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9 Retail Strategy Macro Trends Driving Growth in 2021
Online retailing has been growing, becoming increasingly competitive, and evolving for several years. COVID-19, which limited brick-and-mortar shopping opportunities, has dramatically accelerated that growth and evolution. E-commerce revenue is expected to reach a staggering USD5 trillion this year, according to a Boston Consulting Group survey. Shopping patterns also are shifting. Brands will need to adapt their retail marketing strategies to stay ahead of the competition and drive sales. Here are a few trends for 2021.
1. Continued Growth and Competition
The continued growth of e-commerce will lead to more companies entering the field. This increased competition puts added pressure on companies to remain relevant to their customers and to foster customer loyalty. In the past, merchants offered loyalty program perks for use only in their brick-and-mortar stores, but that’s changing. Now, online retailers are expanding loyalty programs to include online and mobile purchases.
One way retailers are doing this is by offering memberships that allow customers to save if they commit to a monthly membership fee that goes toward their purchases. Examples of these programs are Amazon Prime, Instacart, and Fabletics. Another way digital retailers are expanding loyalty programs is by offering subscription boxes or subscription items that are convenient or provide cost-savings. Examples are Nordstrom’s Trunk Club, Barkbox, and Amazon’s Subscribe and Save. Subscription services tend to be popular with younger, wealthier populations. In particular, consumers of these services are more likely to age 25 to 44, have incomes from USD50,000 to USD100,000, and live in Northeast cities.
2. The Rise of Partnership Approaches
Retail marketing strategies for online merchants also will include more partnership programs in 2021. Affiliate programs, in which a retailer partners with an online content publisher, will continue to increase as e-commerce competition increases. The content publisher uses their influence to generate sales for the online merchant partner and, in turn, receives a commission on each sale. In 2021, retailers will further diversify their publisher partnerships to connect to new consumers. One trend is for retailers to look to more long-form media recognizing that consumers are now willing to spend more time reading online.
Publishers also are re-thinking their relationships and strategies and reviewing the brands they partner with. In some cases, they’re expanding their portfolio of retail partners; in others, they’re refining their partnerships.
Influencer marketing is similar to affiliate marketing, but instead of partnering with content publishers, the retailer partners with individuals who have followings within their niche on social media. These influencers have the reputation of being experts in their fields. Because influencers are trusted by their followers, their recommendations can quickly drive potential customers to a company’s social media site, e-commerce site, or app. Once there, the lead will hopefully be converted into a sale.
3. The Surge of New Online Shoppers
The pandemic brought many homebound customers online and mobile for the first time. Now e-commerce stores, rather than brick-and-mortar ones, are the primary purchase path for many brands. To keep these new customers engaged, digital marketing strategies will include technology to ensure that the purchase path for the company’s merchandise is easier than that of competitors. 2021 will be a year in which many online retailers invest in technologies necessary to improve performance. Apps will slim up, and servers will compress images to decrease the time required for the page to load.
Some technologies that will make shopping easier, increase sales and drive e-commerce growth include:
- Robust search and filtering capabilities so that customers can find what they want quickly.
- Unobtrusive but effective personalization at each contact point.
- Sites that load almost instantaneously. The most important metric will be the customer’s perception of page loading times.
- Streamlined returns and exchanges.
- Unified inventory management and pick up in-store for retailers that also have a brick-and-mortar presence.
Another key to gaining and keeping new customers is prompt order fulfillment. Rising last-mile delivery costs and environmental concerns present challenges to efficient and cost-effective order fulfillment. To combat these challenges and to keep up with competitors who offer next-day delivery, retailers may need to significantly upgrade logistics networks. Last-mile options could range from low-tech services in which customers go to a brick-and-mortar location to retrieve their items to high-tech robots that deliver to homes. Digital retailers will also need to increase fulfillment efficiencies from when the order is placed until it’s delivered.
A third key to gaining and retaining customers is the use of chatbots. When online shoppers can’t find what they’re looking for in a few clicks, they become frustrated. Chatbots, filling the sales associate’s role at brick-and-mortar stores, jump in to offer the customer help and save the sale.
4. Buy Now Pay Later
Another way to make digital shopping more comfortable and more attractive is to offer the option of buying now and paying later. While credit cards have always provided this option, most buy now pay later (BNPL) vendors charge no interest or fees and don’t affect the customer’s credit utilization metric on credit scoring formulas. Customers choose the BNPL option at checkout and are referred to the third-party vendor’s Website, where they agree to a payment schedule. BNPL was popular pre-pandemic, but during the pandemic, consumers have preferred longer payment plan options.
