The retail ecosystem has been turned upside down over the past six months as changes big and small rippled through the segment worldwide in response to the pandemic.
Consumers shifted their buying preferences nearly overnight, and an expert panel recently joined Karen Webster for PYMNTS’ latest “On The Agenda” discussion to look at how retailers must ready themselves for the digitized landscape of the future.
The panel — Purity Cosmetics CEO Ric Kostick; Afterpay Co-founder and U.S. CEO Nick Molnar; and Apricot Lane Boutique CEO Patrick Stewart — agreed that the marketplace’s changes will only grow. Consumers are shopping more online, are increasingly interested in contactless payment methods and are showing up in stores to buy, not to browse.
They’re also looking for curbside pick-up when they order online, omnichannel interactions and more choice when it comes to how they pay and when. In short, consumers are looking for a lot of the digital enhancements they’ve become accustomed to over the past half year to now be regularly occurring features of their shopping experiences.
But the panel also agreed that perhaps more important than what has changed is what remains constant despite the pandemic — consumers are still shopping, which means there’s opportunity for retailers to capture that spending if they approach it correctly.
“We see millennial and Gen Z customers absolutely shopping, and the brands that deeply understand them are growing at faster rates than they have ever grown before,” Molnar said. “And there's a huge opportunity. The exclusive product-drop ecosystem is on fire, the online market and just the frequency with which customers are transacting is definitely elevating. There are real opportunities for those brands that deeply understand their consumer.”
Consider Consumers’ Needs
Much of the challenge of retail over the past half year, the panel agreed, has been in responding to shifting consumer preferences that aren’t always predictable. For example, Purity’s Kostick noted that his firm’s makeup sales have gone down, but its orders for skin care products have doubled.
“We're in a business where we are half makeup/half skin care, [but] the makeup category got really hit hard during this because women weren't buying makeup for staying home,” he said.
But more importantly, Kostick said that as Purity was forced to close down physical locations, its online channel — which had been 55 percent of the business pre-pandemic — became the core channel for accessing customers. Nearly overnight, that created an opportunity for leveraging digital more expansively.
But it also created operational challenges in terms of how Purity’s work processes actually functioned. Kostick said the company had to say to itself: “We have these great knowledgeable retail associates in our stores, so how do we leverage that? Is there a way we can leverage them to support the digital side of the business? And if we can, the retail staff was bonused and had their goals set on the sales through the store. How do we give them incentive to generate sales online? We're figuring that out.”
Figuring it out, Apricot Lane’s Stewart told the panel, has real rewards for a retail business The firm's franchised boutiques have fared well during the pandemic because consumers have shown a greater inclination during COVID-19 to shop local, both out of loyalty to local businesses and from a perception of greater safety at small locations.
But he added that Apricot Lane has also leveraged Facebook Live as a sales channel, with good results. Stewart said the company has used the site to connect with consumers across a whole new channel and make them want to come to the store and buy what they’re seeing.
“The Facebook Live sessions held in store are fantastically popular,” he said. “They are so great. Facebook Live is something that we hadn't done pre-COVID, but we found those half-hour to one-hour try-on sessions are very festive. The store owner and team are having cocktails, and they make it so that a customer watching is like, ‘Boy, I wish I was there.’”
Consumers, the panel agreed, are still looking for connections with merchants, but how they want those connections to occur is more varied than ever. After all, everyone has their own personal barometer for what they consider a safe level of interaction.
But panelists agreed that the critical element is offering the customer control at every phase of the interaction — how they shop, where they shop, how they pay and what they pay with. Afterpay’s Molnar said that what his firm has seen among merchants since the pandemic began is a desire to give customers a fuller set of options and control. He said the shift from physical to digital commerce gets a lot of attention, but the shift from credit to debit has been equally clear when one looks at the card network numbers.
“That is a shift towards people wanting to spend their own money,” he said. “So, when you couple the digital experience with the shift in payment behavior, there's an ability to unlock a significant amount of incremental value.”
Forging A Path Forward For The Holidays
Unlocking that incremental value while thinking about what they’re offering customers end to end is about to become crucial for retailers as the holiday shopping season gets underway.
But there will be a lot of unknown factors heading into the season this year, including when it will actually begin. Will it start after Halloween as has been traditional, or will sales start in early October as some are expecting? And will U.S. consumer spending be significantly depressed given the current economic uncertainty and ugly employment effects the pandemic has had?
These questions are tough to answer so far. Kostick noted that the uncertainty has pushed Purity to adjust its strategy heading into the holiday season in terms of how the firm will stock and present inventory to consumers.
“Usually for holiday in beauty, you have a lot of gift sets and things of that nature — but if you have a weak holiday, you end up having a ton of extra inventory that you can't sell,” he said. “So, we don't want to stuff our stores with gift sets. We're going to get more creative about how we merchandise things and do the whole holiday experience so that it's not dependent on tons and tons of gift sets.”
But Afterpay’s Molnar noted that with experiences like travel and dining less palatable due to the pandemic, consumers will have unspent cash that savvy retailers can capture during the season.
Apricot Lane’s Stewart added that retailers have an opportunity to leverage multiple channels to give something that every customer will desperately want this holiday season — a little bit of distracting joy.
“If you need to know what is negative and what bad happened in the world, the media is going to be your constant source,” he said. “But if you want to know what's happening that's really uplifting and good, it’s up to [retailers]. So, find the nuggets of joy that are out there, share them with your customers, and you will become the oasis that customers will gravitate to.”
Because after a half a year of COVID-19, the panel agreed, everyone could use just a little bit of joy as a side benefit of every shopping experience.