Retail in 2021: What will endure and what’s going to change?

11 predictions for trends that will shape the next 12 months

What lies ahead for 2021?

The United States will have a new president in the White House. “The Matrix 4” will hit the big screen, Tokyo hopes to host the Olympic Games and sales of CBD products will continue to climb. JPMorgan Chase & Co. and Morgan Stanley are feeling bullish about the stock market in 2021 and conversations about vaccines are more than likely to reach a fevered pitch.

Unfortunately, the U.S. can also expect the long tail impact of the COVID-19 pandemic to be felt in the retail industry for months to come.

As the nation collectively learned in 2020, it’s impossible to truly see what lies over the horizon. Nothing can topple predictions like a mysterious virus that brings the world to a virtual standstill for months.

A year ago, NRF predicted tumultuous change in retail supply chains, a voracious appetite for resale and recommerce, and “blurred lines” in retail as companies worked to develop innovative ways to servicing and supporting the customer journey.

We got those right. Still, like every other prognosticator, we had no clue of the looming pandemic or its disruptive effects.

The biggest takeaway from 2020 is the shift to ecommerce; consumers have embraced online shopping with vigor and retailers have responded with the speedy rollout of new technologies, new apps and new ways of meeting shoppers’ needs. The words “contactless” and “frictionless” have quickly become part of the vernacular and companies that have managed to break the mold and adapt are winning.

What’s ahead for 2021? Here are 10 predictions — plus one for good measure — that are likely to shape the next 12 months.

Direct-to-consumer brands flexing partnership muscles and exploring models to differentiate from the pack will see disruptive growth and profitability.

After a brief period of suspicion as to how these darlings would fair in the long term, it appears the DTC landscape presents plenty of possibilities. Nimble by nature, brands have introduced new categories (Allbirds, Casper) and are pouring new energy into perfecting their customer-obsession objectives (Stitch Fix, Glossier, Peloton).

It appears the future is multichannel as brands such as Everlane and Birdies link up with Nordstrom, Headspace partners with Spotify, and wellness company Alo and beauty brand Tatcha team up in Animal Crossing. And lest you think there’s a dearth of new entrants, don’t forget CUUP, Prose and JUDY.

Supply chain’s transformation has been accelerated by the pandemic, leveraged by 5G and underpinned by substantial investments in digital solutions. Good news: There’s no stopping the momentum now.

If the C-suite were not already convinced supply chain disruption could have serious repercussions, they got the message loud and clear courtesy of COVID-19. The pandemic spawned a series of recalibrations throughout the global supply chain as retailers and manufacturers reexamined every step from procurement to sourcing and from reduced lead times to improved speed, resiliency and responsiveness.

And those shifts will be ongoing over the next 12 to 18 months. Along with increased investments in all things related to logistics, expect more experimentation, particularly in dark stores, ghost kitchens, micro-fulfillment centers and malls masquerading as distribution centers.

Spending on global reverse logistics technologies will spike in 2021 — forecast last year to hit $604 billion by 2025 — as retailers seek to alleviate a major pain point in the shopping journey and minimize the costs of returns. The quest to build a more sustainable supply chain lost some steam in 2020, but the vision for a more sustainable future and a reduced carbon footprint remains a key objective.

Livestreaming will take center stage in 2021, with the potential to be one of the fastest-growing categories in the digital one-to-one ecosystem.

Nothing beats the experience of shopping in person, yet livestreaming is the closest many retailers and brands have been able to come to physically connecting with their customers during the pandemic.

The Interactive Advertising Bureau recently reported that livestream-generated sales are expected to double to $120 billion worldwide in 2021. Experts say digital savvy shoppers want more than just a product; they want to feel a connection to a brand. Thus, a growing number of brands are incorporating livestreaming into their strategy.

Bon Appetit magazine’s Test Kitchen crew produced “The BA Test Kitchen Variety Show.” Estee Lauder hosted more than 1 million virtual try-on sessions globally in the first quarter and is also connecting with consumers through its Clinique Skin School with on-demand live streaming. And these examples are just the tip of the iceberg.

Adoption of robotics technology, food delivery robots and autonomous vehicles are no longer considered a novelty, but it’s still shy of primetime status: Experimentation needs to accelerate, and costs need to come down.

2020 was supposed to be a breakout year for robots in retail, perhaps even more so given the “hands-off” mindset that colored the past year. That wasn’t the case. Experiments and rollouts were sluggish as other projects took priority.

Still, the objectives remain firm: In-store robots must accurately, repeatedly and autonomously collect and process data to solve business problems. Drones still have the potential to make certain trips obsolete, conserve energy and contribute to more sustainable practices.

There are bright spots: Walmart is experimenting with driverless cars and flying drones; Walgreens has partnered with Wing and is testing drone deliveries in Virginia; Nuro’s autonomous vehicles are rolling across a handful of spots around the country; and robots are powering in-store inventory management and speeding fulfillment in distribution centers. Stay tuned.

“Evolution” is the word for shopping malls. Shoppers will return after the pandemic, but malls need to be reimagined from multi-level boxes anchored by department stores to more enticing, smaller environments in sync with consumers’ needs.

Shopping malls became an industry-wide punching bag in 2020. Faced with a decline in foot traffic, operators are being called upon to convert empty commercial space into mini-fulfillment centers for their retail tenants. If only it were that easy.

