If there’s only one thing 2020 drove home, it’s that we’re living in unpredictable times. Still, the uncertainty and fluctuation that hit retailers over the last year didn’t necessarily change our view at RELEX of the direction our industry is moving in. If anything, 2020 has perhaps brought some of our predictions to bear sooner than we had thought.
As we look forward to 2021, I think it’s still worthwhile to share what we at RELEX believe our retail partners around the world will need to focus on in the year to come.
1. Omnichannel Efficiency Will Be More Important than Ever
The importance of omnichannel efficiency has been clear for some time already, but the COVID-19 pandemic has forced the hand of many retailers who had not yet prioritized it. The pandemic, with its lockdowns and social distancing requirements, has pushed unprecedented numbers of consumers over the learning threshold for omnichannel shopping, whether home delivery or curbside pickup.
Many retailers had to scramble to establish new ordering and fulfillment channels to maintain or capture market share. Shoppers have largely been enthusiastic about this new level of convenience, and they’re unlikely to abandon these new shopping habits entirely, even after pandemic restrictions have passed. While some demand will certainly return to traditional brick-and-mortar channels in 2021, retailers must not let their omnichannel progress from the past year go to waste.
Because running omnichannel services is neither cheap nor easy, retailers need to figure out how to ensure efficient omnichannel operations, or else they risk thinner and thinner margins as their omnichannel business grows. In 2021, retailers will work on managing these new channels efficiently with low cost, high availability, and fast, accurate fulfillment.
2. Retailers Need More Adaptable Supply Chains
We’ve been hearing a lot about the need for “resilient supply chains” this year, but I prefer to talk about adaptable supply chains instead. Retail isn’t going to see just some bumps in the road that we need to bounce back from—we need to be able to fundamentally adapt to continued, real change.
The demand surges that hit retailers in the acute phase of the COVID-19 pandemic revealed how even large, sophisticated retailers struggled to adapt their supply chains quickly enough to meet new demand patterns. While essential retail supply chains were able to prevent any catastrophic shortages, months of availability problems made clear that supply chain adaptability needed to become higher priority.
To move toward true supply chain adaptability that will prepare them against future shocks, retailers will work toward improving visibility into their inventories and demand. This needs to happen at the item level and for each fulfillment channel offered. Retailers who do this will gain the ability to react quickly to future demand and supply change and redirect their inventory to wherever it’s needed most.
3. AI Becomes a Must-Have
Traditional time-series forecasting, which uses historical data to model future demand, was already growing outdated as the speed of change in retail accelerated. However, with the short and long-term demand shifts caused by COVID-19, those models will unfortunately be even less useful for retailers trying to calculate future demand.
As a result, even retailers who trail the pack in terms of technology sophistication will have to turn to modern, AI-driven forecasting solutions in the coming year. Early adopters, on the other hand, can take advantage of their head start to uncover deeper benefits.
Forecasting, after all, is just one application area for AI—there are many benefits in merchandising and operations as well. Early adopters may consider using AI to optimize their capacity utilization and workforce planning. Retailers who are able to optimize these costs should be able to increase profitability and/or lower prices to capture market share and gain a competitive advantage.
4. Retailers Will Experiment with “Circular Economy” Approaches
The importance of sustainability has been growing for some years now, both for consumers and for businesses of all types. I think it’s quite lucky that, with everything else that could have distracted us in 2020, it continues to be a highly visible, important part of the discourse in retail.
2021 will see more retailers experimenting with “circular economy” approaches that aim to reduce waste by reintroducing used items back into the supply chain rather than throwing them out entirely. Some specialty retailers, for example, offer programs where they buy used items back from their shoppers and re-sell them at a discounted, second-hand price. Another increasingly popular approach is renting items rather than selling them.
Some believe these types of offerings are more about lip-service than sustainability itself, but I think that mentality will soon change. There’s no doubt that reducing waste by encouraging re-use has a positive impact on sustainability efforts—and those who adopt such approaches early stand to capture market share.
5. Grocers Will Double Down on Reducing Food Waste
Grocers and their store staff were among the true heroes of 2020, working through unforeseeable challenges and braving the front lines to make sure their communities had the essential items they needed. In this unusual year, battling food waste was probably not the highest priority on most grocers’ lists—but we believe it will bounce back in 2021.
Grocers will double down on initiatives to reduce food waste not only because it’s good for the environment, but because it just makes good business sense, too. The supply chain improvements that drive down waste and reduce carbon footprints can also reduce costs, drive sales and profitability, and save food retailers the immense amount of money they’re losing to spoilage—averaging $70 million in annual losses for US retailers alone!
A commitment to reducing food waste is, in all likelihood, the sustainability initiative that offers grocers the largest, fastest return on investment.
Like many of you, I’m happy to have left 2020 behind and am excited to see what 2021 has in store for us. Retailers still have a lot of challenges to face down, but I’m looking forward to seeing how the industry will continue to experiment and innovate new ways to improve shopper experience like it always has.