Cashless society: By 2024, digital wallets will eclipse all other payment methods
Has the cashless society arrived? The pandemic sped adoption of mobile and digital wallets, putting pressure on retailers to provide digital payment options.
After the most atypical of years, all eyes are on retail 2021. How will an industry so heavily impacted by COVID-19 fare next year?
Will shoppers return to brick-and-mortar stores? Or will e-commerce continue its record-breaking pace? Will safety measures remain paramount?
Retail in 2021, after everything changed
The havoc wreaked by the pandemic on the retail industry is well documented. Panicked shoppers hoarded necessities, depleting store shelves. Supply chain disruptions made it hard for retailers to stock critical items.
Many big names in retail declared bankruptcy or disappeared altogether from the landscape, including JCPenney, Pier 1 Imports, and Lord & Taylor.
At the same time, a huge proportion of retail spend quickly migrated to e-commerce as consumers chose to remain in the safe confines of their homes. The e-commerce share of grocery spend now tops 15%, while for general retail it’s a whopping 35%.
Contactless shopping and mobile payments went mainstream and shoppers relied on delivery services like Instacart and Amazon for their groceries.
While it’s impossible to make retail 2021 predictions with any certainty, it’s a safe bet that some COVID-triggered trends will continue into next year.
Retail 2021: Brick-and-mortar vs. e-commerce
A big question for retail 2021 is whether people will return to in-person shopping once the lockdowns have eased.
Deloitte’s latest survey of consumers showed that 56% feel safe going to a store and 49% are worried about their physical well-being. Clearly, brick-and-mortar retailers will need to reinforce safety measures as they try to draw shoppers back to stores.
Meanwhile, the significant percentage of people who continue to view shopping as a risky activity will continue to drive e-commerce growth.
“People ask themselves, is it worth it to go to the store to buy bananas or batteries?” Brendan Witcher, Vice President and Principal Analyst at Forrester, says. “If they decide that it’s not, retail will continue to suffer even though stores have technically reopened.”
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Witcher asserts, however, that the current spike in e-commerce will start to subside, particularly as shoppers long for the more experiential aspects of shopping – feeling a garment, trying it on, and so forth.
He estimates that the e-commerce share of general retail will drop down to 19%; for grocery, the share will drop to about 5%. Even with those dips, however, the pandemic has essentially accelerated e-commerce adoption by five or six years, propelling it into a $3.7 trillion industry.
Mobile payments, virtual fitting rooms, and fulfillment hubs
What remains an open question is whether other changes in the retail environment will remain. It seems likely that the shift away from cash in favor of mobile payments will endure beyond the pandemic.
The use of cash had already been on the decline, with Millennials preferring their digital wallets over cash. COVID has led more consumers to overcome any hesitancy towards contactless payment methods. Some retailers now only accept card payments.
Before COVID, retailers were already experimenting with augmented and virtual reality technologies.
The pandemic led many to ramp up their use of AR and VR to give shoppers the option of virtual fitting rooms, where they could sample and trying on products at home. In 2021, expect this retail trend to continue.
And with the focus on e-commerce, expect retailers to turn physical retail space into fulfillment hubs. There are already examples of this in Ohio, where Amazon set up shop in a former mall.
Mindful marketing
In the meantime, retailers remain hesitant to make investments in sales and marketing, during the crucial holiday shopping season. This reluctance is partly due to a sensitivity about the financial hardships so many consumers are facing.
When people are focused on things like finding work and paying back rent, splashy marketing is likely to come across as tone deaf. And where consumers do spend, it’s likely to be driven by promotions and discounts.
Still, Witcher says, there are ways that savvy retailers can take advantage of the situation – provided they are mindful of consumers’ real situations. Some retailers are effectively bundling items to support new realities, like virtual schooling and working from home. Others are trying to lure shoppers by offering auto-ship of staple items like paper products.
For big retailers, there’s an urgent need to meet the massive increase in “buy online, pick up in store” – and the high volume of in-store returns that come with it.
As we’ve seen, there are numerous reasons why retail’s emergence from the pandemic is being called “the great reset.” Of course, the challenges for retailers in 2021 are enormous – but for astute retailers, so are the opportunities.
