Categories
Amazon E-commerce

Amazon: From Pandemic Power Grab to Pandemic Hangover

We often think of Amazon as one of those invincible brands. A bulletproof business. But like a lot of tech companies they thrived during the pandemic and now they’re finding life difficult.

Why?

1) General volatility. Like all retailers, Amazon is grappling with unprecedented cost inflation at a time when consumer demand remains sluggish. That’s a dangerous combo for any business but in Amazon’s case it’s exacerbated by the fact that during the pandemic they OVER-HIRED (added half a million workers in 2020 alone – not even Walmart, the largest private employer in the US, has ever added so many employees in a given year) and OVER-EXPANDED (essentially doubled their fulfilment network) to help cope with the huge surge in demand for online shopping and cloud computing.

natalie berg amazon bbc

2) Recalibration: return to IRL shopping. We’ve now had a year of relative normality. The world is far more hybrid than we could have ever imagined pre-2020 but the pandemic has taught us the value of stores in this digital era. Shoppers are abandoning e-commerce and returning to bricks & mortar. They’re looking for value over convenience and delaying those discretionary buys. Important to bear in mind here that e-com penetration rates are still higher vs pre-pandemic levels (both US and UK). But the pandemic has reaffirmed that the future of retail is NOT e-commerce – it’s a blended mix of physical and digital commerce.

As a result, Amazon is looking unusually vulnerable.

And, longer term, I believe Amazon will go from disruptor to disrupted. More on that next time.

Categories
Consumer E-commerce Retail trends Technology

2023 Predictions: A UK Retail Rollercoaster

‘Permacrisis’ was declared the word of 2022, so what might 2023 bring?

There are reasons for cautious optimism, but first retailers are going to have to buckle up and brace themselves for more turbulence.

Spending more to buy less

Let’s briefly recap on retail’s Golden Quarter. Christmas was not the wipe-out that many of us had expected. After a bumpy couple of years with Covid cancelling Christmas, consumers were determined not to let illness, inflationary pressures or industrial action hamper their celebrations.

There are some caveats here: soft comparatives (remember Omicron?); supermarket success came at the expense of the hospitality sector; and perhaps most importantly much of the growth we saw was fuelled by inflation – in December retail sales were up in value terms but volumes continued to fall. In other words, consumers are spending more to buy less.

Inflation might be starting to ease, but consumers are still a long way from feeling the benefit. This ongoing erosion of spending power makes for a pretty gloomy outlook: consumer confidence tanked again in January, returning to a near 50-year low. Looking ahead, the deterioration in consumer sentiment is likely to persist throughout the first half of the year, at least. A reminder to retailers that value will remain firmly top of mind, purchases will continue to be incredibly considered, and big-ticket discretionary buys will be delayed.

Trimming the fat

The spending hangover is here and while there’s never a good time for subdued consumer demand, it’s especially painful when retailers are simultaneously grappling with their own cost inflation. No one is immune: this dangerous combination of soft demand and rising costs is impacting even the most bulletproof retailers. Amazon, for example, is laying off 6% of its global workforce, closing warehouses and putting the brakes on bricks & mortar expansion. 2023 will be a year of operational efficiencies for retailers, in many ways mirroring their own customers’ behaviour by trying to do more with less.

The other immediate challenge for retailers will be shifting excess stock, the result of over-ordering during the supply chain crisis and exacerbated by the current consumer weakness. With a glut of inventory and sluggish demand, retailers are left with little choice but to slash prices. But wait, haven’t they been doing that for the past four months? Aside from the obvious margin implications here, there is also the risk that shoppers are becoming desensitised as promotion fatigue sets in – or even worse, that they forget what it’s like to buy at full price.   

2023 opportunities: bricks & mortar resurgence and immersive digital experiences

There’s no sugarcoating it: 2023 is going to be another year of instability and uncertainty. But the retail industry is nothing if not resilient and I believe there are reasons to be optimistic. Stores are back, they’re repurposed and better than ever. We’ve been thrust into the future thanks to the pandemic-induced digitization of bricks & mortar retail, levelling the playing field and shifting the industry’s perception. Stores were once considered liabilities in this digital era, but they’ve been reconfigured for 21st century shopping and are now essential assets.

When it comes to customer experience, I believe that ‘tech-enabled human touch’ will be the next battleground, as retailers recognise the many opportunities that come with equipping your staff with the right digital tools. Mediocre experiences have become a thing of the past. Meanwhile, automation will climb higher up the agenda as retailers look to achieve operational efficiencies, despite the initial outlay, while simultaneously addressing the current labour shortage. In 2023, we’ll see more trials of autonomous vehicles delivering our goods and robots working alongside humans in warehouses.

