2020 Year in Review: Retail Upended, Reset ContinuesSheng
As 2020 comes to a close, it’s time to reflect back on a wild and crazy year in retail, to paraphrase the Festrunk brothers from Saturday Night Live.
COVID-19 came in like a wrecking ball in February and March, causing widespread shutdowns that hit retail especially hard, leading to hockey-stick growth in ecommerce as consumers everywhere hunkered down to stay safe and purchased tons of essential goods from their devices.
Entire subsets of the population that had been avoiding online buying for various reasons suddenly shifted to digital as it became the only game in town. The consensus of industry experts is the behavior shift will remain locked in even if the pandemic lifts as we all hope.
Retail store closure and bankruptcy filings, already a steady beat before the pandemic, accelerated in pace. Major names like Macy’s, Forever 21, J Crew, Tailored Brands, Brooks Brothers, Ascena Retail and Modell’s Sporting Goods filed court papers in 2020 to protect against creditors and closed thousands of doors, with some being acquired by opportunistic investors.
Digital sales soared for many, but often not enough to offset the physical retail losses. A case in point was Macy’s, which saw same-store sales shrink 61% in Q2 while ecommerce grew 53% as it leaned heavily on its years of omnichannel preparation. However, there were categories purpose-built for lockdowns that blew out their numbers, such as home improvement, lawn and garden supplies and physical fitness.
Companies that had never had a digital strategy or even an ecommerce presence suddenly found themselves scrambling to set up shop online by purchasing tools to sell their wares and route them directly to customers. Suppliers from Shopify to ShipStation found themselves deluged with new orders, leading to some implementation delays as merchants rushed to ready themselves for the new reality.
In particular, retailers found their supply chains severely disrupted as all kind of raw and finished goods were stuck at various points between here and manufacturers in China and elsewhere. On the fulfillment front, buy online pickup in store (BOPIS) and its cousin, curbside pickup, became a major thing everywhere, as did contactless commerce in general including massive use of QR codes. These are all customer experience trends that will last into 2021 and beyond.
Carriers networks strained under the crush of online orders, leading to levels of volume normally seen during peak season at the end of the year – and this came with peak surcharges, which have been pushed into 2021. For the first time, the US. Postal Service added surcharges in 2020. Carriers overall invested billions in additional hires as well as facility and technology upgrades to handle the sudden demand. Regional carriers suddenly found themselves in high demand from spillover ecommerce volume as the duopoly players were swamped.
Amazon had a banner year in 2020, to understate the case a bit. Over the holidays alone, Amazon said it delivered more than 1.5 billion toys, home products, beauty and personal care products, and electronics, forcing Santa to order another 50,000 sleighs and hire crowdsourced pilots.
The ecommerce giant massively expanded its own fulfillment efforts, hiring an incredible 400,000 associates in 2020 including drivers and warehouse workers to fulfill unprecedented volumes. There were previously unheard-of reports of even vaunted Prime orders taking weeks to arrive. Third-party merchants, representing more than half of Amazon’s marketplace sales, were faced with severe limitations on fulfillment space and order volumes as Amazon triaged its order flow to prioritize essential items.
As of today, Amazon workers at a fulfillment center near Birmingham, AL are close to a historic vote to unionize, which the company has been battling tooth and nail for years. If the vote goes through it will be a game-changer not only for Amazon but for the entire logistics and fulfillment industry.
Some FBA sellers faced suspension of their accounts over late deliveries, even if was more a matter of carrier issues vs. their own order management.
E-grocery, which had been in the mid-single figures in terms of overall industry sales, exploded as many resorted to online ordering and curbside pickup. Demand grew for all kinds of technology solutions, from micro-fulfillment center (MFC) systems to inventory management and order processing software to flow orders. Services like Instacart, Uber Eats, Fresh Direct, Peapod, Shipt and DoorDash saw their last-mile delivery business skyrocket.
But all this came at a cost for grocers, who already lived on very thin margins, and most are still working to make e-grocery at least a break-even if not profitable proposition.
Toward the back half of the year, e-grocery growth slowed as shoppers grew more comfortable with in person grocery shopping using precautions like distancing, masking and sanitation. But again, as with ecommerce in general, shopper behaviors, expectations and comfort levels have been significantly reset.
Facebook busted a major move and swiped at Amazon and eBay with the launch of Facebook Shops in May 2020, letting small businesses set up free online storefronts across Facebook and Instagram, extending eventually to Whatsapp and Messenger as well. In August, Facebook added the Shops feature to its main app while rolling out new features.
More ecommerce equals more returns, and 2020 saw partnerships emerge to address the burgeoning issue. In September, Staples agreed to accept returns from other retailers through a partnership with Optoro, similar to what Kohl’s had done with Amazon three years prior, while Happy Returns expanded to 2,600 locations through a deal with FedEx. Other returns providers like Narvar, B Stock, Returnly and goTRG found themselves in high demand from swamped ecommerce sellers.
Walmart, in its never-ending battle with Amazon for retail dominance, picked the pandemic year of 2020 to launch Walmart+, its answer to Amazon Prime’s 200 million-plus members, raft of perks and millions of SKUs. This led the rollout to be delayed twice, finally hitting in mid-September. Early reports saw the service gaining some traction with shoppers.