Distressed malls appear to be an attractive target for companies such as Amazon and FedEx that are eying the empty spaces for micro-fulfillment. But flipping the model will require the properties to be rezoned and, in many instances, the shift from commercial to industrial is likely to be met with pushback from local residents.

Other ideas that have been floated to repurpose mall spaces include senior citizen housing, health care facilities and community colleges, but the same challenges persist. Another bitter pill to swallow: The shift toward experiential tenants that began in earnest just a few years ago is disappearing.

Touch-free technology will become mainstream.

A tremendous amount of innovation during the pandemic was born of the need to reduce the frequency of touch. And shoppers have embraced the trend with gusto. Digital shopping has soared, contactless payments have quickly become the norm, and augmented and virtual reality — technologies that have been dancing on the edge of more widespread acceptance for the last few years — are poised for growth.

Case in point: virtual fitting rooms. Using AR to facilitate virtual try-ons is proving to reduce return rates. Look for retailers to connect mirrors to social media — a move that will provide a more interactive personalized experience.

Shiseido is using hands-free technology (along with artificial intelligence and algorithms) to remotely analyze skin and offer personalized suggestions. A Japanese company recently debuted the first-ever foot-operated vending machine allowing hands-free access. And it’s hard to ignore the elephant in the room: Amazon One, the new technology for its Amazon Go stores that lets shoppers pay for their groceries by scanning the palm of their hand. This one has enormous potential.

Social commerce has the potential to grow faster than overall ecommerce — proving once again that, while consumers may not be meeting up in person, socially driven commerce is uniquely embedded in their DNA.

If asked to identify the indisputable breakout trend for 2021, no doubt it would be social commerce. The idea of retailers and brands creating shopping experiences via social media has certainly taken off. Its staying power is undeniable for multiple reasons, including the exclusive feelings these opportunities create, the chance to build purchasing intent and the frictionless payment process that gives new meaning to the word “seamless.”

Technavio recently reported that the social commerce market is poised to grow by $2,051 billion during 2020-2024, progressing at a compound annual growth rate of almost 31 percent.

Who’s leading the charge? Facebook, Instagram, Twitch, TikTok, Pinterest and Spotify.

On-demand manufacturing is poised to have its day in the sun.

For years, concepts like mass customization and personalization have peppered predictions about the future of fashion. Now comes on-demand manufacturing. To be fair, it’s not new, but using on-demand strategies to create products lets brands respond faster to changing customer demand, create products as orders are placed and keep minimal amounts of stock on hand.

All of that meshes with the ethos of today’s shoppers. In addition, on-demand manufacturing improves sustainability and moves the needle closer to the goal of zero waste. It could even shift the pendulum a bit toward nearshore sourcing.

The challenge is good data and technology that allows companies to optimize that information. Zara is the poster retailer for on-demand manufacturing, but DTC brands are quickly learning the ropes.

Digital transformation defined 2020, but that was just the jumping off point for what’s to come.

The last nine months alone have produced more digital transformation than the last decade. Retailers, manufacturers and consumers alike were forced to change and what appeared to be quick fixes in the early days have quickly become habits. The surge in online shopping, the race toward frictionless payments, the quick deployment of curbside pickup and the endless flurry of apps created to enable all these changes are just the beginning.

What does this mean for 2021? Looking for ways to monetize customer data is table stakes for retailers; the challenge is doing so in a true omnichannel ecosystem. The companies that get it right will be omnipresent for shoppers — connecting online, in stores and over social commerce and making sure every touchpoint is frictionless.

A key enabler of all things digital is 5G. It may have been over-hyped a year ago, but 5G is vital as we rush headlong into 2021. If remote work, nonstop video conferencing and stepped-up digital collaboration have taught us anything, it’s that reliable connectivity and greater bandwidth are imperative. Consumers can’t afford to be disconnected, so it goes without saying that neither can businesses.

Paying for a purchase in one fell swoop is so 2018 — shoppers want options every step of the way.

The old-fashioned model of paying for items in full is fading fast as the next generation of shoppers embraces pay-over-time models and subscriptions. What began as a novelty is now available online, in-app and in-store. And it won’t be the only creative method retailers come up with to keep shoppers shopping.

Look for more subscription payment options such as Klarna, Affirm and Afterpay to gain ground; these types of options are borne of digital media, a la steaming services and gaming, but retailers are looking to get in on the action.

Other potential game changers in the payment space include rental companies such as Feather and Fernish that give consumers the chance to rent a room of furniture and pay for it monthly. Then there’s the rent-buy model, which allows aspirational shoppers to rent designer pieces for a fraction of the full price and buy at a reduced cost.

Trade-ins are becoming a thing, too: Think Levi Strauss & Co. and Patagonia. Just don’t stop thinking of creative ways to extend payment options, because the 2021 shopper demands it.

And, just in case 10 predictions for 2021 are not quite enough, here one more to consider: The death of third-party cookies will be a good thing for marketers, but no one expects the changing environment to yield positive outcomes quickly.

The rise of ecommerce, coupled with the elimination of cookies, has made data-rich “walled gardens” a priority, yet brands face new privacy regulations and compliance measures that require investments in customer data platforms. As retailers seek the next holy grail of targeting, look for those who have giant databases and/or partnerships to win.

Source: National Retail Federation