Shoppers will continue to abandon e-commerce in droves now that we have returned to some semblance of normality. Some categories like food, fashion and furniture will never transition online like the rest of retail has, but it’s clear that as an industry we have been propelled towards a more digital world. And over the next decade, new, immersive digital experiences will redefine our perception of e-commerce – this is going to be the next big thing in retail. I’m still a bit of a metaverse sceptic. I know barriers can be knocked down but right now how many of us really have a VR headset kicking around at home? However, it’s clear that e-commerce is ready to evolve. Sure, all of the friction has been sucked out and today the experience is wildly accessible, slick, effortless. But is it any fun? Not really. It’s still far too transactional, too one-dimensional. This will change.

The next stage of e-commerce is all about immersion, discovery, curation, hyper-personalisation and escapism. And it’s already happening with augmented reality, virtual showrooms, live shopping, social commerce, 3D product views/virtual try-ons, video shopping consultations, among others. In the future, we won’t know where the physical world ends and the digital one begins.

Our hybrid way of living is here to stay and while businesses may still be acclimatising to the consequent shifts in demand patterns, longer term this will present new and exciting customer engagement opportunities. Despite tight budgets, investment in sustainability will remain high on the agenda in 2023, while opportunities to tackle the often-neglected post-purchase experience and explore new revenue streams such as retail media and third-party marketplaces will accelerate. In summary, short-term volatility will persist while consumers batten down the hatches, but as always the future of retail is bright for those who are willing to evolve.

Categories
Amazon E-commerce Technology

New Book Explores Amazon’s Pandemic Power Grab

The COVID crisis has upended shopping habits and forever changed the world of retail, according to the second edition of Amazon: How the World’s Most Relentless Retailer Will Continue to Revolutionize Commerce. Authors Natalie Berg and Miya Knights argue that while COVID sounded the death knell for many businesses, one retailer in particular has come out stronger: Amazon is hands-down the undisputed winner of the pandemic.

With crisis comes opportunity – for Amazon at least. While many retailers muddled their way through the pandemic, Amazon propelled itself into new industries, made blockbuster acquisitions, launched new products and brands, and doubled down on technology. The retailer hired hundreds of thousands of employees, unveiled new store formats, turned disused malls into warehouses, and even added a couple of new markets to its roster. A key theme of this crisis is that the strong will emerge stronger.

“Amazon’s business model may not have been intentionally built for a pandemic, but it has turned out to be highly relevant in such a climate,” said co-author Natalie Berg. “Amazon is seemingly invincible these days. The pandemic-induced shift towards a more digital world has strengthened every aspect of its business – retail, cloud computing, advertising, Prime and Alexa.”

Amazon is now firing on all cylinders. It has woven itself into the fabric of our everyday lives and, in the absence of regulatory intervention, will continue to benefit from post-pandemic tailwinds,” concluded Berg.

The authors argue that the pandemic has afforded Amazon a unique opportunity to tighten its grip on consumers and bolster its broader ecosystem by:

  • Reinforcing its status as the indispensable route to market
  • Further embedding itself in consumers’ homes
  • Accelerating its vision as a technology vendor

Co-author Miya Knights added: “The second edition underlines Amazon’s seismic digitally-enabled impact on the retail landscape. Technology has always moved at breakneck speed, but the added catalytic effect of the pandemic has only spurred Amazon’s ambitions to use its tech advantage to consolidate and grow its dominant market position.”

Knights continued: “This is a crucial time of transition for new CEO Andy Jassy as he is tasked with convincing lawmakers that Amazon’s ubiquity is good for the economy – and for democracy as a whole. His number one job will be ensuring Amazon doesn’t go from disruptor to disrupted.”

The book also advises how retailers can co-exist with Amazon and identifies six key retail trends being accelerated by the pandemic:

  1. The demise of ‘status-quo retail’
  2. Digital transformation: COVID will finish what Amazon started
  3. The digital store: frictionless shopping and no-touch checkout
  4. The store as a fulfilment hub: the future of e-commerce is stores
  5. The democratisation of white-glove service
  6. The shift to conscious consumption

With the first edition now translated into more than a dozen languages, Amazon is an invaluable resource for discovering the lessons that can be learned from the retailer’s unprecedented rise to dominance.

To arrange an interview with Natalie or Miya, or to request a sample chapter, please email hello@nbkretail.com.

