Retail Trends 2021
Following a year like no other
2020 proved to be a very tough year for the retail sector and while we look forward to a better year, a second wave of infections and new strains of the COVID-19 virus have pushed back the prospect of a consumer-led recovery to the second half of the year.
Retail sales proved remarkably resilient in 2020 with consumers embracing online shopping in ever larger numbers. This shift online is acceleration of a pre-existing trend. However, the scale of change is quite startling: in the first half of 2020 we saw five years of growth in the market share of online in a matter of weeks. Even when non-essential stores reopened footfall was still significantly down on 2019 - an early indication that some of the changes in consumer behaviour were beginning to stick
We now have a new baseline for e-commerce sales from which growth, supported by increasing retailer investments in online capacity and a growing number of consumers who are more familiar with the benefits of online shopping, will continue through 2021 and beyond.
This has impacted the high street, which was already under intens e pressure from rising costs and suffered as a result of store closures and lower footfall. The pace of change has been too much for some to bear and we have seen a number of high profile administrations and record numbers of stores closures and job losses. It is clear that the restructuring and reinvention of the high street will, particularly as some of the government support measures are withdrawn, continue well into 2021 and beyond.
New consumer behaviour
2020 we saw a big shift to online and we believe this shift is now consolidating – data from Deloitte’s Global Consumer Tracker shows that 1 in 10 consumers across Europe now shop online for food and in the UK this figure is close to 30%. We have seen similar growth in non-food – with stores shut consumers have quickly adapted to shopping online. Another factor behind the growth of online is that consumers remain concerned about the safety of shopping in store with less than half of UK consumers stating that they would feel safe shopping in a store.
We have also seen the lines between the home and the office blurred, with the home becoming an office, a classroom and a gym. This has changed consumption patterns with more calories consumer in the home and growth in spending on categories focused on the home such as furniture, garden products and home gym equipment. As part of broader focus on health and wellness we seen the growth of flexitarian diets and in particular Vegan foods.
And finally consumers have shopped more locally which has benefited neighbourhood grocery stores and have chosen to support local businesses and local producers.
1. Net Zero Retail…now!
Retailers need to decarbonise operations, products and supply chain.
Now that the big public commitments on climate have been made and with COP26 in Glasgow on the horizon, we believe that it is the time for retailers to act. In the coming year retailers need to consider how they can begin to transition to Net Zero Retail and accelerate their efforts to decarbonise operations, products and their supply chain.
2. Digital by design
A digital first approach is rapidly transforming retail.
2020 proved to be a transformational year for retail – offering a compelling case for a digital first approach as stores closed due to COVID restrictions and consumers were told to shop from home. To reach locked-down consumers, retailers had to take advantage of the only channel available, scaling their online capability. This has led more and more retailers to adopt a digital first approach.
3. Thoughtful Experiential
The re-birth of the store.
The growth of online has forced retailers to reassess the true value and role of their stores. In 2020, experience-based retailers struggled with a lack of footfall and opportunity to engage consumers. We believe experience remains essential to the future of the store – but it needs to be more thoughtful. The cost pressures remain and investments in experience need to ensure that they make sense from a brand perspective, add value to consumers, and deliver a commercial return. It cannot just be experience for experience’s sake.
The polarisation between real destinations and hyper local shopping.
Lockdown and the growing number of people working from home has led to a return to local shopping, which we believe will continue beyond the pandemic. However, we think the market will polarise between real destination stores that will continue to attract consumers and "hyper local shopping", which bodes
well for the future of the high street.
5. Health: a focus for all
The battle for the consumer health market has begun.
One of the most notable changes in consumer behaviour last year was the increased focus on health and wellness. This has created increased demand for wearables and data-services to provide personalised programmes. Consumers have dedicated more time and more money to looking after themselves and this has created a big opportunity for retailers.
6. Lead with purpose…
…and create a culture of inclusion.
Last year we said that we believed that purpose was the new digital. By that we meant that we expected purpose to be as disruptive in the next ten years as digital had been in the last ten. In 2021, it will be more important than ever before to lead with purpose and create a culture of inclusion. Just as with digital, we believe retail leaders need to ask themselves once again: how do we embed this into our business?