Online retailers are offering BNPL options because they reap three major benefits from them.
- Increased spending. While loyal customers likely will keep coming back with or without BNPL, researchers say they tend to buy more with the availability of BNPL.
- Offering BNPL lowers the risk of shopping cart abandonment for expensive carts. It also increases conversion rates, even in financially uncertain times. Customers on the fence about a purchase may be more likely to click “Buy” if they can pay for their purchase with low payments over time.
- Customers come back if their shopping experience is positive. From a customer’s perspective, more ways to shop, more ways to pay, and more products to choose from are all positive factors. The flexibility to BNPL will increase loyalty and drive sales.
While Splitit offers all of these business benefits along with more traditional “alternative financing” providers who extend credit at the point of sale, it also adds an additional ethical benefit. Because it uses shoppers’ existing credit cards, it gives them an additional tool to manage their spending, budget, credit utilization, and credit history.
5. Mobile Commerce
Another top trend that will continue to drive growth is the increasing prevalence of mobile commerce. About half of all consumers currently use their mobile devices to shop.
Consumers are influenced by phones including more data storage and by their confidence in data protection. As a result, they’re willing to add more apps to their phones. Having a mobile-friendly site or app will become increasingly important; otherwise, you’ll lose potential customers to competitor’s mobile sites. The shift toward 5G networks also will drive more mobile commerce.
One way for online sellers to determine the mobile-friendliness of their sites is the Google Mobile-Friendly Test. To improve the customer experience, consider using a progressive web app (PWA), which loads faster, and implementing accelerated mobile pages (AMP).
One challenge retailers face is converting mobile shoppers into mobile buyers. Last holiday season, 75 percent of e-commerce shopping was done on a mobile device, but only about 40 percent of that resulted in a sale. Online retailers will be finding ways to close that gap. While one way may be through improved apps, another may be through offering more customer-friendly pay options. Mobile shoppers want to pay digitally. Marketing strategies that enable more digital payment options will attract customers and increase sales.
M-commerce success isn’t entirely about technology, however. Retail marketing strategies that have deliberate goals and execute those goals can drive customer engagement; for example, a simple design that’s easy to use, a call to action that’s fun, or a mobile-first marketing campaign designed to capture the Instagram or TikTok crowd.
Unfortunately, the rise in mobile commerce can also mean an increase in mobile fraud. Merchants will need to be vigilant about data security and manually review flagged transactions if they want to avoid a loss of customers, false declines, and negative damage to their brand.
Another trend is toward buyers wanting to support companies that have been produced in an eco-friendly way or that preserve the environment or encourage recycling. The notion of sustainability contributing directly to the bottom line has been problematic for most companies to accept until recently. By 2030, at least USD12 trillion of marketing opportunities will be linked to the United Nations’ Sustainable Development Goals. Some experts believe this 12 trillion is a conservative number, and the reality could be as much as USD36 trillion. This statistic compels online retailers to implement sustainable practices and develop marketing strategies around this implementation. While some retailers, such as Amazon, are setting bold goals such as eliminating carbon emissions by 2040, a small or mid-market online retail store can attract green-focused new customers by making some simple practices part of their marketing strategies:
- Decide how you’ll contribute to the environment and tell the world what steps you’re taking toward that goal. Include your sustainability message in all your advertising, social media, and influencer marketing.
- Switch to eco-friendly packaging, such as compost bags or recycled wrapping sheets, and use as little packaging as possible to ship the product safely.
- Operate your data center with renewable energy.
- Send only electronic receipts.
- Add products that encourage sustainability or look for eco-friendly alternatives to existing ones.
7. Voice Assistants
Customers are increasingly relying on voice assistants such as Siri, Alexa, Cortana, or Google Assistant. Juniper Research predicts that the number of digital assistants will equal 8 billion by 2023, representing a 300 percent increase since 2018. Global smart speaker sales also are rising, and studies say that more than 100 million U.S. households and 85 million households outside the United States will own smart speakers. Since 62 percent of people who own smart speakers use them for voice commerce, the increase in households that own smart speakers will likely lead to an increase in voice commerce.
Another reason voice commerce is trending upward is that customers want a hands-free customer experience. Voice commerce also is on the rise because the technology for it is growing in accuracy and convenience. The algorithms behind voice technologies are rapidly becoming more intelligent. Google and Alexa are developing technologies that would enable their voice assistants to detect customers’ emotions from their voice commands. This would pave the way for online retailers to increase sales by marketing products to match their mood. Both Google and Alexa also are pushing regional languages in their virtual assistant devices to help consumers shop more conveniently.
