Retail has undergone a dramatic transformation in recent years as consumers have shifted to online channels. This first came out of necessity, but now it's out of choice with ecommerce sales continuing to grow despite the reopening of the high street.
How has the retail industry adapted to overcome the challenges that emerged in the last few years? And what are the opportunities that lie ahead? Leaders from ASOS, eBay, John Lewis and IKEA provided their views at Retail Week Live 2021.
Brands can't take customer loyalty for granted
Successful vaccine rollouts may be allowing the world to reopen gradually. But, for retail, it's clear that there's no going back to the way things were. In Europe, our research finds that 74% of consumers have no intention to significantly reduce their online shopping now that they can re-access brick and mortar shops. Similarly, US consumers intend to continue shopping online, including everyday necessities like groceries.
With the shift to online commerce becoming permanent, brands must be aware that customer loyalty is no longer a given, argues Eve Williams, eBay's Chief Marketing Officer in the UK. Case in point, at the start of the pandemic, customers bought from brands they knew and trusted. But over time, they've become more comfortable trying new brands they'd never engaged with before.
As a result, retailers must create experiences that make customers want to return. And this means understanding their behaviors and, more importantly, their needs and expectations.
Peter Jelkeby, IKEA's UK Country Retail Manager and Chief Sustainability Officer, sounded a warning to those who take customers' needs for granted: "We might think we know what customers want, but we don't. At IKEA, we do one million home visits a year to gather this data. We can't make a difference in their lives unless we understand them."
It's time to think outside the shopping cart
Customers' growing comfort with online shopping means they're becoming more willing to try new ways to buy. But for them to do so, retailers need to earn their trust by offering value-added services at the checkout.
eBay, for instance, launched a sneaker authentication service with great success. The collectible sneaker market has been growing steadily for the past five years. So, by offering consumers a way to confirm genuine items, eBay has positioned itself as the go-to collectible sneaker marketplace.
Subscriptions are another opportunity. Our research finds that 55% of consumers plan to increase their usage of rental style subscription services for products such as clothes, hardware and furniture. Building subscription models is a greenfield opportunity for many retailers to secure long-term customer loyalty and build a reliable stream of predictable, recurring revenue.
But the opportunities go beyond ecommerce retailers' core business. The rise of embedded finance and banking-as-a-service means they can also build new revenue streams by branching out and offering financial products at the time and place where it makes the most sense.
Buy now and pay later loans when paying for big-ticket items, for instance. Or even health insurance when customers buy fitness equipment.
In her keynote speech, John Lewis' Executive Director, Strategy and Commercial Development, Nina Bhatia, said that diversification has been instrumental to the brand's success. As a long-term strategy, John Lewis aims to achieve 40% of its profits outside of its core retail offering.
This diversification has also strengthened the brand's reputation. "Customers say they want to do more in their lives," said Bhatia, 'And they trust John Lewis to help them achieve this."
Embracing customers' values
Changes in shopping patterns aside, Covid-19 has also made many customers re-evaluate their priorities.
Lockdowns, business shutdowns, and the other consequences of the pandemic have shone a spotlight on the social and environmental impacts of the global economy. As a result, customers are increasingly seeking out inclusive, sustainable, and ethical brands.
For retailers, this is tricky ground. More and more consumers will only buy from brands that match their values. But brands need to be genuine, or their efforts risk coming across as an attempt to drum up business by jumping on the bandwagon.
"If you want to be more sustainable, you need to make sustainability more affordable and accessible," says IKEA's Jelkeby. Similarly, John Mooney, Brand Creative Director at ASOS, added: "inclusivity shouldn't be just marketing. Otherwise, it comes off as an afterthought. It has to be ingrained in every aspect of the business."
IKEA has taken steps to make 40% of its product range more sustainable. They've also introduced take-back and buy-back schemes that offer customers vouchers and money back to recycle their old furniture in store.
Meanwhile, ASOS launched a tool that shows how the same item of clothing looks on 16 different body shapes and heights — a move aimed at dismantling infamously unrealistic fashion standards and normalizing diversity.
It's a new dawn for retail
The pandemic may be one step closer to being 'over,' but its consequences are here to stay. Customers' attitudes, needs, and expectations have shifted. And to thrive in this new landscape, brands must continuously look ahead and innovate.