About the authors:

Natalie Berg is a Retail Analyst and Founder of NBK Retail, a consultancy specialising in retail strategy and future trends. Regarded as one of the world’s Top 20 retail influencers, Natalie has led research and given talks on a range of industry topics including: reimagining retail for the post-pandemic digital era, store of the future, the convergence of physical and digital retail, customer loyalty and discount retailing. She is a regular TV and radio commentator and her views on retail have been published in the FT, Guardian, BBC and The Times, among others. Natalie is also a guest contributor for Forbes and Retail Week.

Miya Knights is Global Content Strategist at poq Commerce, with 25 years’ experience as an analyst, journalist and editor specializing in retail enterprise technology use. Based in Sussex, she is the owner and publisher of Retail Technology magazine and has appeared on the BBC, Channel 4 and Euronews and commented in The TelegraphThe Times and The Financial Times among others, as well as regularly speaking at or moderating industry events. She has also been recognised as the 2021 Arts & Media Senior Leader by the Black British Business Awards. 

Additional files:

Amazon book cover (high res)

Natalie Berg headshot

Miya Knights headshot

–ENDS–

Categories
E-commerce Fulfilment

Rethinking Returns 2021

Let’s talk returns. The industry’s perennial problem has been exacerbated by the pandemic and retailers can no longer afford to avoid the post-purchase experience. In this latest report with Klarna, Rethinking Returns: From Returns to Retention, we explore the power of returns as a customer acquisition and retention tool, and the repercussions of getting them wrong. 

Based on a survey of over 2,000 UK consumers, our research found that over eight in ten (84%) online shoppers would turn their back on a retailer after a bad returns experience.  

With 39% of consumers* having done more shopping online since the pandemic, an increased reliance on returns means people’s patience is waning when it comes to clunky or costly returns processes. 83% of online shoppers** admit to getting frustrated by retailers which have an inefficient returns process, while 82% agree that retailers in general need to improve their returns capabilities.

Demonstrating the need for retailers to keep up with consumers’ changing needs, some of Brits’ biggest frustrations with returns stem from the inconvenience of slow, out of date or inflexible returns processes. Over a third (36%)** cited slow refund processes as the most frustrating element of returning items bought online, highlighting the importance of flexible payment options. Other frustrations include having to print off return forms when they don’t have a printer (25%), the inconvenience of queuing to return at the post office (23%) and not being able to return items in store that they’ve bought online (21%).

Exacerbated by COVID, these frustrations with the returns process are the driving force behind emerging shopping trends, as people find ways to avoid inconveniences. Over the past 12 months, a fifth (21%) of online shoppers say they have reluctantly kept an item they were unhappy with because it was too much effort to return it, 12% have avoided returning items at the post office because it’s difficult to social distance, while 11% have gifted and 9% have resold items they don’t want instead of returning to the retailer. In the long run, this could mean people avoid buying again from retailers that don’t meet their needs.

For those retailers that get returns right, this can serve as a competitive advantage, helping to attract new customers, and boost customer loyalty. 84% of online shoppers agree they’re more likely to buy from and 86% are more likely to come back to online merchants who offer free returns. However, even a little added inconvenience can come at a cost: over two thirds (70%) of online shoppers state that if a preferred retailer stopped offering free returns, they might not shop with them.

Alex Marsh, Head of Klarna UK, said: “Nobody wants to be out of pocket as a result of items they don’t even choose to keep, so it’s no surprise that slow refund processes are the top frustration factor when it comes to returns. As reliance on returns grows, retailers need to ensure they’re offering a smooth, seamless process that meets the needs of today’s customers – considering everything from effortless logistics to flexible payment options. As our research suggests, those that fail to adapt will lose customers in the long term.”

The research also uncovers a consistent trend of rising consumer expectations when it comes to returns services. Compared to 2019, a greater number of online shoppers now believe that returns are a normal part of online shopping today (80%, up from 77%) and expect that every retailer they shop with offers free returns as a minimum standard of service (81%, up from 75%). And, as customers increasingly demand free and easy returns, more consumers also now state they’d never shop with a retailer that didn’t offer free returns (57%, up from 53%), and that all their preferred retailers offer free and easy returns (73% up from 70%).

Natalie Berg, Retail Analyst and Founder of NBK Retail:

“Consumers often expect a returns policy to mirror that of delivery – fast, frictionless and free – but that’s not always the case. The pandemic has thrust the issue of returns into the spotlight, exacerbating the disconnect between the effortlessness of placing an online order and the inconsistent and often friction-filled experience of making a return. Returns are fantastically out of sync with an otherwise seamless e-commerce experience.

