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02/04/2021

Turning the page: How retailers can capitalize on trends from 2020

If there is an asterisk next to the year 2020 in the retail record books to indicate what an aberration it was, there also is a question mark next to the year 2021.

It remains to be seen how many of the habits that consumers adopted during the pandemic will persist in the year ahead, and how long it will take for a new standard set of consumer behaviors to evolve.

One of the key retail trends that emerged in 2020 was the shift toward consolidated shopping trips, as consumers made fewer excursions to physical stores, but purchased more items on each visit in order to keep their pantries and medicine cabinets fully stocked. This behavior was supplemented by a sharp increase in online shopping, whether for curbside pickup or for home delivery.

“Shoppers want to make the most out of each of their trips,” said Tory Gundelach, senior vice president of retail insights at Kantar Consulting. “Retailers like supermarkets have really benefited during times like back to school, where they typically haven’t been a significant player, but consumers have been saying, ‘Now I’m going to pick up my back-to-school supplies while I’m getting my groceries.’”

At least in the first half of 2021, she said the trend toward retail trip consolidation may continue, and shoppers may appreciate retailers that offer opportunities for this kind of one-stop shopping.

Katie Thomas, who leads the Kearney Consumer Institute, an internal think tank at global strategy and management consulting firm Kearney, said the trend toward trip consolidation and bigger baskets “is not going to change overnight. Even once we have a vaccine, people have gotten a little bit more used to making fewer trips and having those bigger baskets,” she said.

For many retailers, a key opportunity will be to retain new customers they may have attracted during the past year. That includes completely new shoppers — such as those who may have come in for a COVID test, for example — and customers who expanded the range of products they purchased by shopping additional categories, Gundelach said.

Retailers that already excel at data analytics and targeted messaging, such as through personalized loyalty programs, will have the upper hand, she said.

“I think we’re going to start to see even more separation in the retailers that are able to talk to, message and give offers to those shoppers who changed their behavior with them during the pandemic,” Gundelach said. “There’s going to be a lot of focus on how to maintain those gains.”

Retailers and suppliers also have opportunities to leverage tools that were widely used in 2020, including telemedicine, online video product demonstrations and live video chats for categories like beauty.

Click-and-Collect Seen Growing
Curbside and in-store pickup already have been gaining significant traction before the pandemic, and these services accelerated in 2020. “I think that the good news is that most retailers feel pretty comfortable in that space,” said Gundelach, who predicted click-and-
collect services will continue to gain traction in the year ahead.

She said she sees food and drug retailing migrating toward a model in which home delivery is offered only in the densest urban markets, where it can be done profitably, while most of the country will instead offer a click-and-collect style of e-commerce.

Opportunities that food retailers may have are in the convergence of delivery from restaurants and delivery of hot, prepared foods from supermarkets, Gundelach said. And, on the flip side, retailers may be able to capitalize on the delivery of dry goods by such third-party restaurant delivery services as DoorDash’s DashMart. “We’ve seen even more options launched during the pandemic, and I think that’s going to be one of the more interesting things to watch going forward,” she said.

Kearney’s Thomas said food and drug retailers have considerable opportunity to improve upon the e-commerce experiences they offer, citing as an example the often bewildering array of products displayed online when shoppers are looking to make a quick purchase. Retailers could benefit, she said, from an interface that allows those shoppers, who are seeking to fill a quick basket with their needed items, to execute those types of trips more quickly and efficiently.

Retailers and suppliers also have opportunities to leverage tools that were widely used in 2020, including telemedicine, online video product demonstrations and live video chats for categories like beauty, Thomas said. As an example, she cited the success of livestreaming infomercials as a sales tool in other countries such as China.

Shoppers likely will continue to use both in-store and digital shopping channels, she said, including delivery and click and collect, based on what suits their needs at any particular time.

“There’s a lot of talk around people never going back to the store, now that they’re used to this delivery option, but I’m not a believer in that. I think it’s not delivery or the store, it’s delivery and the store,” she said. “These different options like click and collect and telemedicine really enable consumers to have that much more flexibility in their lives.”

