When we think about the COVID-19 pandemic’s impact on how people shop—and on how retailers cater to their needs — it’s important to recognize that consumer preferences to “buy online, pick up in store” and to take advantage of other digitally enabled solutions are not simply short-term shifts. In fact, the current period is more likely a tipping point in the digitization of retail and in the shifting power dynamics between buyer and seller.
The traditional business-to-consumer retail model has unraveled in recent years, and COVID-19 has accelerated a push toward a new era of consumer-to-business relations. In this new model, consumers have become merchants in their own right, buying from a broad spectrum of retail channels, curating and promoting their own array of products via their social media accounts, reselling used goods through digital platforms, and setting the terms for how their purchases get to their doorsteps.
Consumers no longer rely on retailers the same way they did in the traditional model. Rather than trusting the same retailer for the best prices and the broadest selection, people are more likely to skip from source to source, powered by peer recommendations and price comparison shopping as they go.
Retailers have realized that their role in the customer journey has changed, and while their profit margins were already squeezed, many have invested heavily in expanding digital experiences and increasing convenience for consumers. They’re developing more partnerships with third-party providers of data-driven services and experiences to create more value for their customers, but these strategies can lead to a profitability paradox in which they struggle to capture value in return. Retailers can no longer rely on alleviating margin pressure just by cutting costs.
In order to thrive in this new era, retail businesses need to reinvent both how to go to market and how to leverage their own customers along the way.