Jan 13 2021

NRF 2021: Retailers Will Eventually Benefit From the Challenges of 2020

Experts argue that COVID-19 was the industry’s ‘chief innovation officer.’ Brands are seeing dividends already.

Mitch Joel had a classic pandemic retail experience. After discovering that his preferred online-only store couldn’t quickly deliver the scooters he wanted to buy for his children, he checked out the website of Canadian Tire, a department store chain with a location near his Montreal home.

The site informed him that the scooters were in stock at the nearby location and that he could pick them up quickly. Because most stores in Canada were not offering in-store shopping, he used Canadian Tire’s new curbside pickup service, parking in a designated spot and calling a number. Soon, a store associate was loading the scooters into his trunk. Joel never left his vehicle.

“I’ve been a loyal shopper there ever since,” he said. “It changed the game. This forced local way of thinking changed it for me.”

Speaking at NRF 2021: Retail’s Big Show, the virtual version of the industry’s biggest annual event, which is taking place virtually through Jan. 22, Joel said the incident was emblematic of the rapid increase in innovation that brands have undergone this year. Joel, an author, speaker and founder of Six Pixels Group, called this “the Great Compression” and noted that it’s shaking up customer loyalty and changing how retailers stock their shelves and meet consumer demands.

“What we’ve seen is a true acceleration of digital transformation, in terms of innovation and in terms of where the world is at,” he said. “Everything has compressed.

In March and April of last year, we suddenly had everybody digitized, from the youngest kids in kindergarten to the elderly, all dealing with new ways to interact digitally. People were getting online and their capabilities changed, and it’s very important for retailers to think about this in a dramatic way. The stuff we expected to take until 2030 happened in the space of a few months last year.”

Retailers Made a 10-Year Digital Leap in 10 Months

Indeed, said Shelley Bransten, corporate vice president of retail and consumer goods industries for Microsoft, “COVID-19 has really been the chief innovation officer of this industry.”

One example is REI, the Washington-based retail chain that specializes on outdoor gear. Chris Putur, REI’s executive vice president of technology and operations, explained that while the company had an e-commerce platform it was proud of in 2019, “we did see a 10-year leap of business that we were doing in in stores that shifted over to digital very quickly.”

For example, while the company already had an option to buy online and pick up in-store in place, it had to quickly roll out curbside pickup when stores were forced to close to shoppers. And because many of REI’s products are precisely the sort of goods consumers want when they’re no longer able to go to public indoor spaces, the company dealt with demand spikes even as it was building a new fulfillment process.

“For example, bicycles: There was a big long stretch where we were selling five times as many bicycles as we normally would,” Putur said. “So, we not only had to do curbside pickup for regular goods but curbside for bikes. Bikes are a considered purchase. We had to implement things like virtual outfitting, so if you couldn’t go to a store because it was closed but you wanted to talk it through, you could schedule an appointment and talk through the purchase with an expert.”

Joel argued that the retail industry is in the second of a three-phase pandemic recovery process. The first phase, survival, began when the pandemic started in North America in March and ended in late summer. During that phase, retailers tried to quickly adapt their business models for the times, hoping they’d survive until business returned to normal. Many of those that were already struggling did not survive.

The second, the sustain phase, involves retailers trying to continue to meet customer needs under trying circumstances. Most have stabilized their businesses. All retailers are aiming to hit the strive phase, which is the mode retailers were in pre-pandemic, when most were healthy and thriving.

MORE FROM BIZTECH: Find out the four tech trends to watch for in retail in 2021.

Why Data Become Critical to Retailers in 2020

At the same time, Bransten said, the industry saw four key trends unfold in 2020:

  1. Data exploded, and brands found new ways to monetize it. The “tricky thing” is that most data that retailers possess is unstructured, Bransten said: “Our machines are only designed to make sense of about 10 to 20 percent of it. Retailers are increasingly asking, ‘How do I make sense of this data so I spend less time preparing data and more time responding to it and personalizing it?’”
  2. The pandemic has spawned arrangements between retailers and a host of partners. “We’re seeing partnerships around last-mile delivery, like between Walmart and Instacart, for example, and also some unlikely partnership around things like digital services, such as between Walmart and AT&T, where they’re collaborating around 5G capabilities to digitize their stores,” Bransten said.
  3. Sustainability and e-commerce have emerged as more important during the pandemic. As consumers have more time, they’re learning more; they want to know about retailers’ supply chains and business practices.
  4. According to McKinsey, 75 percent of consumers have reported a new shopping behavior during the pandemic. That could mean buying something online they’d always previously bought in person, or trying contactless payment.

“We were forced to innovate in 2020,” Joel said. “The question we’re asking in 2021 is, which of these innovations will we keep?” He cautioned retailers not to simply return to pre-pandemic business models when stores reopen fully simply because it’s easier. Consumers changed during 2020, and brands must understand who they are now.

Bransten argued that retailers have changed too, and most are not going back. “One lesson I learned in the past 10 months is that retailers that laid digital tracks early were better equipped to understand the massive change that was coming in their consumers’ behavior,” she said. 

Keep this page bookmarked for articles and videos from the event. Follow us on Twitter at @BizTechMagazine, or the official conference Twitter account, @NRFBigShow, and join the conversation using the hashtag #NRF2021.

Getty Images/ FlamingoImages

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