The pandemic had a profound impact on business in 2020. But the trends that influenced the retail industry might surprise you. In this episode of Connected & Ready, market researcher, speaker, and author Pamela Danziger discusses shifts in consumer expectations, the mindset retailers need to be successful, the biggest lessons they can learn from 2020, and her expectations for consumer behavior in 2021. Dynamics 365 Commerce delivers a complete omni-channel retail solution that unifies back-office, in-store, and digital experiences. This end-to-end solution empowers retailers to personalize customer engagement, increase employee productivity, and optimize operations across physical and digital channels. Request a live demo today: https://aka.ms/AA8ku82
Host Gemma Milne is joined by Pamela Danziger, founder of Unity Marketing, to talk about how retailers can best navigate the changing business landscape driven by shifting consumer demands, the most important trends that have emerged and accelerated this year, and what can we expect from consumers and retailers as we move into 2021.
About Pamela Danziger
A market researcher, speaker, and author, Pamela founded Unity Marketing in 1992 as a research-led marketing consultancy following her career in research and information management. She focuses on affluent consumer behavior and psychology, and has authored many books on the topic. She is a member of Home Trust International’s Leaders in Luxury Design and Jim Blasingame’s Small Business Advocate Brain Trust. Pamela is also a frequent contributor to Forbes and The Robin Report.
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Gemma: [00:00:05] Hello, welcome back. Happy New Year. You're listening to Connected and Ready, an ongoing conversation about innovation, resilience, and our capacity to succeed brought to you by Microsoft. We hope you've had a wonderful holiday break and are looking forward to 2021. I'm Gemma Milne. I'm a technology journalist and author. And I'm going to be exploring trends around how companies are adapting to a disrupted world and preparing for tomorrow. We're going to speak to the innovators who are bringing products, operations, and people together in new ways.
Pam: [00:00:37] In today's episode, I'm joined by Pam Danziger, market researcher, speaker, and author, all about navigating the changing landscape in retail, driven by shifting consumer demands. We unpack the consumer trends that have emerged and accelerated this year. We talk about what staying home for the holidays has meant for retailers, and we talk about what can we expect from consumers and retailers as we move forward into 2021.
Gemma: [00:01:06] Pam, thank you so much for coming and joining us on the show, and I wonder if you could start by just giving us a little bit of an introduction to who you are and what you do.
Pam: [00:01:13] Well, my given name is Pamela Danziger, though I go by Pam. I'm a market researcher and by training, I'm a librarian, I have a master's degree in library science. And in 1992, I formed Unity Marketing doing survey research and qualitative research to understand the consumers and the Unity Marketing ideas that if we understand our consumers, we can market to them better. And my particular focus is looking at the more affluent consumers and look at retail across the board to sort of understand those people with money who can afford to spend with you.
Gemma: [00:01:51] So this is obviously been quite the year for everyone, but specifically for retailers of all different shapes and sizes. So I think we're probably going to spend a lot of this chat reflecting on that. Why don't we just start with an open question. What has been going on this year? What have been the biggest shifts, trends that have had the biggest impact on retailers?
Pam: [00:02:12] Well, I mean, all you have to do is look around you. We just have gone back into like a semi shut down mode here in Pennsylvania where I live. It's really the pandemic has changed everything. A lot of people talk about how the pandemic has accelerated trends that were already happening in the retail market, which is absolutely true, the transition or the rapid shift to online shopping. But you know when I look at it, I see the whole process of shopping versus buying has been in the process of being disintermediated. And essentially this year, by that, I mean, it used to be you wanted to buy something, you had to go to the store, you had to go shopping to get it. And with the arrival of so many online retailers, we really didn't need to do that anymore. We weren't thinking like that because the stores were open and we are creatures of habit. So a new pair of shoes. Well, you could go search on Zappos, but, you know, you can go to the mall too, so that disintermediation has really happened and the cord’s been cut now. And I think it's never going to really ultimately go back. And the biggest underlying trend that I see happening in retail today, shopping is an experience. Buying something is more of a practical need.
