Why Store-nostalgia Won’t Suffice: 7 Changes in the Retail Landscape You Don’t Want to Miss in Your Upcoming Strategy Iterations

This article offers seven thought-provoking impulses on how to navigate the post-Covid retail landscape. Spoiler alert: You will need to get your online strategy up to scratch!

Coming out of lockdown part two, photos of balloons in the hands of cheerfully waving store employees at retailer entrances were hard to avoid on social media. The sentiment was positive and, combined with an equally calendar-induced emotional state, some business leaders were inclined to foresee the end of the analogue-digital nightmare before them in fervent LinkedIn posts.

“Strategy is not about what you prefer”

The euphoria didn’t last very long. Consumers are not returning to the high streets like the brick & mortar industry had hoped. And the inevitable question is to what extend this lack of physical store demand is induced by the pandemic (infection fears, unclear health & safety regulations etc.) and/or by irreversibly changed consumer behaviour towards the convenience of online shopping.

Clearly, our industry likes to group into camps: the (predominantly) physical retail camp, the (predominantly) online pure play camp, the multichannel camp (predominantly as evolution from the physical retail camp), vendors by camp, academia by camp and industry associations by camp. The most important camp is unfortunately often left out: the consumer camp. In light of all that, here are some of the key changes in the landscape to inspire your upcoming strategy iterations and push towards what matters to your consumers, regardless of what camp you consider home:

1. Online Dominates the Markets

In China, the online share of total retail is estimated to surpass the 50% mark this year, and the UK is projected to be at approximately 27%. Germany, excluding late-comer grocery, is at 18%, in some categories like Fashion and Consumer Electronics already at 40%. And the upward trend across all segments continues, with Internet penetration in Germany approaching 95% as per January 2021. So, regardless of the camp you belong to, strategies without a digital focus can safely be ignored.

2. Platforms Dominate Online

Platforms are the big winners in digital, with both consumers and financial markets. More than 50% of German e-commerce already happens via marketplaces, 60% of which already was Amazon before its pandemic-induced boost. Globally, Amazon has grown by an entire Ebay in 2020, and by a mind-blowing billion US dollars in Q1 2021. Per day. In Germany, Amazon accounted for 75% of the entire online market growth in 2020. But specialised players like Zalando, About You or Asos also had a run, with Zalando increasing its mid-term top-line growth targets to 30 bn EUR. So, strategies without a clear view on platforms can also be ignored.

3. D2C is Becoming the Dominant Model

Platforms are replacing traditional retail as trading infrastructure for manufacturers, pushing ‘old retail’ out of the equation. But on their path to market-dominance, platforms predominantly scale their working-capital friendly third-party marketplaces, not their own retail, if that was even existent in the first place. As a result, manufacturers wanting to do business via platforms are forced out of the long popular wholesale- into the D2C seller-model. Therefore, any company that does not master the D2C operating model , either via platforms and/or their own touchpoints, will struggle to exist.

4. D2C to Become C2M

A closer look at Chinese shooting star Shein (pronounced She-In) shows new standards: data signals from social media and search engines are translated into products within a few working days and get dropped in small quantities via the app to highly active users. Shein’s approach is called Consumer-to-Manufacturer (C2M) as products are not pushed down the market’s throat against demand. Instead, actual demand is recognised early, products are launched with short lead times and made available to a large customer base. What’s gone is gone. In principle, this is a more sensible approach because it’s because more resource efficient. If applied in a different way, it offers significant opportunity for the industry to improve sustainability.

5. Mobile Operating Systems Are the New Gatekeepers

At the same time, the big tech platforms, above all the mobile operating systems of Apple and Google, continue to raise protective walls around their access to the consumer. And as they go, they shake up the advertising market with their newly discovered guiding principles of data-protection and privacy. Google has announced the abolition of cookies in their Chrome browser, and Apple’s protection against app-tracking and the dynamisation of email content should be considered just the beginning.

Google also recently announced that it will make the entire content of websites, but also podcasts and videos, searchable. This will literally make almost all digital content available on Google. While Google is of course grateful for your content, don’t expect any traffic in return as your content will be consumable on the search results pages without linking to your site. The only way out of this trap, albeit far from trivial, is to make your brand and content strong enough for users to come directly to you.

6. Brand Equity and 1P Data Are Paramount

Alongside platforms, brands are among the beneficiaries of these changes in the landscape. In the slipstream of social media, platform-, and D2C-dynamics, new ‘digital native’ brands have emerged, while established brands began to understand the importance of consumer relations. With consumer expectations on the rapid rise, new retail is moving beyond distribution into value-adding relationships and experiences. Companies who measure the world purely in transactions will lose as consumers have moved on. Your own D2C world and your zero- and first-party data are the key to activate your brand in a 3P-cookie free world. Remember, in a largely commodified product world, your brand’s relevance and the quality of your end-to-end brand experience will be vital.

7. Be Unique and Add True Value

For all its dominance, Amazon in 2020 has lost market share in the US for the first time in its history. And it did so primarily to Shopify, the technology of choice for many creative D2C brands. Platforms are optimised for scale, volume, and efficiency. Engaging browsing experiences and content, attention to detail, or solutions to special needs are simply not in scope. This creates opportunity in the shadows of the big platforms. However, ‘same same but different’ is not enough to capture that opportunity. A clear, meaningful profile and real, no-bs customer-centricity are prerequisites. The good news: digital technology will not be the bottleneck. The key is to get started, so: Just do it!


About the Author:

With more than 20 years in Digital Commerce for leading players, Stefan Wenzel is a recognized figure and a distinguished mind in the industry. Stefan has held positions as managing director for companies such as Ebay, brand4friends, Otto and Tom Tailor Digital, led digital transformation & acceleration across various business models and growth states, including nine years of work and life abroad.

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