Trends

As global vaccination rates keep climbing higher, it looks like there is finally a light at the end of the tunnel for the pandemic. This leaves many CPG leaders wondering – what retail trends that developed during lockdown will become permanent? Although many consumers are eager to regularly get out of the house again, they have also become comfortable with many of the new habits that they have picked up. Now that America has officially lived with COVID-19 for a whole year, here are our predictions for retail trends that we believe will stick around long after the pandemic is over.

eCommerce is Here to Stay

The explosive growth of ecommerce in 2020 has had a major impact on retailers. Consumers have a totally new set of habits, needs, and expectations, with shoppers prioritizing traits like convenience and value. For retailers, this has meant that competition has become a lot more complex. Now that shoppers aren’t limited to the stores in their immediate vicinity, their options have suddenly multiplied. It’s also more of a hassle for shoppers to drive from store to store than it is for them to visit a new website, meaning that shoppers no longer have the same incentive to settle for the price and product selection that’s available at their nearest store.

For CPG brands, this push towards ecommerce means that they need to reconsider what they know about their consumers and how they shop. For example, packaging that was designed to compete on-shelf may not have the same effect on a screen. Rather than being grouped by category, shoppers may be searching for products based on specific traits.

If we look at a sugar-free jelly product, for example, a diabetic consumer that is shopping in a store will see the jelly on shelf with all of the other spread options. A diabetic consumer shopping online, however, might just search for “sugar-free” on a retailer’s website without a specific type of product in mind. Now, instead of competing only with brands like Smucker’s® or Welch’s®, that sugar-free jelly is competing with all other sugar-free snack options that are vying for the shopper’s attention. Packaging will have to be designed with the online consumer in mind, and searchable traits like “sugar-free,” “vegan,” etc. will have to be near the top of the hierarchy.

Direct-to-Consumer Selling Could Dominate

With shoppers becoming so comfortable with ecommerce, more brands are seeing the benefits of skipping the retailer entirely and just selling directly to consumers. A direct-to-consumer sales approach has helped many small brands like Harry’s® become major players in their categories, but there is even more potential for large multinational companies to get in on the game.

Because of the way that many ecommerce shopping baskets work, it’s easier than ever for consumers to become repeat shoppers. Online platforms allow shoppers to reorder items that they’d already purchased through their account, saving the consumer time by encouraging them to rely on products that they know that they’ll regularly use.

Multinational companies have an opportunity to apply this data towards developing their own direct-to-consumer lines. For example, a company like Procter & Gamble could market a laundry kit that includes products from Bounce®, Tide®, and Downy®, delivering the bundle directly to consumers while passing some of the cost savings from avoiding the retailer markup on to the shopper. Both shoppers and brands would save money, shoppers would benefit from the convenience of not having to shop or think about their purchases in this category, and brands would know that shoppers will continue to reorder even before they may actually need to replenish their supplies. We are only just beginning to see the potential of this kind of sales strategy, but we are predicting that it could become one of the leading retail trends of the next few years. 

Growth of the Dollar Channel

The dollar channel saw explosive growth in 2020, and Dollar General’s same-store sales growth was twice as large in the first quarter as Walmart or Target. Dollar Tree also managed to beat out both retailers by 5%. More consumers outside of the channel’s traditional demographics are starting to really embrace dollar stores, and these retailers are responding by expanding their product offerings into new categories like fresh produce and frozen foods.

With new consumers turning to the dollar channel, some brands are also selling in dollar stores for the first time. More premium snack, beverage, and frozen brands are seeing opportunities to reach their target audiences in the dollar channel, and this is going to have a permanent effect on the dollar channel shopping experience. New entrants will also make the channel more competitive, which could lead to exciting new CPG opportunities that are worth watching.

Center Store Discoveries Could Stick

This time last year we were at the very beginning of the pandemic, which saw a huge surge in “panic buying” – shoppers buying up shelf-stable products because there was so much uncertainty around grocery store safety and inventory levels. For brands in this area of the store, it was a struggle just to keep up with demand and keep shelves stocked.

Just a little later in the pandemic, shelf-stable products took on a new role. They weren’t emergency supplies anymore, but a welcome change of pace for consumers that had relied on eating out before and were tired of their own limited recipe capabilities. They were also a source of comfort, as many consumers have a lot of nostalgic memories with products like boxed mac and cheese and canned soup.

For other consumers, this trip to the center of the grocery store was also an opportunity to see how much these products have evolved. They may have been surprised to see organic, paleo, or keto products in these aisles. Now that shoppers are more familiar with both the new products and old favorites that are available in the center of the store, many of these discoveries will lead to loyal repeat purchases post-pandemic.

In these cases, it is important for CPG brands to invest in market research and do the work to really understand these new consumers. Who are they, what are their needs, what are their habits? By knowing these answers, CPG brands can better position themselves to retain these new consumers and deliver the right products, the right messaging, and the right creative assets for future growth.

Drug Stores Push the Envelope as Service Providers

Given the huge shift towards ecommerce, retailers are seriously in need of reasons to pull consumers back into stores. One way for them to do this is to become destinations not just for products, but for services as well. Retailers have been doing this for a very long time – think of vision centers in Walmarts or business printing services at Costco – but the pandemic has really shown just how important it is for retailers to be all things to all people if they want to compete in the era of ecommerce.

One channel that is really spearheading this effort is drug stores. With retailers like CVS, Rite Aid, and Walgreens expected to play a big role in COVID-19 vaccine distribution once everyone over 16 becomes eligible, the idea of retailers as service providers will take on new significance – especially since they have already become major destinations for COVID testing. Consumers won’t forget the role that these retailers have played in curbing the pandemic, and this goodwill could have a lasting impact on the way that consumers think about drug store chains as health care service providers. We would not be surprised to see many more consumers turn to these retailers for regular healthcare needs post-pandemic, such as annual flu shots and physicals.

Some retail trends will end with the pandemic, while others are likely going to stick around for much longer. Shopper lifestyles are never going to fully go back to normal, which is why retailers and CPG leaders must prepare now to serve customers when we’ve reached the “new normal.” From new channel opportunities to legacy brand rediscoveries, shoppers are already settling into habits that will impact the industry for years to come.