Retail Trends for 2021
There is no question that bricks and mortar retail, which faced challenges prior to the pandemic, is now facing an accelerated threat to evolve or become irrelevant. Where and how people shop has changed and will keep changing. These are some of the trends we expect to see in retail over the next year and beyond.
From Bricks to Clicks
Store closures was a trend even before the pandemic but will continue through 2021. Retailers such as Gap, Macy’s, Nordstrom, Victoria’s Secret, Lord and Taylor and other have permanently closed numerous stores. Others have filed for bankruptcy/restructuring over the past year including J.C. Penney, Neiman Marcus, and J. Crew. The likelihood is that Bricks and Mortar retail will stay relevant by serving multiple functions, for example as a showroom to provide a touch and feel experience for consumers.
Big Box Gets Bigger
Retailers that have done well through the pandemic were well positioned with e-commerce and omnichannel platforms and had a wide product offering at cost-effective pricing backed by good customer service. This includes Amazon, Walmart, Costco, and Target which offer a general assortment of products at a low cost with fast shipping and easy returns. The big box stores have also done well with fulfillment trends such as Buy-Online-Pick-up in Store (or elsewhere) that have thrived through the pandemic.
Buy Now, Pay Later
Another evolving trend which was growing pre-pandemic but has accelerated with increased online shopping is more flexible 
payment options for consumers. Payment providers such as Sezzle, Paybright, Afterpay and others allow consumers to buy products and split the payments over several weeks or months, but the merchant gets paid right away. Such solutions have helped retailers, especially those selling bigger ticket items to convert browsers into buyers.
Direct to Consumer
Direct to consumer brands will continue to grow as consumers shift loyalties to products that meet their functional requirements, new brands launch direct and brand owners look to bypass wholesalers and retailers. Under Armour is the latest consumer brand to announce bigger plans to sell direct through their own online channels and physical stores, l much like Nike has done successfully. Coach owner Tapestry and Levi Strauss have gone the same route. The pandemic has only accelerated this trend.
Digital Localism
Another trend that we have seen thrive through the pandemic and is likely to stick is digital localism, which covers consumers buying closing to home, but also the option of picking up closer to home. In some cases, retailers have converted retail locations to fulfillment centers. What we have also seen are e-commerce marketplaces that cater to consumers seeking alternatives to Amazon, linking consumers with local stores. Also the trend of “second-life” products, where brands facilitate the sale of used goods.
The Case for Nearshoring
Given the heavy impact of the pandemic on supply chains, many companies have turned to sourcing closer to home or nearshoring to expand their sourcing options. A recent study by Blue Yonder and Coresight Research found that 65% of retailers plan to expand their local and domestic manufacturing. Some of the reasons include improved quality control, shorter lead times, better inventory management and adaptability to market demand.
One of the big issues many retailers are facing is unsold inventory – in many cases, double the usual volumes. The case for near-shoring is like the case for e-commerce – where products are available in real-time versus a 3-6-month cycle to source product from China.
One of the big challenges of a model that sources from Asia is the long lead times and advance planning. This was a key factor in the success of UK based online retailers, Asos and Boohoo who did not have the scale to source from Asia when they started. This gave them an advantage in their ability to launch innovative designs faster. In only a few years, these online retailers have surpassed traditional retailers acquired long established brands such as Top Shop.
Apparel shipments from China to the US dropped by 39.16% to $15.16 billion. This drop is attributed to Covid, but also to the US trade war and shifting of apparel manufacturing to other locations. China will still be one of top two sources for apparel or apparel inputs for the coming years given their large capacity.
The trend of nearshoring, which was picking up in recent years appears different for US and European buyers. Some reports indicate that US brands were more likely to buy from factories reopening in South Asia than from Latin or South America, whereas European brands continued to increase their sourcing from countries such as Morocco, Egypt and Tunisia, which all saw double digit growth.
For the Americas, nearshore sourcing options might include South and Central America and Mexico, whereas Eastern Europe and Turkey would be closer to home than Asia. According to the Coresight survey, Honduras, Mexico and El Salvador all saw import declines of around 30%, despite enjoying duty-free status to the US, which suggest that a lot of work needs to be done to shift sourcing closer to home. Other locations such as Nicaragua and the Dominican Republic and countries that are part of the Central America Free Trade Agreement also show promise.
Part of the challenge in shifting to sourcing closer to home is most of the inputs are still made in China. If sources for parts materials can be found closer to home, companies can then take advantage of shorter lead times, smaller production runs and responds faster to the ups and downs of market demand.
All these issues and more are covered in the most recent CBX Q1 2021 Sourcing Report. To learn more about how to address some of these concerns with the CBX platform, feel free to contact us directly.