SOURCE: Retail Dive
The pandemic, and recovery from it, will likely define the year as consumers look to refresh their wardrobes and retailers hold on to new practices that worked, analysts say.
After a year that unfolded unlike anybody’s predictions, the retail industry and its analysts are trying to game out what 2021 could look like as COVID-19 continues to surge, vaccines against the disease roll out and anxious consumers pine for life after lockdown.
Vaccines that inoculate against the coronavirus could shift many of the trends that 2020 brought, while some changes are likely to remain in place and accelerate as the U.S. and the world try to build a new normal.
Categories that downshifted during the pandemic could see “strong” demand this year, including apparel, beauty and footwear, according to the NPD Group’s Chief Industry Advisor Marshal Cohen. At the same time, those areas those that gained traction in 2020, such as home goods and other categories that helped make stay-at-home life better, could lose steam in 2021.
Other growth areas, like gaming and home productivity, could continue their growth post-pandemic, according to NPD Group.
Some new shopping habits are likely to remain in place as well. As Cohen noted, online shopping by consumers over 65 remained strong throughout the year in 2020. Some could return to brick-and-mortar shopping after vaccination, but NPD said that “it will be important to follow the long-term implications of older consumers adopting e-commerce and monitor the extent to which online shopping displaces in-store shopping for this group.”
Digital still a top priority
According to Deloitte survey data, digital acceleration remains a priority for 88% of retail executives going into 2021, making it chief among all topics. That follows a year when, according to Deloitte InSightIQ analysis of Affinity Solutions spending data, online’s share of retail spending hit 40% in the spring and holiday season.
“With the pandemic taking the volume of digital interactions to unprecedented levels, the majority of retailers expect a continued increase in demand for digital engagements through 2021,” Deloitte staff wrote in a recent report.
It wasn’t digital alone that surged last year. Omnichannel, with its blend of digital and store operations, also took center stage and is likely to remain a major force in retail. According to a November study from NPD, 34% of consumers reported using a buy online, pick up in store option since COVID-19 restrictions began, and 31% said they had used curbside pickup.
In a company blog post, AlixPartners Senior Vice President Alexa Driansky wrote that 2021 will be a year when omnichannel “stops being an afterthought” for the industry.
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For consumers, the curbside and store pickup options reduced social contact amid a pandemic. For retailers, as Driansky noted, it can help reduce the operational costs of e-commerce. She writes that these channels “create a ‘win-win’ answer of speed and convenience for customers and reduced shipping costs for retailers.”
General cost cuts and lean inventories adopted last year amid store closures and general uncertainty could stick in 2021, boosting the bottom line for retailers and brands, B. Riley’s Anderson noted.
The year ahead could also be defined, as in years past, by financial turmoil for some. Driansky noted that “many more retailers will file for bankruptcy, while those with deep pockets will make opportunistic acquisitions or consolidations.”
While deal volume hit a six-year low in 2020, the total value of mergers in the consumer market ticked up by 7% from 2019, according to a recent PwC report.
“Consumer players continue to rationalize their brand portfolios to reduce supply chain complexities and prioritize core brands for growth and scale,” the report states. “Investments in direct-to-consumer channels and digitally native brands may help companies stay relevant amid rapid online sales growth. Emerging tech adoption will help to build further transparency across the supply chain.”
As the market picks up generally, it could make the path for other kinds of deals as well.
As one example, Anderson suggested that L Brands’ spinoff of Bath & Body Works from its Victoria’s Secret brand could be back on, after a deal to sell a majority stake in Victoria’s Secret to private equity firm Sycamore Partners fell apart amid the pandemic last year.