In stores or online, the future of retail is experience
The promise of a largely vaccinated country is on the horizon, and Americans are itchy for a return to normalcy. Where does that leave e-commerce? What’s next?
Experts say some consumers, for some purchases, definitely will head back to brick-and-mortar stores when it feels safe and appropriate. But although digital shopping almost certainly won’t maintain all of its gains—including that 50% year-over-year revenue increase in the 2020 holiday shopping season—the past year clearly has changed the trajectory of e-commerce.
“It isn’t a zero-sum game. Physical retail won’t go away. But bad physical retail will go away: the retail space solely designed around sales per square foot,” says Shopify’s Loren Padelford. “The future of retail is experience.” That might mean physical showrooms that are destinations for shoppers, that provide a place for consumers to see and touch products and for brands to tell stories—supported by e-commerce transactions.
“What humans want is the experience,” Padelford says. “Retailers know you want to touch and feel products. But no one wants to stand in a checkout line. The best retail will marry the two worlds. We’ll find a way to give shoppers the best purchase experience, which is most likely a digital one, while allowing them to shop and engage in the way they want. That is what will separate the best retailers.”
Diageo’s Steve Wallet says his company increasingly is preparing for the “blurring of retail channels.” Instead of the traditional bifurcation—on-premise sales at restaurants and bars, and off-premise purchases at stores for home consumption—Diageo brand teams, he says, are talking about “non-premise.” “The notion of only going to a bar or restaurant to have a cocktail, or a store to buy alcohol, is changing,” he says, saying people might order something online, pick it up and drink while shopping or browsing or gathering in a non-retail location.
“The past year has accelerated the trend we call ‘shopping at the edge,’” says Saleforce’s Rob Garf. “Retail used to be about coming to the property and engaging in the four walls. Shopping used to be very linear and deliberate. Now consumers might be traversing nine different touchpoints: livestreamed demonstrations, gaming, YouTube, social commerce. These places on the edge are becoming the new shopping mall—places for inspiration, community and for shopping. That means now it’s as much about embedding the buy button wherever the consumer is. And that’s increasingly off the retailer’s property.”
Facebook calls it the growth of “discovery commerce.” “We create or engineer the serendipitous moments of brand discovery on the platform. Through a combination of machine learning, great creative and customer experience, people discover brands on their mobile phones that they had no intention of buying,” says Facebook’s Simon Whitcombe. That might be via an ad served on the platform, or within content like a video. “But the discovery leads to an action,” he says.
Garf says Salesforce research shows 16% of all digital transactions will happen on these emerging commerce platforms.
Spurred by what’s happened in the past year, a lot of those transactions will be with young, new, small brands. “One of the big trends that will continue is the proliferation of new brands; digital has proved how fast and easy it is for a new brand to come to life,” says DAC’s Jenna Watson. “With digital, smaller brands don’t have to win the whole of the population; targeting is huge in making a new brand happen.”
Emerging brands that might have struggled to reach viability now have access to a global market via digital—small brands can tap into “thin slices of huge global markets,” Padelford says.
At the same time, experts think consumer interest in supporting local brands and retailers will continue post-pandemic. “We may open up, but we have become acutely aware of the community we live in,” Padelford says. “People will continue to spend more on local business, including buying online with local delivery.”
Expect a shakeout
Although all these trends create opportunity for newer and smaller brands, expect a shakeout, Kantar’s Reid Greenberg says, and continued M&A activity as larger corporations continue to look for opportunities to snatch up emerging DTC brands—as digital DTC pioneers Harry’s and Dollar Shave Club were acquired by CPG giants pre-pandemic.
Greenberg also says he expects more brands—big traditional brands—to work on their own direct-to-consumer connections. “If your DTC is through Amazon, as a brand you don’t own that relationship,” he says. “More and more, big and small brands are asking: How can we have a direct relationship with our customers?” He says that is not limited to e-commerce sites; outside-the-box options like vending machines might be an option for some brands. And as they face a more privacy-oriented, cookie-less future, marketers are cognizant that direct customer contact has other benefits. “DTC is not always about the P&L,” Greenberg says. “It may not be strictly profitable, but it can still be important to have that presence—to have that CRM, to build a first-party database that will pay dividends in the long run.”
Being connected to the consumer also means two-way communication. Facebook’s Shiva Rajaraman predicts more “messaging-based commerce”: The call to action in an ad or post is the option to open direct communication with the marketer to ask questions or find out more about the brand.
As brands, retailers and their partners navigate the new normal and anticipate what the future holds, though DAC’s Watson offers a final sobering thought. “One piece of advice for everyone: Don’t assume you know how it’s going to work tomorrow. Don’t assume you have the right plan. Don’t assume what you’re doing will keep working. Anything could change tomorrow; it did with the pandemic. And it will change when third-party cookies are gone,” she says. “Be prepared, and be ready to adapt.”