The new year is finally here, and it’s time for retailers emerging from a shaky peak season to reflect and plan for what’s ahead. Though uncertain, these are the trends we’re counting on for the coming months.
A lingering COVID economy. It’s now clear that COVID-19 will follow the economy into this year. Consumer habits are sticky. Even post-vaccine, the pandemic’s influence on buying behavior will largely remain.
While customers are craving a return to normalcy, the coronavirus hastened an already-rising digital economy. These changes are systemic, not merely temporary. This year, expect more demand for delivery, more businesses getting into delivery, and a greater need for retailers to stand out.
Pop-up fulfillment. Temporary storefronts called “pop-up” shops have evolved into a retail trend, seen in holiday urban shopping centers and environments that depend on seasonality, such as ski or college towns. Now this trend has come to supply-chain networks, led in part by Walmart. In response to a holiday increase in e-commerce traffic, Walmart is adding pop-up fulfillment centers in order to maintain high service levels for speedy deliveries. Walmart is creating these pop-up fulfillment centers by partitioning off parts of its own distribution centers that usually handle palletized goods.
E-commerce surge solutions. Online holiday sales in the U.S. rose a whopping 49% from a year ago, according to a Mastercard report. Walmart’s e-commerce sales increased by 79% in the third quarter of last year, while rival retailer Target had an increase of 154% in online sales in the same quarter. This growth trend was underway before 2020, but the pandemic gave it a significant boost. In response, retailers have created various facilities to store products, fill orders and dispatch them.
Warehouses and other key elements in the supply chain, in response, will continue to develop dark stores, distribution centers that look more like retail stores for pick and pack, and even tiny warehouse spaces within retail stores to help with fulfillment in 2021.
Face-to-face deals. Given the structure of supply-chain, warehouse and distribution center layouts, most decision-makers prefer to see them in-person when surveying locations for acquisitions, expansions and sales, as well as first-hand observations of operations.
Therefore, we predict we will see an increase in mid-market mergers and acquisitions in the supply-chain and logistics segments as 2021 opens up, providing people can get out and meet one another to get them done.
Optimized delivery. In 2020, e-commerce delivery volumes boomed. Customers wanted to stay safe during the pandemic while still eating, drinking and mimicking their favorite social activities. Food businesses are a perfect example of how these habits are here to stay.
In 2021, customers will order more delivery than ever before. Now that customers are comfortable with delivery, expect them to increase their frequency across industries. Once someone’s already ordering food twice a week, it’s only a small psychological shift to start ordering three times. And once customers are familiar with ordering delivery in general, expect them to start ordering in new areas too, especially following a positive delivery experience.
In food delivery, this will lead to businesses optimized for delivery, like combo kitchens or non-traditional preparation spaces. Retailers will adjust in other areas, too, leaning toward low-rent options such as micro fulfillment centers that emphasize deliverability over a storefront.
Rise of the robots. In delivery, like in many areas that operate in the supply chain, economic conditions favor automation. As the demand for delivery accelerates, the value of delivery automation increases too.
In 2021, expect to see small movements toward automation, such as increased funding for drones and autonomous vehicle companies. That said, these shifts are likely to be small. The opportunities are promising, but the challenges are large. Government regulation, for instance, is only nascent, and car insurance companies are still unsure how to cover self-driving cars.
Delivery is still in the early stages of this paradigm shift. Amazon, for instance, recently laid off a large portion of its Prime Air drone delivery team, implying less enthusiasm for investing in this area for the time being. On the other hand, autonomous delivery companies Gatik and Nuro recently raised $25 million and $500 million, respectively — the sort of money that will accelerate industry innovation in the coming years.
This year, be on the lookout for interesting developments in autonomous vehicles, but we’ll have to wait a bit longer before automation takes delivery by storm.
New subscription models. Subscriptions instill loyalty in customers, increasing the likelihood they purchase again. These models both increase efficiency and create reliable revenue. Since a small percentage of customers typically drive a large percentage of sales, the successful businesses in 2021 will create new business models that increasingly revolve around delivery subscriptions.
Successful retailers will realize that delivery isn’t merely a choice between on-demand, subscription, or scheduled; instead, your optimal offering depends on your customer and product. If you find the combination that works for you, you’ll make profits and happy customers.
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