Gemma: [00:03:35] And what has been the consumer thoughts around that shift? Because that's certainly something that people have noticed, particularly when you think about the sort of discourse around, you know, making sure you shop with independents because they really need you right now is almost sort of like a charitable narrative around making sure that we're consciously shopping as opposed to, shall we say, mindlessly buying. And what have you been seeing from that perspective?
Pam: [00:04:02] I mean, it's very interesting how, you know, the government has drawn the line between what we call essential retailers, which were the retailers allowed to stay open during the pandemic shutdowns, the grocery stores, the hardware stores, whatever the government decided was essential versus nonessential retailers in terms of independent retailers, clothing, accessory stores, and everybody that isn't essential. And that has created a decision that consumers have to make in their own mind. Is this purchase essential or nonessential? And that's the difference between essential and discretionary purchases. And I think we're going to see a shift. Consumers are really evaluating their discretionary purchases with a much harder yardstick, much more disciplined now than they ever did before. And I think those changes are going to be maintained as we go forward the next couple of years, if not further. The sort of mindless purchases that people have been making, I think are going to be much more left brain conscious rather than emotionally driven.
Gemma: [00:05:10] I mean, I'm sure there's many different variables, but I'm thinking about, well, just simply being better with money, perhaps because work might be different at the moment. And this idea of, you know, if we're at home and not doing so much, maybe we don't need an extra whole load of clothes if we’re not seeing as many friends as we were before. Or, you know, is there also this element of now we understand we have all these interconnected systems and supply chains and maybe we shouldn't be as thoughtless as a human species, sustainability - all these kind of ideas. Do you see as just a kind of mishmash of all that? Or can you, kind of, I suppose, find those causalities a bit easier in the data that you're seeing.
Pam: [00:05:48] As retail has been defined by essential and non-essential, I think our purchases and consumers mindset is now going to be thinking more in terms of do I need it versus do I just want it? And in the world that I work in, you know, the most discretionary of all purchases was luxury. So I think there's going to be a much higher bar of people evaluating spending so much money on something, they can go other places to other brands and find almost as good a quality for less money. You know, again, shopping has always been sort of emotional and now I think it's been forced to be more rational. And the underlying sort of psychology, as I see it, is this concern about health, wellness. I mean, that's become a very hot term today in business circles, wellness. But it's really more than just wellness. It's about well-being. And that has three key dimensions. I mean, there's the physical well-being, our health. There's emotional well-being, which we have suffered tremendous amounts of emotional disruption and then there's financial well-being. Lots of people in the states have, you know, had their incomes drop. So there's that financial concern, too. And if your finances are in order, you're emotionally not in order. And maybe you can't take care of your health as well. So, you know, they're all interconnected. The fact is, you can't buy your way to emotional or physical health, but you can certainly spend your way to financial ruin. So I think that this whole approach of well-being, I think we need to think broader about it. And I know consumers are thinking broader about it. And that's going to help them make decisions about the purchases based upon need versus want.
Gemma: [00:07:36] So what is the role then of retail experience? Because that's been one of the biggest areas of discussion, certainly any kind of retail conference or retail discussion that that I've been in over the past couple of years. And it's been this big focus on, you know, whether it's even just the journey through the website feeling nice or the physical store being the place of emotion and the online being the place of transaction and all this sort of thing. How do you think about experience right now? You know, is it just about making sure it's easy for people so that they're not having to think about it? Or is there ways that you can think about experience that’s, I guess, lifting up from this transactional kind of just "I need this, I'm going to buy it, doesn't matter how it feels like."
Pam: [00:08:16] Yeah I think experiences and experiential retail, it's such a deep and rich concept because, I mean, the fact is, people talk about, you know, the online transaction is not being experiential. Guess what? I save a tremendous amount of money and wear and tear on my body and I don’t have to go out if I buy something online. So the convenience factor is a tremendous experience and time is our ultimate luxury. I think we're really going to have to understand the dimensions. I mean, right now, people are very concerned about going to the store. So I guess there's that sense in retail circles. Oh, well, the personal in-store experience isn't going to matter as much in the future, but I think that's wrong. I mean, we are going to get through this pandemic. People will start traveling again. And a big part of what people do when they travel is go to stores and want to see and shop and experience different cultures. So I think we're going to see a return to physical retail. The question is, particularly for local boutiques and stores, can they survive until that happens? Because there was just a survey that came out from Alignable, which is a small business networking group. They surveyed 9,000 of their members and only 50 percent of the retailers believe that they have enough financial resources to survive over the next couple of months. I mean, what will, when we have, you know, 50 percent of the main street retailers which have so much personality and that's where you get such a local feel and local experiences, if 50 percent of them close, I mean, what have we lost not just in terms of money and economics and what have we lost in terms of our culture, in terms of our communities? I mean, it's really - we're at such a tipping point in terms of what the future of retail is really going to look like for consumers five, 10 years from now.
