Nobody could have predicted the ecommerce climate in 2020. But the Digital Commerce 360 staff thinks the past year’s events lend themselves to some forecasting as 2021 takes shape.
In some cases, we think some retail and ecommerce trends that emerged over the past 12 months will continue as COVID-19 vaccines roll out gradually and the U.S. economy remains still severely shaken by the effects of coronavirus-related lockdowns and restrictions. But with the retail sector forever changed, many corporations, investors and entrepreneurs could benefit from opportunities unheard of at the start of 2020, while others will find it harder to do business in the new year.
Below are some of what my colleagues and I expect in 2021.
Realignment and growth opportunities
“Tech companies will buy traditional retailers and shopping malls. The stock market value of tech companies like Amazon, Google and Facebook is soaring and likely will rise even further in 2021 as the economy rebounds from the pandemic,” says Don Davis, editor at large. “Meanwhile, brick-and-mortar retailers and malls are worth very little in the eyes of investors.”
The low valuations of traditional retailers will make it easy for the tech giants to cherry-pick from among retail chains and malls, he says. Online retailers could buy up such merchants as J.C. Penney Co. Inc. (No. 31 in the 2020 Digital Commerce 360 Top 1000) or Sears Holdings Corp. (No. 41) and use their real estate as convenient pickup locations for online orders. In addition to adding physical locations. Amazon could deepen its drive into luxury by buying retailers like Neiman Marcus (No. 40) or Saks Fifth Avenue, currently owned by Hudson’s Bay Co. (No. 28), Davis says.
Other opportunities will emerge in the online grocery sector. Many Americans have learned how to order groceries on their computers and smartphones to order for delivery or curbside pickup.
Katie Evans, chief technology editor, says buying groceries online is here to stay. “Online grocery shopping will become so popular that many traditional grocery stores will shutter or become fulfillment centers for online grocery orders as grocers realize they don’t have to pay for as many cashiers, carts, massive parking lots, etc.”
I write a lot about the online food business and I wholeheartedly agree. Online grocery shopping will remain at elevated levels compared with 2019. I also expect app-based delivery services like Instacart, Mercato Inc., DoorDash and Rosie to gain more clients as small chains and independents try to keep up with the giants like Amazon and Walmart.
Meanwhile, I believe Amazon will open its omnichannel-first Fresh grocery stores at a more rapid rate in 2021, compared with 2020. Walmart, the nation’s largest grocer, will press its advantage in grocery pickup points and continue to roll out delivery in more places.
Jessica Young, senior research analyst and business reporter, says more retailers will think about how to cater to older consumers, who in 2020 became much more comfortable shopping online during the pandemic. That includes purchasing essentials like groceries.
“Online adoption for essentials like groceries skyrocketed this year and will not drop back to pre-pandemic levels,” Young says. However, she says, grocery is an ecommerce category that’s likely to have some “backsliding,” given how frustrating it can still be to leave produce picking to a stranger or manually select “do not substitute” for every in-cart item. “But online grocers have seen the opportunity that exists if they streamline and improve customer experience regarding the delivery process,” she says.
Technology and operational improvements
2021 also could be a year for getting close to customers without being in the same location, says Lauren Freedman, senior consumer insights analyst. “Virtual appointments and private shopping see further adoption as retail goes virtual to take care of their customers in these challenging times,” she says.
Young also says retailers will invest in technology aimed at improving their customer-service operations.
“They will keep investing in technology, marketing and employee training for features like virtual appointments, which have seen a recent proliferation,” Young says. And price-matching and return policies will remain lax, she says, as retailers aim to alleviate any concerns about early buying or potential store closures.
Stephanie Crets, digital editor, says 2021 will be a year when retailers double down on technology. She sees online merchants investing in ecommerce platforms and adding new tricks. Site features, she says, will continue to grow in importance as shoppers grow increasingly comfortable shopping online—and retailers increasingly look for more ways to re-create the in-store shopping experience at home.
The emphasis on technology also will be apparent in retailers’ fulfillment operations, Crets says. “With the coronavirus overburdening fulfillment centers and workers, more retailers will adopt automation such as robotics and artificial intelligence technology to increase efficiency and productivity,” she adds.
Evans says retailers will work hard in 2021 to improve their supply chains. “After being burned by the pandemic, retailers will seriously invest in diversifying their supply chains, having multiple backup options for sourcing products. The same goes for fulfillment and warehousing,” Evans says. “They will invest more and think long and hard about contingency plans for these areas of their businesses.”
April Berthene, managing editor, adds that curbside pickup is here to stay. “More retailers will offer the service, and even with a vaccine, consumers will continue to use curbside because it is so convenient,” she says.
Tabitha Cassidy, content manager and research analyst, says social media and messaging apps will rise as a separate ecommerce channel. “We’ll begin to see ecommerce retailers operating solely on these channels before beginning a traditional, desktop website,” she says.
Like Evans, Cassidy also expects retailers to alter their supply chains. “Domestic product sourcing will become a larger priority for retailers as they continue to evaluate the logistics of overseas production,” she says.
Ecommerce will become harder in 2021 than it was in 2020. As usual, the advantage will go to the agile, adaptable and innovative retailers. Increasingly, that includes having a conscience, Berthene says.
“A number of merchants have highlighted their environmental and sustainable priorities on their website as differentiating features for their businesses,” she says. “More merchants will do this with both the environment and other values, such as diversity or made-in-America products.”
Evans says retailers should also prepare for consumers to return to in-store shopping once they believe it’s safe once again.
“Sometime in the coming year, if the vaccine rolls out as anticipated and most of the population has access to it, there will be a turn of the tide against ecommerce,” she says. “People will long for the social, emotional and physical connection of shopping in a store and be so sick of sitting at their computer screens that there will be a big uptick in store-based shopping.”
Davis expects consolidation of Amazon-selling small brands to compete on Amazon’s marketplace, thanks to the consolidation of such retailers by investment firms.
“A new type of company has emerged in recent years that raises lots of capital and then buys small Amazon brands, with the idea of putting more resources behind those brands and increasing sales and profits,” he says. “The more these Amazon aggregators grow, the more difficult it will be for smaller brands to sell on Amazon.”
At the same time, Davis says, established consumer packaged goods (CPG) brands are selling more on Amazon, further heightening competition.
“A lot of entrepreneurs have made a good living on Amazon up until now, but that won’t be so easy in 2021 and beyond,” Davis says.
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