“As we reimagine retail for a post-COVID world, retailers must accept that returns are part and parcel of 21st century shopping and, if managed well, can encourage conversion and drive loyalty among their most valuable shoppers. Retailers can no longer afford to ignore the post-purchase experience.”

You can download the full report here.

NOTES:

* consumers that shop online

** consumers that shop online and return items

 

Categories
Consumer Retail trends

Clicks and Cliques: Understanding Modern Shopper Tribes

Knowing your customer is essential in the best of times. In a post-pandemic world, it will be the difference between survival and failure.

I had the pleasure to work with Klarna on their latest report Clicks and Cliques: Understanding Modern Shoppers where we identified five distinct shopper tribes for the post-COVID world. Based on a survey of 4,000+ consumers across Europe, the UK, USA and Australia, the report examines how shopping behaviour has evolved and how retailers can stay relevant in a fast-moving world.

Good value for money is naturally a top priority for shoppers this year, with more than two-thirds (67%) suggesting it has become more important since the start of the pandemic. It’s followed by promotions and deals (60%), a good reputation and trustworthiness (60%) and having a wide range of products available (58%) — perhaps fuelled, in part, by shortages on the shelves earlier in the year.

Over half of respondents said that an easy returns process (55%) and next or same day delivery options (51%) have become more important this year — naturally coinciding with 49% doing more of their shopping online and 44% doing most or all their shopping online now.

The ability to pay flexibly has also grown in importance, according to 45% of respondents — and this can be a real dealbreaker. Four in ten (42%) prefer to shop from brands or retailers that offer flexible payment options, while three in ten (32%) won’t shop from those that don’t.

Commenting on the research, Luke Griffiths, CCO at Klarna, said: “This year’s events have transformed the way we browse and buy, reinventing our relationships with brands and retailers and accelerating change at an unprecedented rate. Merchants must keep a finger on the pulse of their customers wants and needs and adapt their products and service offers accordingly to build a connection with shoppers to drive loyalty and, ultimately, sales.” 

Natalie Berg, Retail Analyst and Founder of NBK Retail, added: “The retail industry is no stranger to disruption, yet nothing in our lifetime has jolted the industry like Covid. As retailers look to navigate the new normal, resilience and agility will be essential for survival. There will be no return to the status quo. The days of being everything to everyone are well and truly over: in order to find their tribe, retailers need to be bold about who they are and what they stand for. Opportunities have emerged, enabling retailers to reimagine both physical and digital commerce for the future.”

Download the full report here.

Categories
Retail trends Store of the future

The Retail Exchange Podcast: 2020 Review & 2021 Predictions

Natalie Berg joins Karl McKeever, MD of Visual Thinking, as co-host of The Retail Exchange‘s final podcast episode of the year. 

If you were trying to end this year by winning a prize for its greatest understatement, you could describe 2020 as ‘eventful’. It is difficult in many respects to argue that 2020 was an especially good year. Emerging trends didn’t just gather momentum, they marched forward to turn the industry on its head in ways we could never have imagined. For retail, it’s been a year of contrasting fortunes. Some have faltered. Others have thrived.

To set the tone, we revisit some of the interviews and discussions that have shaped The Retail Exchange’s podcast episodes in 2020, with special co-hosts Karl McKeever and Natalie Berg reflecting on the past year – the challenges faced, things we’ve learned, the opportunities taken – and looking ahead at what’s to come in what we all hope will be a brighter 2021.

You can listen to the full episode here.

Categories
Retail trends

Future of Retail 2020

What will shopping look like in 2021, 2025 and 2030? I had the pleasure of speaking to Raconteur for this annual supplement in The Times. Always an interesting read but especially this year given that we are in the middle of a pandemic that has upended the industry like nothing before. You can catch my thoughts in the following sections:

You can download the full PDF here.

Categories
Consumer Retail trends

Peak Car And The Hyper-Local Retail Opportunity

In my latest long read for Forbes, I explore how London’s green recovery will create opportunities for local retail:

Across the UK, city streets are quietly undergoing radical transformation. Temporary cycle lanes have popped up, footways widened to enable social distancing and, perhaps most drastically, residential roads are being blocked to through traffic. Since May, over 200 of these “low-traffic neighborhood” (“LTN”) trials have launched as more than 50 councils take advantage of the £250 million of emergency “active travel” funding from central government. The vast majority of these LTN schemes are in London. Full disclaimer: I live in one.

Full article can be accessed here.