Ad: [00:10:17] Dynamics 365 Commerce delivers a complete omni-channel retail solution that unifies back-office, in-store, and digital experiences. This end-to-end solution empowers retailers to personalize customer engagement, increase employee productivity, and optimize operations across physical and digital channels. Request a live demo today by following the link in the episode description.
Gemma: [00:10:44] So what have you been seeing in terms of retailers that are navigating these changes and new expectations that consumers have? The 50 percent that do believe they're going to be able to keep going. What do you think is perhaps the difference between those that are going to last, hopefully, and ones that don't feel really well and how would be kind of better understand what the consumers are going to want as we move forward?
Pam: [00:11:09] Well, I think the ones that are going to survive, if we're going to look at those survivors, I mean, they've come into this thing in a better financial position. So they have been managing their businesses better. They've been more successful at connecting with their consumers and creating a personal relationship with them versus, you know, not doing as well as that. But I think, you know. The other thing that is important, and we understand this is the human psychology. I mean, if you feel your business is done, I mean, how can you, you know, opening the doors? I mean, it's almost like a self-fulfilling prophecy. So I think we really, each individual business, each individual entrepreneur, every manager of a really big corporation, needs to have that kind of positive outlook - set their psychology right so that they can survive and that they're open to new ideas. I mean, what I've seen with big retailers who have lots of resources, they have been very effective at pivoting very quickly, would like to buy online pickup in store and so many other, you know, deliveries, home deliveries. They've been very effective in changing and adapting new techniques, new technologies and so on. I mean, without the pandemic, I'm sure they would be much, much slower in doing those kinds of changes. We've really learned how important it is to be flexible, to be nimble, to be able to change and try something new. I mean, somebody said, you know, the biggest risk is not taking a risk at all. And I think that this has forced many people to move and shift. You know, again, human psychology, we don't want to do that, but we're going to have to and we're going to have to be even more sensitive to that as we go forward.
Gemma: [00:12:59] From your perspective, what do you think customers are expecting from retailers right now?
Pam: [00:13:05] Safety. I mean, it's as simple as that. I think they've also become very concerned about the safety of the employees too, the people that are on the sales floor. Again, we talked about how we divided people between essential retailers, non-essential retailers. Well, there's been essential workers to find. My son is an ICU nurse. He's an essential worker. But guess what? My other son, who works part time on the grocery store crew, is an essential worker, too. And I think we really want safety as customers, but we also want to be assured of safety and that the retailers really care about the essential workers that are on their front lines.
Gemma: [00:13:48] And it kind of actually comes into my next question, which was going to be around, what do you think the biggest lessons that could be learned about 2020 from these sort of trends? And what do you think is going to move forward? I mean, it sounds like this kind of mindset, shall we say, is perhaps something that, you know, that shift in mindset is something that can be taken forward. But, yeah, I wonder what you think about this, what have we learned is that we can kind of not just be kind of, I don't know, negative about how the years gone. Is there anything we can take from this?
Pam: [00:14:17] Yeah, positive. I mean, it's hard when you talk about, you know, really big retailers that rely upon big data and their databases and consumers walking in the store. You know, they're just your faceless entity just coming in and going out and so on. I really think that the personal connection, getting to know who your customers are and really understanding them, to me, that should be the absolute biggest takeaway of what we've experienced this year. How important is having a real connection with our customers? And in that regard, smaller independent retailers are way ahead of the game than big national retailers with all their thousands and thousands of stores. But if you're running a local Wal-Mart store, you really do need to know who your customers are. I think you need to be out on the floor. You need to be talking to customers, not holed away in some office in the back. What are we missing from the pandemic? We're missing the personal connection with our neighbors. We're missing the personal connection with, you know, the people around us. We want that sense of community. And I think to me, that should be the biggest takeaway from this year is how important really, knowing your customers, knowing their names, knowing who they are, knowing what they want and making that relationship stick. And it's going to be the retailers that benefited from the shutdown, the essential ones, the Wal-Mart's, the Home Depots, Lowe's. They're going to have a harder time than smaller ones in making that personal connection with the customer.
