March 27, 2020 at 5:00 am ET
With social distancing measures taking hold across the country, the outlook for retail is clear: Retailers have to go digital to survive. Those who do could actually thrive; consider Amazon, for example, which announced this week that it’s hiring 100,000 more employees to handle order increases.
With COVID-19, digital capabilities have exponentially increased in importance to help weather the virus. Starbucks has gone from “sip and stay” to “grab and go” by closing seating areas in all U.S. locations. Apple, Lulemon, Nike and many more retail locations have gone totally online.
As the senior vice president of retail for a global software product development company, I’ve seen how rapidly the retail industry has evolved. Now, and in post-COVID days, the demand for software that can expand digital capabilities will skyrocket. Even in 2019, when shopping was high, over 9,000 stores closed in the United States, mainly those struggling to incorporate new consumer digital demands. Many of these demands will focus on ease of ordering and home delivery options.
In the fourth quarter of 2019, e-commerce sales made up over 10 percent of total retail sales – the highest ever. Retailers that are making the most of new technology began coming out ahead; digital behemoth Amazon, unsurprisingly, was the leader in e-commerce, with nearly 40 percent of e-commerce sales in 2019 and 4.6 percent of total U.S. retail sales. Target, however, also recently broke into the top 10 U.S. e-commerce retailers, thanks to a digital push that includes features like in-store pickup and its invite-only curated online marketplace. In 2017, Home Depot announced an $11 billion investment to improve its digital services. This may have been just in time.
These new tech strategies are a major effort to avoid the failures that plagued mall giants like Things Remembered, Gymboree, Forever 21 and Destination Maternity, which all filed for bankruptcy last year.
Successful brands today often employ a growing trend in retail – the app. It’s simply not enough anymore to have a website, however sophisticated or streamlined that site might be. More than a third of e-commerce purchases in 2019 were made with a smartphone, and as we move further into 2020, we’ll see more and more retailers releasing their own apps. The amount of time consumers spent in shopping apps increased 60 percent between 2016 and 2018 alone, and today, four in five smartphone users say they’ve used their phones to buy at least one item in the past six months. A recent study found that millennials now make 36 percent of all their purchases with their smartphones (and considering millennials now make up a third of shoppers for apparel, jewelry, beauty products and toys, those industries should especially take note). Shopping apps are clearly not the fad market that analysts predicted just a year ago.
Again, Starbucks is an example of how retailers are capitalizing on digital features that make shopping more convenient. In less than two years after its launch in 2011, the beverage company’s app had received more than 70 million mobile payment transactions. Even before physical locations temporarily closed, millions of people were skipping the line by ordering through the app, and the chain opened a mobile-only location in New York City.
The shopping experience of the future isn’t in apps alone; the lines between what’s digital and what’s not have blurred significantly in the past year. When stores reopen, there will be much more integration of mobile and digital features with brick and mortar browsing. Shopping will be just as much about the experience as the end product. Retailers are incorporating the “endless aisle,” in which you look at and touch specific items in the store, like furniture, but then view dozens of different customizations for that product (Interior Define, which has thriving national sales but only has stores in six cities, is an example).
In the future you’ll also be able to “opt into” sharing your data and preferences with a retailer when you walk into the store; these preferences will let store associates know things like whether or not you like to be assisted or shop alone. When you stop in front of, let’s say, a pair of shoes, a video related to the product will launch on a background screen. When you go into the dressing room, you’ll be able to request a different size or color using a dressing room monitor, or ask a sales associate to pick out coordinating accessories.
Social commerce is expanding as well. Social media ads are being supplemented by “conversational commerce” – using smart devices like Alexa to order products without looking at a screen at all. And thanks to platforms like MikMak, brands are beginning to incorporate shoppable videos into their offerings.
Retail of the future won’t be as segmented as it has been the past few years; one store won’t “own” the brick and mortar space, while another owns the app space and another dominates on social media. Retail is quickly becoming a multi-platform experience, and this shift is only accelerated by the current global health crisis. To stay in the game, you have to be able to play it digitally.
Casey Craig is senior vice president of retail at 3Pillar Global.
Morning Consult welcomes op-ed submissions on policy, politics and business strategy in our coverage areas. Updated submission guidelines can be found here.