COVID one year later: How retail sectors have adapted to new realities
Customer Service ChannelseCommerce
Local delivery, curbside pickup, augmented reality, contactless payment — there's no question that the COVID-19 pandemic has fundamentally changed how retailers do business with customers.
“COVID-19 has accelerated the trends we've seen over the past few years as retailers reimagine the customer experience (CX), blending online and offline channels," says Katherine Cullen, senior director of industry & consumer insights at the National Retail Federation. “Many retailers are emphasizing e-commerce offerings, as well as utilizing services such as local delivery, curbside pickup and BOPIS (buy online, pick up in store) to meet customers' needs."
Retailers that were able to pivot quickly from an in-store experience to an online one reaped the benefits. In 2020, consumers spent over $861 billion online with U.S. merchants, up 44% from the previous year, says Digital Commerce 360. That's the highest annual U.S. e-commerce growth in at least two decades.
Data from IBM's U.S. Retail Index estimates that the pandemic has accelerated the shift to digital shopping by roughly five years. Looking ahead, that trend is expected to continue.
Let's take a look at sectors that did well during the pandemic and the ways they leveraged technology to stay connected to their customers and drive positive business outcomes.
Strong performing retail sectors
Home improvement retailers did a great job reaching customers who filled their lockdown days doing home renovation projects, such as painting, landscaping and re-modeling.
Home Depot, for example, stepped up investments in e-commerce by providing online project guides and videos to educate do-it-yourselfers. On its app, the company showed shoppers where to easily find items in stores via detailed store maps, to help them reduce the amount of time spent in-store. Shoppers also used Home Depot's 3D visual feature and augmented reality (AR) to see how items would look inside their homes.
Bruce Winder, a retail analyst and author of Retail Before, During and After COVID-19, says that companies also used YouTube to demo products and hosted webinars to promote items and answer customers' questions.
Beyond embracing YouTube, Home Depot also extended its return policy from 90 days to 180 days, a boon for shoppers who purchased items online.
“Online shopping return policies are more liberal," says Winder, noting that favorable return policies allow customers to purchase items with limited risk, encourage them to try new items and in some cases, try online shopping for the first time.
Big box retail
No one wants to make multiple shopping trips during a pandemic. Walmart and Target were able to offer shoppers everything they needed in the same place by creating seamless digital experiences.
Even though Walmart already had a strong omnichannel strategy before the pandemic began, the company built on this with Express Delivery, which allowed shoppers in certain locations to have their online purchases delivered to their homes within two hours.
Target, meanwhile, offered a host of benefits on its mobile app including contactless payment, to meet demand from shoppers who still preferred to shop in-person for items like groceries and toiletries.
"Businesses that were categorized as essential, like grocery stores, in many cases continued to see strong brick-and-mortar performance throughout the pandemic," Cullen says.
Target also doubled the number of drive-up spots where shoppers could pick up items - especially crucial, given that research shows that 68% of Americans will use curbside in the future. They also boosted the number of 'MyCheckout' devices so that shoppers could check out in multiple locations throughout the store to encourage physical distancing by avoiding the need to queue up in lines at the checkout lanes.
Electronic retailers emerged as a bright spot during the pandemic. Cullen says that sales were especially popular during last year's back-to-school season, given that many children remained at home and needed devices for virtual learning.
Winder also notes that some retailers offered virtual appointments to sell electronics and other higher-priced products. For instance, Best Buy offered contactless curbside pickup, online chat and free digital consultations with tech experts. The company also leveraged localized data and analytics to pilot various services for local shoppers, such as opening stores an hour earlier for consultations. Additionally, Best Buy expanded its use of augmented reality by allowing customers to digitally preview products in their homes using their mobile app.
Unfortunately, there were sectors in retail that weren't able to sustain the downturn in business. Some companies downsized, while others filed for bankruptcy. But within these sectors, there were companies that persevered and emerged stronger with the help of technology and a little creativity.
Knowing that luxury customers crave virtual try-on experiences, clothing retailer Burberry spearheaded a new AR project using Google Search technology to let people try on items before buying through online retail channels — a nice-to-have perk in normal times and one that proved to be essential during the pandemic. In fact, products that feature AR content show a 94% higher conversion rate than products that don't have it, according to new data from e-commerce company Shopify.
Burberry also became the first luxury retailer to livestream its spring fashion show on Twitch to attract new and younger customers to the brand, a novel idea during the pandemic that paid off - during an incredibly challenging year, it grew full-price digital sales by 50%.
While some apparel companies struggled during the pandemic, Lululemon enhanced its digital offerings via its $500 million purchase of at-home exercise equipment maker Mirror. By embracing a digital solution, Lululemon was able to help offset some of the challenges brought on by COVID-19 by growing its community of fitness-minded members and strengthening its predictable revenue stream (Mirror charges a monthly fee to stream classes.)
Nike turned to its app to help drive sales growth in 2020. While the company previously required a subscription to access workouts through its Nike Training Club app, in March, the brand began offering the content at no charge to assist those at home during the pandemic. This, in turn, provided a boost to sales (a smart strategy, given that PwC estimates that around 45% of people are using their phones more to shop since the pandemic).
In addition, Nike published a magazine so that users could color drawings of its Air Max sneakers and see their work in 3D AR on their smartphones. They also set up an interactive microsite that unlocked exclusive digital content for its mobile users.
The only constant is change
Over the past year, COVID-19 has been a major catalyst for transformation in retail. But, even after the pandemic subsides, technology will continue to reshape retail as companies experiment with digital solutions to meet shoppers' evolving habits and demands. From AR "try-before-you-buy" experiences, to seamless omnichannel shopping, it will continue to be critical for retailers to leverage innovative and leading-edge digital solutions if they're going to keep up with the pace of change.