Gemma: [00:15:54] So we spoke a lot about the local stores or the smaller stores or independent stores tending to know the customers really well. What do we mean when we say they know the customers? You know, how do they signal that they know them in a way that works?
Pam: [00:16:10] Well, I mean, first of all, just to smile and say hello, I mean, so many times you go into a store, I'm thinking of a chain store, and they might have a sort of a patter or their script that they're supposed to say "welcome" or you know, "hello, what can I do for you?, What would you like to see?, What can I get for you?", Whatever. And I think we have to get rid of all those scripts. I mean, we have to hire people on the sales floor who know how to interact with people. Who can spark up a chat and remember people's names. Remember oh you came in two, three weeks ago, good to see you again. I mean, we need to hire on the sales floor for personal skills as opposed to whatever kind of expertise they might have. And if you're a jeweler, like jewelry stuff, you can train people in your product category. You really can't train people to have that the ability to deal effectively on a personal level with people. But that's what we need. And yes, it's really great if you can remember people's names, but it just helps to you can still act like you've seen them before. You can still act like you know them, you know something about them. And I think those are qualities that really will cement the memory of the store and the experience in people's minds.
Gemma: [00:17:28] So it's interesting, this conversation. We've mentioned words like wellness, positive psychology, mindset, knowing your customer connection, and we haven't once, I don't think, said anything about technology or data or the sort of things we normally talk about in these kind of future facing discussions. I wonder, you know, seen as we are on a tech podcast, if you could talk a little bit about what you see, the role of technology either this year and moving forward and amongst all of these other words that we're using, which, of course, is normally how tech, is spoken about in terms of the needs.
Pam: [00:18:02] Well, what do you say? You know, if the only tool you have is a hammer, everything looks like a nail. And I think what has to happen with tech is it's really got to be integrated into the human way we interact and interface and so on. Just recently, IKEA announced that they are getting rid of their catalog and basically IKEA is forcing their customers to interact with them online, digitally and you know, I think, well, you know, human beings we’re analog creatures. We shouldn't be forced and digital is great for certain kinds of things, but it isn't so great for other kinds of things, like dreaming about what you want your new bedroom to look like and clipping out pictures and putting them up on a board. I mean, I think digital has to be the tool to help us. It can't be the leader. It's got to help the human. It's got to be human focused and human designed. And I think it still has a long way to go to really being able to be a tool for humanity.
Gemma: [00:19:15] So what do you then perhaps you could even pretend that Covid hadn't happened for a second. And if we were on a podcast talking about the future of retail, do you think you'd be seeing the same thing as the future trends as we are now, based on the year we've had?
Pam: [00:19:32] I have been saying this for a long time. Yes, I do. I mean, I think well, in the world of luxury that I operate in, a couple of years ago, I was all for luxury brands going online, recommending that to my clients and so on, because they were dragging their feet. They said, oh, you can't have a luxury experience online. So that was one of the last industries to come online. Now they've adopted it lock, stock, and barrel, and they're all online and thinking, well, that's going to be the savior. It's not going to be the savior. It has to be pulled together. I mean, the existing predictions are somewhere between 25 and 30 percent of retail is going to be conducted online. That still means 70 percent is going to be in the store. And there's no question we need you know, you need to have that digital presence. Your website is your storefront in the online digital world. It will never go away, but it has to be fully integrated with a storefront, with your physical store, and your personal connection. So I just think for so many brands, I think it's become the tail that wags the dog. And really what we need is we need to focus on the person and then let's put the tools to enhance their experience with us. And online is, of course, critically important. But it's - people are letting it become the tail that wags the dog.
