faster product innovation cycles (hint: we can help with that), plan in contingencies, and give your local shops and offices more room to adapt to their specific situation.
Your challenge? Making sure to keep a cohesive brand identity and build in ways to measure ROI. The main question you should be able to answer is if your customers are loyal: do they buy across channels, categories, time, etc.?
Now that you’ve heard from our experts what you should focus on this year, we’d love to hear from you! What do you believe retail will be defined by in 2021? Let us know in the comments.