It’s one year from today: Nov. 9, 2021.
It’s been 18 months since the coronavirus swept the world and changed everything about it. But finally, the citizens of the world are ready to re-engage in the physical world the way they did in January 2020.
A widely available vaccine and FDA-approved therapeutics have given consumers the confidence that sitting together indoors, in a crowded restaurant, carries little to no risk. Neither does cheering on their favorite sports teams in a crowded stadium or booking that long-awaited vacation with family to a faraway destination.
And, boy, after 18 months of so little human contact, are they ever ready.
The pent-up demand for all of the experiences impossible to replicate in the digital world promises to be explosive.
Businesses across all facets of the economy are preparing to capture some of that demand — and spend. If they get those customers they’ve missed for so long, maybe they’ll keep them.
For retailers, it is a time of reexamination.
Their 2022 business plans reflect the reality that the decline in physical store shopping, already well underway pre-pandemic, was accelerated in the face of COVID. The year 2021 was more or less a continuation of most of 2020, when consumers’ concerns over their health trumped their interest in going to the store to shop.
And where digital and digital-first experiences delivered, literally.
Over those 18 months, from the start of pandemic-caused lockdowns, large swaths of consumers who once viewed “going shopping” as a social activity found digital to be a more than a suitable substitute for buying what they needed. Nearly eight in ten U.S. consumers found the experience so satisfying they say they’ll stick with most or all of the digital-first habits they’ve formed over that time. Shopping for essentials such as groceries and household staples had slowly shifted to weekdays and online, as work-from-home consumers no longer had to time-box shopping in physical stores on evenings and weekends.
At the same time, consumers’ needs had changed as the stay-at-home economy ushered in a subtle but important shift in shopping and buying priorities.
As such, for many consumers, replacing the physical store with digital – or a digital-first shopping experience – wasn’t hard. In fact, it was pretty easy, even for the digital dilettantes or totally new-to-digital shoppers. Digital-first or digital-native retailers made it so.
Retail’s own performance reflected that shift.
Online sales boomed while physical store sales slumped for many, even after stores reopened and were staffed to receive customers. Brands fast-tracked their own direct-to-consumer efforts as stores were no longer the reliable distribution outlets they once were.
The conversations in retail boardrooms and war rooms in November of 2021 will center on how to direct some of that pent-up demand their way.
Success will require a shift in their own thinking.
And it will require finally confronting the reality that even though a consumer still spends most of her money and time shopping in physical stores, she consistently finds it to be the least satisfying channel in which to shop.
The Numbers Have It
Released today is the PYMNTS study on the digital shopping experience as told by a census-balanced panel of 2,170 consumers and 500 merchants in the U.S.
This work, The Global Digital Shopping Index, done in collaboration with Cybersource, is part of a global effort across four countries to help retailers better understand how to align consumer preferences and expectations when shopping for retail and grocery products with what they offer today. The U.S. survey was fielded in mid-July of 2020; those results will be followed shortly by those for Australia, the U.K. and Brazil.
In the U.S., we find a consumer who no longer uses the web to inform how she shops (or where she chooses to shop) in a physical store, but as a shopping means and an end. More consumers — more than four in 10 — are starting and ending their shopping journeys online (including delivery to their doorstep), at the same time that fewer consumers are starting and ending their shopping journeys in-store.
The share of what we call “online natives” has increased 17 percent since March, at the same time that brick-and-mortar loyalists have declined 10 percent.
A key element of the PYMNTS’ research is the use of statistical techniques to index consumer satisfaction across the various channels they shop.
To do that, PYMNTS examined 27 features that touch all aspects of the consumer shopping journey — everything from inventory availability to product ratings and recommendations, from refund and dispute and data protection policies to online ordering, delivery and curbside pickup, as well as touchless payments, including contactless, at the physical point of sale.
For consumers, digital channels now offer the convenience, efficiency and safety that physical stores do not. In fact, PYMNTS’ analysis also reveals that the satisfaction scores of consumers shopping online are twice as high as those shopping in stores.
A great deal of that satisfaction is the result of consumers using features that increase the likelihood of getting what they want when they want it. Features like real-time inventory availability, delivery, curbside pickup, product reviews and recommendations — as well as clarity on refunds, disputes, policies on data protections and security — all lower the risk and eliminate the frictions consumers face, especially during a pandemic, when shopping in a physical store.
That’s not the case when shopping in a physical store.
Once a consumer has committed to shopping in a physical store, they’ve also committed to selecting from what that store has in stock – or being okay with leaving emptyhanded or going to another store. Digital eliminates that risk at the same time that it mitigates consumers’ concerns over their personal health and safety.
Most likely by late 2021, and possibly a bit earlier, safety will no longer be consumers’ key shopping consideration, as ease and convenience will become the minimum standard that all retailers must meet.
The retail success stories of 2022 and beyond will be those that use digital tools to make it more efficient for consumers to get what they need using digital channels, and what they want to buy via a unique and valuable in-store experience.
From Efficiency To Experience
The pandemic has paved the path for consumers to bifurcate where they shop and what they buy. The top performers won’t make consumers choose one path over the other.
PYMNTS estimates that roughly 60 percent of the average consumer’s food budget is spent on the center-of-the-store purchases classified as consumer packaged goods — the staples that line consumers’ pantry shelves and kitchen drawers. These are also the products that many retailers, including the brands themselves, are making it easy for consumers to “set and forget” through subscription offerings.
Why go to the store once a week to stock up on paper towels, laundry detergent and cleaning supplies, canned goods, aluminum foil, salty snacks and chicken stock when those items can be delivered automatically, at a pre-determined frequency, to consumers’ homes?
