The coronavirus pandemic changed the retail landscape almost overnight, shifting everything from how consumers shopped to what they bought to brand loyalty.
As we move out of the pandemic and into a customer-centric, technology-heavy world, what should smart business owners do to prepare for the future of retail?
Every retailer will need an online presence of some kind. It might be a website or an online store. It could mean a mobile app. It might even include social commerce tools that allow your customers to buy products directly from your social media channels. Without a doubt, browsing and shopping online are here to stay.
This online interface will serve as the “front door” for retailers who also have a physical storefront. Customers will peruse inventory, compare pricing, and check reviews online before they set foot in your store.
Successful retailers will have a robust omnichannel strategy that provides a seamless transition between online and offline shopping. For example, imagine a customer searching for ceiling fans on your website. When that customer enters your store, your mobile app should direct them to the aisle that houses ceiling fans and remind them of additional installation accessories.
A retailer’s online presence should constantly adapt to incorporate new technologies. Already, voice searches are changing how customers will shop. Today, it’s “Alexa, what’s the weather forecast?” Tomorrow, it’ll be “buy a gift for Mother’s Day.” This means retailers will need to optimize their online stores to target customers who use voice-only methods for online shopping.
Similarly, it’s expected that customers will rely on advice from their favorite social media “experts” to decide what to buy. This means retailers’ marketing budgets may include hiring social media micro-influencers to increase brand awareness.
Delivery times and methods will become differentiators as customers will expect Amazon-level shipping (free and fast) for most products.
Drones and autonomous robots will be used to reach new markets and reduce delivery times and operating costs. As far-fetched as it seems, the first delivery via drone of a hot cup of coffee has already happened.
Drone delivery of Girl Scout cookies is currently being tested. FedEx and Amazon are experimenting with autonomous robots for the so-called “last mile.” As a small business owner, you aren’t likely to have your own delivery drone or robot anytime soon—but you may find yourself partnering with delivery services that do.
Shorter delivery times will also force retailers to use local or regional suppliers to reduce waiting on inventory delays. Pandemic-related shortages and Egypt’s Suez Canal blockage highlighted the risks of using single-source or non-regional supply chains. Your customer won’t care why the shipment is delayed—their focus will be finding a business that can deliver what they want when they want it.
Physical stores will transform post-pandemic into a dual-purpose space—a fulfillment center and an entertainment complex.
During the 2020 pandemic, many stores converted part of their retail space into fulfillment areas to meet the increased demand for online and BOPIS orders. This hybrid model of a fulfillment center in the back and retail space in the front is likely to continue. More retailers may take this approach once commercial lease rates adapt to “blend more expensive rates for retail space with less costly rates for logistics space,” according to Melina Cordero, managing director for CBRE’s Retail Capital Markets.
Natalie Berg, retail analyst and founder of NBK Retail, predicts that physical stores will become a place for shoppers to be entertained. She says, “The future of retail in a post-COVID world is fewer but far better stores that will tap into emotion, human connection, discovery, and community. Brick-and-mortar retail will become a high-touch, sensory-driven experience once again.”
In other words, the concept of a “day of shopping” will make a comeback. A leisure outing will include browsing, shopping, dining, and socializing. After all, if customers only want to make a purchase, they’ll do that from the comfort of their couch.
To entertain shoppers, retailers will need to engage in collaborative marketplace ecosystems with non-like retailers. For example, a chocolatier, a regional coffee roaster, and a local musician may collaborate to provide a place for shoppers to enjoy a chocolate truffle with a mug of coffee while listening to live music. The shopper experiences 3 retailers at once while the retailers increase their brand awareness and collectively gather information about the customer’s preferences.
Collaborations like these may even include online-only retailers using part of a brick-and-mortar floor space as a “pop up” store to test out a new idea or concept.
Customer loyalty will be based in part on the “who knows me best” mentality. With hyper-personalization, retailers will move well beyond the traditional notion of white-glove service.
Personal service means keeping IPA craft beer in stock for the Friday evening “get ready for the weekend” crowd. Hyper-personalization means knowing your customer so well that you create a box of custom hard-to-get IPAs for their annual summer party before they even ask for it.
Frank Riva, the VP of marketing at 1010data, describes hyper-personalization this way: “For example, if you know [customers] consistently purchase items every week for Taco Tuesday, why not offer them a packaged meal kit that contains all of their desired ingredients together? This saves them time versus picking the individual items, and further, you could also offer a discount on this packaged purchase.”
One of the keys to hyper-personalization will be knowing not only your regular customers but also your occasional customers. The more data you can gather, the more likely you’ll be able to create the item your customer doesn’t even realize they want.
Corporate social responsibility will be important. A McKinsey survey shows that “consumers, especially Gen Zers, are willing to pay more for products that support their values and have less negative impact on the environment.”
That means that retailers will need to state their environmental, social, and governance (ESG) policies. Do you offer sustainable products? Do you reduce packaging waste? Are your suppliers fair-trade? Do you offer employees paid leave, healthcare, and mental health coverage? Are you a certified B corporation? Customers will choose to shop with businesses whose ESG goals are transparent and in-line with the customer’s priorities.
Technology-enabled small business owners to pivot their business models during the COVID-19 pandemic. Customers, in turn, expect technology to facilitate their retail experience.
Frictionless stores focused on “relevance, transparency, and ease” are the future. With the right technology implemented, speed bumps in the shopping experience disappear. A customer won’t encounter an empty shelf because an IoT sensor will have alerted the retailer to restock inventory. A customer will always know where in the store to find the product they want based on digital wayfinding and a mobile app. If you have trouble envisioning what that looks like, check out Toshiba’s short video on frictionless stores.
Technology will help guide the customer decision-making process. Smart fitting rooms will allow customers to find different sizes, colors, and recommendations for clothing without ever leaving the fitting room. Virtual reality will help online shoppers look at a product in-depth before purchasing.
Customers won’t pay with cash or even stand in line to check out. Retail Touchpoints predicts that digital wallet adoption (e.g., Apple Pay, Google Pay) will represent “…15.5% of POS payment volumes by 2024.” And an Inmar Intelligence survey showed that 75% of grocery shoppers do not want to stand in line to check out. Scan-and-go checkout options, where the customer scans the item with their mobile app as they place it in their cart and pay with a digital wallet, may become mainstream for retail.
Retailers will embrace artificial intelligence (AI) to automate routine tasks such as using a chatbot to answer first-line customer service calls. In the future, AI may even be used to read a shopper’s emotions as they view a product or advertisement, thus allowing retailers to offer a hyper-personalized incentive to close the sale.
Even without AI, automation will reduce operating costs for backend processes. It’s possible to automate your bookkeeping tasks with Sunrise today. In the future, you may automate other backend processes, such as hiring employees.
All of these changes mean upskilling your workforce. Employees will need training on using the technology that’s part of your retail DNA—everything from using kiosks to omnichannel basics to providing exceptional customer service based on data points in your CRM system.
And perhaps some—or most— of your workforce won’t even be employees. McKinsey predicts that gig workers will “account for the majority of the workforce by 2027.” That means how you train workers, what benefits you offer your employees, and even how you handle your payroll will look different.
As you prepare for your retail business’s future, focus on your customer. Position your business to adopt technologies as they become mainstream and thus more affordable. Find local or online-only retailers to partner with to build up your small business ecosystem.
While no one can predict precisely what the future holds, tomorrow’s retail industry will undoubtedly look a whole lot different than it does today.