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More than any other industry, retail must constantly evolve to stay relevant. 2020 was the most challenging in living memory, as the global pandemic disrupted our lifestyles and shopping behavior. In a year that saw such rapid change, there were seismic shifts within the retail industry, some of which shook the very foundations of big high street names, such as Arcadia and Debenhams. All the while, purchasing behavior completely changed, as mandated lockdowns have required consumers to stay at home and social events to be cancelled.

Against this background, many retailers have inevitably faltered, but at the same time, it is also true that others will emerge stronger. Now with the glimmer of hope in the form of a vaccine, there is finally an end in sight to some of this disruption. So, what should be at the forefront of our minds as we prepare strategies for trading in 2021?

Flexible working and channel shifts

Consumers have spent the last year largely at home, both for work and leisure, and such home-working patterns are expected to persist far beyond the pandemic, which has led to new shopper mindsets and behaviors. Home-based consumers have given rise to a huge acceleration in online demand, requiring retailers to evolve and adapt their strategies across areas such as supply chain, product development and marketing. As we emerge from the crisis, brands should prepare to serve a consumer that is eager for more physical experiences but at the same time, highly familiar with online shopping, with high expectations for convenience, speed of delivery and service. Local and hyperlocal trends can also be expected to continue, giving retailers the opportunity to drive footfall with more local and flexible range curation.

Frictionless, contactless experiences

Technology trends in 2021 are likely to be focused on technology with purpose. Retailers will invest to reduce costs and increase efficiency, such as via smarter supply chains, automation for online, or by rolling out technology to improve customer experience. As we saw in 2020, queuing and cash are most definitely out and contactless, frictionless experiences are in. These are not new trends, but now is a time when this technology really begins to matter to consumers.

The power of the store remains strong as a place for brand-building and inspiration, but brand relevance and customer experience must evolve to high standards to tempt shoppers back.

Income inequality signals a polarized market

As economies strive to recover post-pandemic, we can expect a growing divide in consumers’ ability to spend. At one end of the spectrum, there will be opportunities for luxury brands to sell to wealthier consumers, as indicated by swiftly rebounding sales across the globe, including in Asia. However, as concern for jobs persists into this year, the major focus for most retailers must be to compete on price and value for money. As both luxury and discount retail entities stand to benefit, mid-market brands will need to strive to differentiate their product and service offerings to ensure that they remain relevant.

In terms of Brexit, the last-minute deal struck at the end of the year has been a relief for the majority of retailers. Tesco is among those recently reporting confidence now in both its supply chain and ability to maintain low prices. However, it is not without its challenges, as the hard border in Ireland, for example, has created issues for those exporting from the UK. 

Focus on sustainability and health

Sustainability and concern for the environment have continued to grow, even as we all had other issues to deal with. Consumers are increasingly seeking out and prioritizing brands and retailers that care for the planet. Policy makers can be expected to incentivize sustainable business practices in the coming year, focused on plastics, packaging and ethical sourcing. As this momentum grows, setting and measuring targets will be a key priority for retailers.

At the same time, health will be a focus area and we anticipate more initiatives to target rising levels of obesity, particularly considering its contribution to increased morbidity during the pandemic.

Partnerships and ecosystems will drive growth

Over the past few years, we have seen an increasing number of partnerships within retail, allowing brands and retailers to become more agile and reach new customers. The M&S joint venture with Ocado is a good example of this, as is Morrisons partnering with Amazon. As pressure within the retail sector intensifies, more tie-ups will follow as complementary partnerships help to drive efficiency and innovation. Moreover, as retailers aim to achieve more, they will need to democratize decision-making and allow those further down the organization to help drive innovation.

The accelerated channel shift has led to ecosystems becoming even more powerful. As the likes of Alibaba, JD.com, and Amazon continue to dominate, brands must focus on understanding ways to win, and optimize their marketplace engagement strategies accordingly. Retailers must increasingly act like brands and brands will become retailers, as they build direct-to-consumer models.

Doing good will be good for business

As we navigate out of the global crisis, consumers are likely to have an altered view of the world. Culture and purpose, kindness and community will all be important to us and these will intrinsically link to innovation, customer engagement and loyalty. Shoppers will actively seek out ethical brands and now is the time for businesses owned by minority groups to seize the opportunity to make a real impact.

Peer-to-peer commerce will grow and as we emerge blinking into the new world, community and togetherness will be something to celebrate. Most importantly, retailers and brands must be ready to change and evolve to meet the rapidly shifting demands of consumers. We hope that the second half of 2021 will bring a much more positive retail environment for us all to enjoy, but retailers must prepare now to ensure that they are ready to benefit.

Lisa Byfield-Green is the Head of Insight for Retail Week. (This article was initially published as part of RPC’s Retail Compass Spring edition 2021)