Over time, these “set and forget” options will change how consumers use grocery stores and their expectations for what they will find when they visit them — in fact, they already have. Ordering groceries online and having them delivered is now something that 12 percent of U.S. consumers do — and that number is growing. It’s also something in which grocery purveyors are investing heavily to keep and grow their share of the market.
Subscribe and Save options from Amazon and subscription offers direct from brands make shopping for the products that consumers use frequently little more than an auto-refill payments experience. Data and AI will nudge consumers to order things that they have purchased before, and could likely need or want to buy again.
These innovations, and others like them, will make ‘going to the grocery store’ less about an errand to restock empty pantry shelves and more about discovering new brands and meal preparation experiences, buying the items that require inspection like meats and produce.
The ability to offer a seamless and secure customer and payments experience across those channels is what will determine who gets and keeps their business. The lack of one today is why consumers cite going to the grocery store as among their least satisfying physical store experiences.
From Certainty To Serendipity
The thrill of shopping in a physical store was once about the serendipity of discovery — walking into the store to find that black dress, only to walk out instead with a blue one that is so much better.
Over the years, consumers have been more disappointed than delighted, as physical store inventory thinned out and consumers found more certainty in the endless choices available online.
It’s why consumers consistently rank inventory availability as an important retail feature — although it is inexplicably, according to The Global Digital Shopping Index, research, undervalued by merchants.
Retailers who make physical a part of the digital shopping experience can align consumers’ expectations of efficiency and certainty with their interest in using the physical store to shop in new and different ways that go well beyond buying online and picking up in-store. As enthusiastic as merchants are to offer that feature, U.S. consumers regard it as much less desirable than delivery, which is their first preference, and curbside pickup, which is second on their list.
Integrating payments, technology and rewards across both channels can deliver the best of both worlds at scale — giving consumers the chance to find and reserve items online and then to examine, try on and test them out in the physical store before completing the purchase. Visibility into those orders can eliminate the uncertainty of not having what consumers want when they arrive, while giving merchants the chance to bring in other choices or complementary items that could drive incremental sales. Innovations in augmented reality can make it easy for consumers to get product information, reviews and promotions using their mobile phones in store, creating an immersive and contextual experience inside the physical store.
Using data to more precisely understand what consumers like and have purchased helps retailers curate and tailor in-store experiences that would appeal to them, while increasing the probability that foot traffic will deliver sales and to target consumers with relevant incentives to come into their stores. Integrating that consumer history across channels creates the foundation for a relationship based on their trust and preferences, a feature set that is critical to keeping their loyalty and more of their spend.
What Top Performers Already Know
Part of The Global Digital Shopping Index measures the gap between consumer preferences with what merchants offer along the 27 feature sets that consumers surveyed say drives satisfaction. Not only does this help profile the characteristics of top-, middle- and low-performing retailers, but it also offers merchants across a variety of retail segments a playbook for getting – or keeping – their top performing status.
In the U.S., more than 90 percent of the top-performing retailers offer nearly all of the 27 digital features we examined. Nearly all (98 percent) offer all of the convenience-focused features — delivery, curbside pickup — that are now required to compete for the consumer’s business. Only half as many middle performers do so.
Top-ranked retailers also consider offering data privacy and security as a top priority, in addition to helping consumers resolve disputes and expedite refunds when returns are made. It’s also where we find a gap between what consumers value and what retailers perceive as important.
Top performers also operate across digital and physical channels. In fact, 42 percent of top-performing retailers do between half and three-quarters of their sales in-store, nearly triple the share that only sell in-store and nearly twice the share that do less than 50 percent of sales in-store. This suggests that consumers value shopping with retailers that offer multiple channels for purchasing the items they need. Getting the best of both channels is key, provided part of that experience is a seamless, integrated and secure flow of payments and customer data across those channels.
The Pent-Up Demand Wild Card?
Sounds easy, right?
Not really. It’s a tough lift for many, especially when considering what we’ve been saying here at PYMNTS for a long time.
The pandemic was just oil on the fire that burned physical retail more quickly.
But here’s the wild card.
Consumers will have been locked down to some degree, sometimes by government mandate and more often by choice, for well over a year by the time the dark cloud of the pandemic lifts over the United States, Europe and other parts of the world in late 2021. My guess is that people will be looking for any excuse to bag digital-first for physical-first, just to see people and, well, to get out of the house.
It’s hard to know how many couples will wake up on Saturday morning and, instead of tapping in the Instacart order, will say, “Hey, let’s go to the supermarket for old time’s sake, or head out for some Main Street shopping?”
That same mindset will apply to traveling, going out to eat and other things they have missed.
Maybe that pent-up demand will be just that: a short-lived burst of physical activity.
But it will be a time for physical retailers to strike while that iron is hot, and to tap into the demand for social interactions, to do what they can to keep at least some of these consumers engaged in the physical world.
This will probably require the courage for retailers to change their business models — for supermarkets to become more like fun food marketplaces and less like places people visit to stock up the stuff they can just as easily order online and have delivered.
Execs and entrepreneurs, sitting at home between Zoom calls eating takeout meals, might want to really start thinking about how to capitalize on this pent-up demand to reinvent physical retail in a way that keeps those digital-first shoppers engaged. Best-in-class retailers will find a way to do both.
How much of the pent-up demand sticks is now largely in your hands.
By the way, no one should wait for November 2021 to start planning for the explosive growth of physical activity. We know it’s going to happen. So now is the time to start thinking about a post-pandemic world where many more people have learned the digital-first way, but where there will be enough pent-up demand to make them want to get the heck out of the house and start experiencing the physical world, and people, again.
And to party like it’s January 2020.