10 trends to help you shape a new strategy
The Coronavirus pandemic has reset the outlook for key retail trends. We’re seeing acceleration in the growth of the ecommerce channel. However, the experiential retail trend – shown by in-store theatre, counter service, and food-driven experience – will become less relevant soon.
At IGD Solutions we help suppliers to understand new retail trends and their impact on retailers’ market and channel strategies. Uncovering retailers’ pain points, identifying their possible threat as well as opportunities; with our support, you can create solutions which help you to better engage with retailers.
The impact of the pandemic on retail cannot be considered in isolation. Wider societal shifts, including the increase in remote working, virtual education, and community togetherness could have a wider impact on consumers and the role of retailers.
We have identified 10 key trends, considered which are being dialled up and dialled down, and collected the key insights to support your business planning.
Accelerated ecommerce growth is challenging retailers
Shoppers have shifted to the online channel to benefit from its convenience. To retain these valuable shoppers, retailers have responded by increasing online order capacity. Retailers such as Amazon have reset shoppers’ expectations of fulfilment. We have seen retailers increasingly offer same-day, and within-the-hour fulfilment in densely populated areas.
Let’s have a look at this trend, call out some of retailers’ pain points and challenges, and identify opportunities for suppliers.
1. Profitability of ecommerce
Retailers have been reluctant to promote the online channel as it is less profitable than physical stores. And the growth of the online channel will have a negative impact on retailers’ profit and loss (P&Ls) and operating margins.
Understanding these challenges, you must be prepared to support retailers in finding efficiencies in their online supply chain. This could include increased levels of automation, implementation of AI, range rationalisation in low-trading categories and ecommerce-friendly packaging.
Through delivering in square packaging, the cube fill of each secondary case is much greater than delivering in bottle formats (P&G).
2. Loyalty to delivery schemes
Retailers will generate additional online revenues from delivery fees and tiered delivery saver schemes like Amazon Prime and Ocado Smart Pass. However, creating loyalty to retailers’ online services is a challenge.
In the UK, 54% of online shoppers do not subscribe to any delivery saver scheme (source: ShopperVista research), while a delivery fee is a barrier for shopping online. Branded manufacturers could help retailers in their goal to lock shoppers into their schemes with exclusive offers and products.
3. Online advertising
A new source of revenue is hidden in online advertising. Retailers’ digital teams will need to provide new website advertising solutions. However, only some retailers have fully explored this opportunity. One of these is Ocado which got £63.9m of supplier income, accounting for 3.9% of its total revenue in 2019. Creating new advertising solutions will help you to secure space on retailers’ digital platforms.
Identify and prioritise key trends
Each of the trends will have different relevance for a retailer and a market. Whereas the purpose-driven retail trend may be a long-term priority of high importance, the flight-to-value trend could be a short-term priority with high importance.
To focus your resources on the most relevant trend, you must prioritise them and assess their importance for each retailer and market in both the short and long-term.
React quickly and offer effective solutions
The economic consequences of the crisis will have a major impact on how these 10 trends develop. The severity of the downturn will impact shopper behaviour and shopper preferences, along with retailers’ ability to invest and respond to any of the individual trends.
However, retailers will be willing to adapt to the changing market situation quickly and effectively. Referring to the trend of ecommerce and digital retail, Ocado raised £1bn in June 2020 to increase capacity with its existing Ocado Solution partners in the UK and internationally. Plus, Schwarz Group acquired real.de, one of the largest online marketplaces in Germany.
Understand what these trends mean for your customer and your business
Our IGD Solutions team will help you to understand the latest trends and their implications for retailers. We will support you in building your business strategy and in creating effective solutions for each of your customers.
Discover more about how IGD Solutions can help you improve your business performance.