Gemma: [00:20:55] Hmm. I wonder if you could perhaps give us an example of maybe who you think is doing some really interesting things, whether that's COVID-related or not, from the perspective of the integration of both. Because, I mean, there's such a big trend, isn't it? Right. I mean, this is something I've heard a lot about in retail spaces. It's kind of like, how can you know the person's name when they walk into a store and know that they've browsed online? I'm thinking, but would I really want that if I went into a store, I don't know, maybe that's just me. But I'm curious as to what your sort of vision looks like in terms of that integration.
Pam: [00:21:27] I could probably give you more examples of brands that I think are doing a poor job. But, you know, I think of Starbucks. My husband, every day, goes to Starbucks. There are three Starbucks that are in close proximity to our home and he'll go to each one individually. Well, guess what? Everyone at Starbucks knows his name. Oftentimes, they'll have his drink ready for him before he even gets to the counter, you know, and he doesn't interact with the digital thingamajig...
Gemma: [00:21:59] The app and all that.
Pam: [00:22:00] Yeah, right, right. He doesn't have any of that. How do they learn his name? Because they wrote it on his cup. They always ask, what's your name? So they can call you. And, you know, I think that's a perfect example of that kind of information. And if he had one, the app would get what you drink, but so does the person, the barista behind the counter. I think that's a good example of integrating the digital and the personal and the personal is never going to go away. I tried to buy a wedding gift for my niece in September and I couldn't figure out how to get it sent to her. I had to ultimately order it and have it come to me so I could take it up to her house. It was ridiculous. Why can't I call the company and talk to somebody? Stuff like that just drives me crazy. It's like, why can't we think broader than just digital is the only way I'm going to communicate with you and I fill out a form. I can't even send an email and get a personal response. So I just think that we have a long way to go and I think it's going to happen. And I think that companies like Microsoft are going to lead in this, that bringing the human and the digital world together so that it works really well for both.
Gemma: [00:23:23] Interesting. So what do you see for 2021? How are you thinking about the New Year? What are consumers going to keep expecting as we move forward, based on what we've had in 2020, and how is that going to evolve as we do emerge out of the pandemic and go back to whatever normal is?
Pam: [00:23:40] You know, we talk about what do people want today when it comes to shopping and safety, I think that even once the vaccine gets spread and people get vaccinated, I think there's still going to be a tremendous amount of uncertainty related to the safety question. So I don't think that's going to go away in the first six months of 2021. I think it's going to be there. The danger and the feeling of threat is going to carry over a lot longer. So all the things that we've been doing in terms of sanitation protocols and cleaning the spaces and making our areas look clean and feel clean and be clean, I think all those things are not going to go away and retailers are going to have to continue to focus on those sorts of things for 2021. I think that consumers are going to start to slowly come out of their cocoons and want to get back to normal. They're going to be getting back to maybe going shopping as they feel more comfortable. I think we're going to see a cautious return to normalcy. I think there's no question, people have been holed up in their homes for so long. A lot of the emphasis that they've placed on redoing their homes and redecorating and so on. I think that's going to basically be done. I think they're going to be looking more toward outside and outdoors. So I think we're going to see a huge influx of interest in gardening and outdoor engagement as we're looking to the future for 2021 and entertainment, things that they can - activities that they can do outdoors.
Gemma: [00:25:18] Amazing. Pam, thank you so much for all of your insights and for your passion on this topic. It's always great to speak to someone who not just thinks about this stuff, but cares about it, too, and wants it to be done right. So we really appreciate you coming and joining us on the show today.
Pam: [00:25:32] Thank you, Gemma.
Gemma: [00:25:37] That's it for this week. Thank you so much for tuning in. You can find out more about Pam's work and indeed some of the broader themes we discussed today in the show notes. If you enjoyed this episode, please do take a few moments to rate and review the podcast. It really helps other people discover the show.
Gemma: [00:25:52] And don't forget to hit subscribe and tune in next time to continue our conversation about innovation, resilience, and our capacity to succeed.
Ad: [00:26:04] Learn how Microsoft Dynamics 365 Commerce can help you personalize customer engagement, increase employee productivity, and optimize operations. Request a live demo today by following the link in the episode description.