This boon of voice commerce means that online retailers who want to attract new customers and retain current ones will need to develop a marketing strategy that includes optimizing their online store for voice. For example, companies will want to incorporate into their online stores answers to common consumer questions surrounding their products. Offering value to potential customers through targeted content may lead to a purchase down the road. For example, someone who initiates a voice search for information on preventing plantar fasciitis will be led to your blog post on the topic. That might, in turn, lead the customer to buy your orthotics.
An online retail marketing strategy that seeks to prepare a site for voice commerce would include the following:
- Optimizing content to increase the likelihood of appearing in voice searches.
- Offering voice-based navigation on the website and mobile app.
Ensuring that customers can easily buy products with a simple voice command.
8. Artificial Intelligence
That’s up from an estimated USD2 billion in 2018. Artificial intelligence (AI) improves the customer experience and drives sales in several ways. One way is through personalization. AI collects data on the customer’s purchase history and browsing behavior and then offers personalized guidance and recommendations. A Boston Consulting Group study commissioned by Google found that customers prefer a shopping experience that helps them quickly make purchase decisions. While not focused on personalization per se, customers like the benefits it provides. Because it provides a good experience, the use of AI to customize recommendations to customer preferences can improve customer loyalty. It also can improve word-of-mouth advertising. Twenty percent of customers who experienced a high personalization level on e-commerce sites said they would recommend the brand to their friends.
Offering personalized experiences onsite or in retail marketing efforts also has been shown to increase sales. In the BCG study, 40 percent of customers said they spent more than they had planned when retailers used a high-level of personalization.
While many digital retailers are engaging in some form of personalization, this trend is still in its infancy. Pure-play companies seem to be leading the way in personalization, according to BCG. These are followed by specialty companies, with computer electronics and mass marketers falling behind the other sectors. Overall, retailers plan to increase their investment in personalization by 18 percent on average between now and 2022. Best-in-class retailers, however, plan to increase their investment by 30 percent, the BCG study said. As personalization increases, digital stores will be able to offer increasingly relevant experiences to their customers, which will drive further growth.
Another way AI improves the customer experience and ultimately drives sales is through improving the voice commerce experience. AI advances have dramatically improved speech recognition and mood detection, which can also lead to more customized product offerings.
A third way AI will continue to drive sales growth is in fulfillment. Amazon uses AI to reroute and change delivery arrival times so that fulfillment meets customer expectations. AI also aids in demand forecasting, which can help retailers to plan inventory.
Marketing strategies of top online retailers will include investment in AI, according to Juniper Networks. Retailers, especially those in low-margin segments, will need to invest to stay competitive. The cost of AI tools will drop by 8 percent over the next four years, making the acquisition of these tools by smaller retailers possible.
9. Augmented Reality
Augmented Reality (AR) transforms the digital shopping experience by superimposing digital information onto the physical environment. AR helps eliminate the hurdle digital shoppers face of not being able to try on merchandise or to physically inspect it before buying it. While AR can make all customer contacts seem warmer and more spontaneous, it’s particularly important to the shopping experience in industries such as fashion and home decor. For example, IKEA’s app allows customers to virtually position the furniture in their own space. Since 65 percent of people in the world are visual learners, AR can fuel exponential growth in digital commerce.
Investments in AR and similar virtual services will help digital companies increase revenues. Offering customers the opportunity to virtually try products before they buy them increases customer engagement and leads to fewer returns. In fact, studies have shown that 3D images reduced returns of online purchases by 35 percent. Better imaging has always increased sales because customers process images faster than words; 3D product configuration and AR have increased sales by 40 percent.
2021 will continue to be a year of growth for e-commerce. Many consumers will still remain cautious about shopping in-store because of the pandemic. As digital customer experiences improve, these customers may well continue to make digital shopping their primary channel post-pandemic. Retailers no longer can dictate how and where customers will buy; they’ll need to be flexible and communicate with customers regardless of whether they buy in-store, online, or via a mobile device, or how they pay. Also, retail marketing strategies that focus on personalizing the shopping experience, making it comfortable and risk-free with AR, and promote environmentally friendly practices will be the most successful and drive sales growth for digital marketers.
These trends will be significant factors in 2021 and beyond. Those e-commerce retailers who plan for and develop marketing strategies around these trends will succeed. Those who don’t, however, may lose customers and revenue to competitors who do.