The pandemic has reshaped the retail space—from the way retailers are streamlining the shopping experience to how comfortable consumers are getting making grocery purchases online. 

We dig into the various ways the retail market has transformed and what to expect going forward.

Direct-to-consumer brands will be more mainstream in the retail market

Traditional brands weren’t the only ones that felt the effects of the pandemic—digitally native brands did as well. Still, despite the many challenges faced in 2020, direct-to-consumer (D2C) ecommerce sales grew by 40.0% last year, an upward revision from our earlier estimate of 24.3% growth. 

Digitally native brand D2C ecommerce sales will reach $32.37 billion this year. - Insider Intelligence
Digitally native brand D2C ecommerce sales will reach $32.37 billion this year. Insider Intelligence

Two key factors helped drive growth. First, as consumers increased spending on areas including grocery, as well as health and wellness, companies like HelloFresh and Peloton thrived. In fact, Peloton’s connected fitness product sales increased by more than 140% during the calendar year ending in December 2020. Second, while some D2C brands had plans to expand their offerings in the physical retail space—with pop-up shops and brick-and-mortar stores—those plans had to be put on hold at the onset of the pandemic. Many had to readjust their planning and go back to their digital roots, focusing again on a digital-first approach, particularly as the shift to ecommerce persisted.

As more retail stores begin to reopen nationwide, we expect D2C brands will once again revisit their physical location plans. But this key focus on digital and ecommerce isn’t going anywhere. By 2023, we expect D2C ecommerce sales will reach $44.65 million.

Frictionless commerce will reign in the 2021 retail market

Cashierless stores, like Amazon Go, were already gaining momentum in the US. However now, these still-emerging concepts are becoming even more relevant and in demand. 

While pre-pandemic, a good number of consumers were using frictionless payment methods both in-store and online, there were many who were hesitant about paying for goods and services this way. Social distancing and sanitizing practices accelerated this behavior, encouraging many people—even older consumers—to try out proximity mobile payments. 

This year, we expect there will be 101.2 million US proximity mobile payment users, with growth steadily increasing throughout 2025. 

By the end of 2021, there will be 101.2 million US proximity mobile payment users. - Insider Intelligence
By the end of 2021, there will be 101.2 million US proximity mobile payment users. Insider Intelligence

Retailers are certainly encouraged by this change of pace. In October 2020, Walmart announced that it would turn four of its stores into digital laboratories. Each of the locations would be leveraged to try out various ways to streamline the shopping experience—from speeding up ecommerce fulfillment and enhancing store signage.

Grocery ecommerce’s growing demand in the retail market

There’s no doubt that one of the biggest trends to emerge from the pandemic has been online grocery shopping. Last year, grocery and food delivery apps were among the fastest-growing app categories, and we expect this change in behavior to spill into 2021 and beyond. 

This year, we expect there will be 137.9 million digital grocery buyers in the US. That’s a 4.8% year-over-year growth from last year, which may not seem substantial—especially when looking at growth between 2019 and 2020. But, it’s important to note that a growth rate like that would be difficult to sustain as we head into a post-pandemic new normal.

Online grocery shopping has accelerated amid the pandemic. - Insider Intelligence
Online grocery shopping has accelerated amid the pandemic. Insider Intelligence

By 2024, we expect more than 150 million digital grocery buyers in the US (more than half the population) will have made at least one grocery order via a digital channel.

Transformation of digital and physical retail

Just like online grocery shopping, click-and-collect (also referred to as buy online, pick up in-store) gained momentum amid the pandemic, and has been embraced by consumers. Click-and-collect sales in the US more than doubled last year, from $35.02 billion in 2019 to $72.46 billion in 2020, per our estimates. And growth will continue to leap throughout the end of the forecasting period.

Click-and-collect sales in the US more than doubled last year. - Insider Intelligence
Click-and-collect sales in the US more than doubled last year. Insider Intelligence

Retailers’ embrace of click-and-collect is a big part of its success story. Seven major click-and-collect multichannel retailers—including The Home Depot, Walmart, and Target—accounted for 64.0% of click-and-collect sales in the US in 2020.

But that’s not the only factor that’s driving up adoption. Amid the pandemic, click-and-collect became a convenience for many consumers who didn’t have to necessarily step foot into a physical store to pick up their purchases. As a result, many shoppers have already tried out this feature, with many more expressing interest in doing so in the future.

According to September 2020 data from Facebook IQ, 30% of US adults have used buy online, pick up in-store, and another 40% said they are interested in using it. Similarly, nearly a quarter of respondents said they’ve bought something online for curbside pickup, while another 42% said they are interested in using this service.

2021 will breed cross-channel loyalty for large retail brands

Loyalty is a customer retention tool that retailers rely on heavily. And when it comes to loyalty programs, Amazon Prime is the holy grail many brands aspire to match. One contender may be Walmart+, the brand’s $98 annual subscription service that gives members free two-day delivery on their orders, as well as gas price discounts, among other perks.

Meanwhile, other companies are working on their own loyalty endeavors. Apple, for example, has entered the loyalty subscription arena with Apple One, a subscription bundle that includes Apple Music, Apple TV+, Apple Arcade, and 50 GB of iCloud storage. Nike and Lululemon have also been experimenting with their own offerings—with the former offering discounts and other perks for its members, while the latter gives shoppers early access to sales and events.

While it’s important to keep an eye on competitors and see how their loyalty programs play out, it’s just as important for brands to find a program that works for them and deliver a more personalized experience to consumers that they can’t get elsewhere. In a November 2020 survey from Merkle, a key consensus among the US internet users surveyed was that they wanted brands to be aware of their purchase history and reach them accordingly, whether that was with personalized offers, content or product recommendations.

According to November 2020 data from Merkle, many shoppers want brands to be aware of their past purchases, and target them accordingly. - Insider Intelligence
According to November 2020 data from Merkle, many shoppers want brands to be aware of their past purchases, and target them accordingly. Insider Intelligence

Retail market 2021 forecast

By and large, the pandemic has transformed the retail landscape—and in many ways—accelerated various aspects of the industry, including online grocery and frictionless commerce aspects.

The retail market will continue to forge ahead as retailers innovate both in-store and digitally.