A More Digital World
Erik Keptner, senior vice president and chief marketing and merchandising officer at Rite Aid, based in Camp Hill, Pa., said the company expects retail and e-commerce to continue rapidly evolving as more and more customers adopt online shopping.

“No matter the generation, we are all participants in the digital world now, and we’re seeing a greater openness across the industry to different models of interaction, such as telehealth, store-to-home delivery services, pickup and drive-thru,” he said.

Rite Aid has long been investing in technology to improve the online and mobile experiences for its customers, and has added such services as same-day delivery of nonprescription items.

“We will continue to find new ways to enhance the digital experience so shoppers can seamlessly connect with the care and products they need to thrive,” Keptner said.

George Coleman, senior vice president of merchandising at Woonsocket, R.I.-based CVS Health, said the pandemic has accelerated a shift toward online and mobile transactions at that company as well.

“In response, we’ve leaned heavily into our digital capabilities and are leveraging strategic partnerships to expand our offerings,” he said, citing the chain’s June expansion of its same-day home delivery options to include DoorDash, in addition to existing partnerships with Instacart and Shipt.

CVS Pharmacy also recently launched a new touch-free payment method in its stores, which allows customers to pay with their smartphones using PayPal or Venmo QR codes. The retailer saw double-digit increases in downloads and engagement with the CVS Pharmacy app in 2020, which Coleman attributed in part to higher engagement with the company’s ExtraCare Rewards loyalty program.

Analysts said the fact that most food and drug retailers appeared to take great pains to provide safe shopping environments during the pandemic should bode well for the year ahead.

Trend Toward Self-care
The pandemic also has driven increased consumer interest in self-care, Keptner said, noting that consumers have been seeking out not only traditional medicine but alternative remedies, including lifestyle changes. These consumers are prioritizing product attributes over brand name when it comes to purchase decisions, he said.

“That is why Rite Aid is overhauling our merchandise and will continue to work with suppliers to give customers an assortment of on-trend health products, with attributes like organic, natural and chemical-free,” he said.

The influx of customers to Rite Aid pharmacies seeking the COVID-19 vaccine presents an opportunity for the company to “play a crucial role as the neighborhood pharmacy in helping to protect our communities,” he said.

Coleman said CVS Pharmacy also has noticed strong demand for proactive health-and-wellness solutions, a trend the company expects to continue.

“Our customers rely on us for convenient access to everyday health products, including vitamins, immunity support supplements, hand sanitizer and face coverings, popular self-care items, and grocery needs,” Coleman said. “In 2021, we’ll continue to expand on our proactive wellness assortment, introducing new brands across health, beauty and consumables.”

He said CVS leaned more heavily into its store brands in 2020 amid financial pressures on consumers and their increased demand for health-and-wellness products.

“Launching a new brand during a pandemic certainly isn’t easy, but we were able to successfully introduce our expanded Live Better by CVS Health line in June by adding more than 80 new products, including vitamins, supplements and digestives,” Coleman said.

In addition, CVS Pharmacy also added 30 new better-for-you snack and grocery items to its Gold Emblem and Abound lines, as shoppers have continued to view the retailer as a convenient destination for pantry staples, he said.

Consumers SupportLocal Favorites
Analysts said the fact that most food and drug retailers appeared to take great pains to provide safe shopping environments during the pandemic should bode well for the year ahead, said Kantar’s Gundelach. That has helped fortify the trust that consumers have in food and drug retailers, which those companies now have the opportunity to reinforce through the efficient distribution of the COVID vaccine, she said.

In addition, consumers threw significant support behind local businesses in general in 2020, whether it was their favorite local restaurants or the local mom-and-pop shops that struggled to stay in business. That could translate into ongoing appreciation for retailers that distinguish themselves as vital parts of their communities, said Kearney’s Thomas.

“I think that’s really starting to show the need to be a little bit more personalized and to think about the local community, and maybe think about how to bring in some local brands and change things up a little bit,” she said. “That can be an opportunity to add a little bit of fun and excitement for shoppers, and something that could be pretty valuable for the year ahead. Before, we were all global to a fault, perhaps, and now we have a greater appreciation for the local.” 

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