Retailers Predict – and Respond to – Long-Term Shopper Behavior Shifts in the Wake of COVID-19
By Cheryl Sullivan, President, DemandTec
Since the rise of Amazon and the ascendance of the always-on shopper with complete price transparency across all competitors and channels, the retail industry has been in turmoil, and uncertainty has taken over. But the one thing for sure is that the growth of e-commerce has continued to accelerate. Now the global havoc wreaked by the COVID-19 pandemic has brought even greater seismic shocks to an industry constantly struggling for relevance and sustainable business models. With COVID also came the birth of a new kind of shopper that is forcing retailers to throw out everything they thought they knew about shoppers and has left retailers struggling to piece together a new playbook in an uncertain world, trying to align to the long-term impact this pandemic has manifested.
We had our own hypotheses on what this new shift in behavior will mean for retail. Still, we wanted to hear first-hand about what retailers think their world will look like for the foreseeable future. With RIS News as our research partner, we commissioned a study to learn how retailers are thinking about their shoppers, pricing, and technology, today and beyond. The results are stark and riveting.
First, retailers who have seen their shoppers shift in unprecedented numbers to their online channels don’t expect those shoppers to return to the store in the post-COVID era. In fact, the study found that 100% of retailers say it’s highly likely or fairly likely shoppers will maintain strong ecommerce dependence long-term. Conversely, only 10% of retailers believe it is highly likely shoppers will ever return to pre-COVID-19 levels of in-store shopping. After months of shifting to online shopping, even among traditionally resistant segments like older shoppers, these e-commerce adopters are entirely comfortable with and fluent in their newfound channel of preference.
Regardless of what channel shoppers are buying in, retailers believe they will be paying more attention than ever to price (as if that is even possible) – 72% of retailers say shopper price sensitivity will increase and remain elevated even after COVID. With larger numbers of price-vigilant shoppers online, where they have full price transparency across multiple competitors, it’s clear that retailers are sitting up and paying attention: 97% of them say they need stronger competitive pricing strategies in light of heightened shopper price sensitivity.
What can retailers do to maximize their opportunities for success in this unfamiliar landscape? The good news is that they recognize that they can’t rely on longer lead times, historical data, and manual, human-led processes to respond with agility to completely new and fast-changing shopper, competitive and market dynamics. A whopping 60% of the retailers say it’s a focus for them to put AI-powered pricing in place, and 70% say they are willing to take humans out of key processes and rely on AI-powered automation and dynamic pricing. Which of course positions them to automate, detect changing demand signals, better understand competitive elasticity and price sensitivity, and price with precision and speed.
This is just one of the many fascinating trends the study identified, and we will be posting additional blogs on other findings from this timely research, including what barriers to AI-based pricing retailers do – and do not – perceive as they prioritize the optimization journey. If interested, we invite you to read the full study here: Smart Pricing Strategies for the Post-COVID World.
Now more than ever, retailers who rely on science-based price optimization have not only significant advantages in the market but indeed are finding that it’s crucial to navigate through today’s challenges brought on by the pandemic and in many cases such as grocery, even thrive in a whip-lashed landscape. Using AI-based capabilities to get real-time insight into demand shifts has become table stakes.