2020 was a year of upheaval and great uncertainty for retailers, with record levels of store closures and bankruptcies. The macro environment is likely to continue to remain volatile and it will be down to retailers to undertake the bold strategies that will ensure their relevance in the future.
In the US alone, 11,000 stores closed and 40 major retailers went bankrupt in 2020. With herd immunity and vaccination levels unlikely to to reach levels that will allow for meaningful lifestyle changes, the first half of 2021 is likely to provide many of the same challenges faced in 2020 – with additional border headaches for those operating between the EU and UK.
While the circumstances may not have changed, what is changing is the understanding of what the problems are and the ability to respond to them.
Working to stay open and operational through continuing periods of lockdown will be important, but it's also essential that retailers treat the shifts emerging as longer-term movements and realign business accordingly. The hollowing out of the middle class, the climate emergency and the transition online are long term evolutions and businesses need to adopt strategies that address all of these in order to ensure long term survival.
The global economy is expected to recover slowly from the collapse caused by the Covid-19 pandemic. Output is expected to expand 4% in 2021 but will remain more than 5% below pre-pandemic projections, according to World Bank predictions.
Economies around the world will face very different outlooks in 2021, with markets that have successfully navigated the pandemic having very different outlooks.
China's economy is forecast to grow by 7.9% in 2021; US GDP is forecast to expand 3.5% in 2021, after an estimated 3.6% contraction in 2020. In the euro area, output is anticipated to grow 3.6% this year, following a 7.4% decline in 2020. Similarly, New Zealand, which took initial aggressive moves to lock down in the first wave is surging out into a V-shaped recovery in the third quarter of 2020, with the 14% jump in GDP significantly higher than economists in the country forecast, coming against an 11% contraction in the second quarter.
This divergence in economic outlooks is also taking place at an individual level and a corporate one with the K-shaped forecast likely to see success of larger brands and people with higher incomes that have been able to use their scale and adapt to a digital reality, while SMEs and those in lower paying roles likely to face increased difficulties due to lower levels of digital integration and jobs that require a physical presence.
Consumers will be expecting companies to build back better from the crisis, with more sustainable and equitable systems that are building towards a positive future.
According to global research from Accenture, 67% of consumers think that businesses will ‘build back better’ by investing in longer-term, sustainable and fair solutions.
Consumers are starting to recognise that ethical consumerism is not going to achieve the necessary levels of uptake in order to avoid the worst impacts of the climate emergency. Having witnessed the speed at which businesses and governments were able to rapidly change systems in the face of the pandemic, they will expect the same degree of focus and energy applied to the climate crisis.
At the same time, the events that led to the groundswell of support for the Black Lives Matter movement is likely to continue into 2021, with consumers expecting to act upon the supportive messaging they witnessed in the middle of 2020.
Expect consumers to shift their focus from buying ethical products, choosing items from capsule collections that align with their personal values to agitating for ethical systems, where consumers are not charged a premium for products that align with their values.
This will require businesses to build forward with sustainable and equitable business strategies that are integrated into business operations, for instance, investing in renewable energy and integrating more sustainable fibres into mainline products.
2020 saw the world shift online as lockdowns prevented real life interaction. As vaccines start to shift behaviours in the latter parts of the year consumers will have normalised online behaviours and expect businesses to be able to serve them digitally.
In India, the average amount of screen time shot up by 25% over the course of the pandemic to almost seven hours per day, according to research commissioned by handset maker Vivo and conducted by CMR. These sorts of statistics are being replicated around the world, with the largest shifts taking place in emerging markets, according to research conducted by the UN Conference on Trade and Development.
E-commerce is defining the new normal for consumers, with Edge by Ascential forecasts placing e-commerce growth at 32.3% in 2020, to account for 27.7% of overall sales.
Where consumers are starting to return to a version of Covid-normal, digital penetration is remaining, for instance, in China, online sales accounted for 74.5% of sales in 2020, with this predicted to increase to 77.1% in 2021.
Businesses will need to incorporate digital into every aspect of retail strategy, integrating online options into every aspect of the sales journey.
Reconfiguring the physical store
Supply chain management