Countless “traditional” brick-and-mortar stores transitioned to hybrid and omnichannel selling in 2021 and 2022, introducing new ways for customers to shop online, leverage delivery services, and even take advantage of click-and-collect opportunities.  

While softening restrictions in 2022 have allowed some companies to re-open their physical locations, retailers’ challenges are far from over. Not only do these companies need to adhere to new customer expectations for contactless, personalised service, but they’re also now dealing with a different set of threats imposed by impending recessions and energy crises.  

So, what will these changes mean to the future of retail? 

The Impact of Rising Energy Costs on Retail 

At present, the biggest threat facing stores strong enough to survive the pandemic comes in the form of rapidly rising energy costs. Throughout the United Kingdom, energy prices have soared to record-breaking levels, leaving many unable to pay their monthly bills. These huge energy costs aren’t just a major concern for consumers; they present a significant problem for business leaders too, who are already struggling with depleted post-pandemic budgets.  

According to one report from the Federation of Small Businesses, around 15% of SMBs believe they may have to either downsize or close completely due to spiralling energy expenses. With the energy pricing cap set to continue rising into 2023, the issue could soon become a lot worse.  

It’s not just niche businesses feeling the pinch either. The Association of Convenience Stores, which represents around 48,000 stores in the UK said energy bills had soared to an average of around £45,000 for some smaller members. Collectively, the ACS says its members are facing energy bills worth approximately £2.5 billion.  

If government bodies don’t step in to reduce the expenses these companies face, the average UK consumer could find themselves with a lot fewer options in where to shop going forward.  

The Trends Likely to Emerge Going Forward 

While it’s difficult to know for certain what the new energy crisis challenges will mean to the future of retail and commerce, there are some trends which are likely to be important for today’s companies. First and foremost, the transition away from in-person retail into omnichannel and digital commerce is likely to continue as fewer businesses can afford to run their own physical location. 

During the pandemic, many businesses already began creating e-commerce versions of their stores to give consumers a way to continue purchasing essentials when brick-and-mortar locations were closed. The use of e-commerce opportunities may continue to accelerate as businesses look for ways to reduce the overheads associated with running a physical store.  

Outside of the transition to more digital commerce options, we’re also likely to see an increasing focus on customer experience to help “recession-proof” struggling businesses and maintain customer loyalty as retailers are forced to raise their prices. If bills continue to accelerate for retail stores, there’s a good chance the cost of common products will also rise to ensure these businesses can stay open. Unfortunately, many consumers will quickly abandon a store with rising prices.  

Fortunately, better customer service could be the answer. According to one study by Ipsos, around 70% of women and 75% of men say they’re more likely to continue buying products from brands even after they raise their prices, if they feel “valued” by the company.  

Ipsos isn’t the only group to establish the benefits of maintaining high levels of customer experience in an economic downturn either. Leading analysts like McKinsey and Forrester have found customer experience leaders have 3 times higher total returns than their counterparts during difficult periods.  

What Does the Future Hold for Retail? 

With economic uncertainty on the rise, along with business energy bills, retail companies have a number of challenges to deal with in the pipeline. However, there may still be ways for these companies to protect themselves. Embracing new forms of digital commerce and doubling down on excellent customer service will give more organisations hope for the future.  

Flexibility in Delivery and Returns  

Perhaps one of the most significant changes in e-commerce is the customer’s decision-making process. For example, when a customer buys a piece of clothing online, they are unlikely to be sure of the fit and size; even the style can be hard to judge through a screen. In a physical store, much of this is negated. We have seen an increase in people purchasing more items online with the intention of returning much of the order – 1 in 3 fashion purchases are now returned. This change in purchasing behaviour has led to the need to modify and simplify returns processes. Ensuring that customers can return items quickly and efficiently isn’t an easy task, nor is it cheap, with an estimated £7bn cost associated with returns.  

As online orders increase dramatically, so have delivery and return demands, ‘with parcel deliveries rising 50 per cent to 4.2bn in the financial year ending last March, according to industry regulator Ofcom’. As a result, services such as, parcel lockers – like those provided by InPost – have become all the more necessary and popular. So much so that ‘the number of potential customers within 5 minutes of a locker has risen from 2 million to almost 7 million in the last year‘. Such infrastructures have been vital in easing the strain on even the biggest delivery giants whilst still living up to consumer expectations of a stress-free process. 

For those of us with an eye on innovation much further in the distance, enhanced touch screens are being discussed as an option to help customers feel objects. That would surely help reduce some of the return’s volumes. Watch this space, with some early versions of this expected in the next five years!  

Options for Payment  

The way that customers pay for online purchases is constantly changing. Before now, most retailers offered a single payment option. A consumer would input their card details and the money would leave their account accordingly. However, there has been a movement here to provide customers with more options. Using credit-based systems, such as Klarna, means that customers can buy products now and settle the balance at a time that suits them. Alternatively, a customer might choose to pay with PayPal, Apple Pay, Google, etc.  

Giving customers options is key – the easier their journey, the more likely they are to make a purchase. A word of caution, though; as the saying goes, more money (or, in this case, payment options), more problems. Therefore, your customer service team must be armed with the knowledge of the different options available to customers so they can effectively support incoming queries on payments. An informed customer service team is an effective one.  

Customised E-Commerce Experiences  

The major difference between in-store shopping experiences and the world of e-commerce is the presence of human interaction. So much of the online experience is automated; customers simply click a button and the products they’ve ordered get delivered to their door. This means retailers have limited opportunity to upsell products or encourage a purchase, as is possible in-store. Digital tools have come a long way in terms of the support they can offer customers online, but what can we do to make that situation more interactive and brand immersive?  

We are seeing more ‘customised’ shopping experiences appearing in the market. Take the fashion world with Stitch Fix and Thread – where the experience replicates having a personal shopper. These services show that creating more interactive offerings doesn’t necessarily mean increasing your headcount and therefore costs. We can certainly expect to see more of this as time goes on.  

Keeping up with Demand  

But, what of situations where a higher headcount might be required? Creating more interactive and immersive digital experiences will depend on your resources. As you add more strings to your bow, you aren’t replacing the old ones. Your customers will still want to call to see why that parcel is a day late, or to ask why they haven’t received a refund yet, or to complain that their order has not met expectations. This realistically leaves two options: 

Firstly, you can grow your own team – utilising that loyal, experienced instore team that has sadly seen its store close, giving them the chance to reallocate those skills. This has already been successfully implemented throughout lockdown; for organisations such as jewellers. Clearly, it is still possible to deliver high-quality customer service in such ways. 

Alternatively, you could choose to work with an outsourcing partner. They can deliver your standard customer service expectations and, importantly, go way beyond this by providing the kind of personalised services aforementioned. Outsourcers are flexible enough to grow with you, taking on the pains of recruitment during peak times. They can also offer you multiple locations for cost-saving purposes and, in most cases, provide access to multilingual, skilled staff – at least that’s the case here at DDC OS. More importantly, an outsourcing partner should be strategic, supporting your aims as an innovative, ever-evolving retailer.  

Indeed, lots to think about; in fact, next time, we will dive even deeper into the topic of delivery and returns.  

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DDC OS in Retail