Small And Mighty: Independent Retailers Did More Than Just Survive 2020
The retail industry has undergone a transformation in the past year and become more resilient, agile, and innovative. In 2020, it was the fastest-growing sector of the economy and retailers of all sizes rose up to the challenges of 2020 and continued to adapt and evolve in 2021. Here are the facts:
- Retail was the fastest-growing segment for new businesses in 2020
- Retailers of all sizes are competing with one another by adopting a multichannel sales strategy
- Small businesses reap the benefits from the industry’s diversity in scale and stand to lose from the overregulation of marketplaces
Retail was the fastest-growing segment for new businesses in 2020.
More than 4.3 million business applications were filed in 2020, marking a record year for new business formation, according to the U.S. Census Bureau Business Formation Statistics, highlights the LendingTree report on new entrepreneurs.
Retail was the fastest-growing industry for new businesses between 2019 and 2020, as reported by LendingTree. “In 2019, there were about 520,000 applications filed to start retail businesses, but in 2020 that figure reached more than 822,000 — an increase of 58.2%.”
Retailers of all sizes are competing with one another by adopting a multichannel sales strategy
Independent retailers innovated rapidly across their online and in-person shopping channels to adapt to the new environment, highlights the McKinsey report on small-business recovery after the COVID-19 crisis. “Retailers that were deemed essential, especially grocers, began offering curbside pickup, limiting the number of customers in their stores, adjusting their hours, and sometimes creating special time slots to cater to the most vulnerable populations. To further maintain physical distance, many experimented with new payment methods and apps. Retailers that were deemed nonessential—those selling apparel, for example—experimented by rapidly uploading products to their e-commerce websites, offering free delivery, and extending return policies.”
Small sellers have access to, and use, more sales channels and digital tools than ever before to reach customers and leverage cutting-edge technologies:
— Traditional retailers are increasingly building out third-party marketplaces, such as Hudson’s Bay, United Natural Foods, Lands’ End, Urban Outfitters, Kroger, Ahold Delhaize, Anthropologie, and more, according to Modern Retail’s Michael Waters.
— TikTok offers a handful of new tools, including the LIVE shopping feature and in-feed ad products, allowing brands of all sizes to reach the platform’s growing number of users. The #TikTokMadeMeBuyIt hashtag—which users post when sharing products discovered through TikTok—has grown to 4.6 billion views, writes Sarah Perez of TechCrunch.
— Consignment app Poshmark has 70 million users, Vinted has 34 million, Depop has 21 million, and Mercari has 15 million as of 2021. All of these app-based retail marketplaces make it incredibly easy to start a small business and make your listings pop, writes Leah Stodart of Mashable.
— Mailchimp morphed into a fully fledged marketing company and launched online stores for small and medium businesses to access its more than 14 million users, writes Frederic Lardinois of TechCrunch.
A new report from the Connected Commerce Council highlights how small sellers are successfully embracing many retail channels: “The report found that despite the rapid growth of e-commerce, traditional offline sales are still the most popular method for SMB sellers. ‘Brick and Mortar’ physical retail stores (79%) and wholesaling (78%) beat out third-party online marketplaces (68%) and sellers’ owned and operated web stores (68%).”
Supporting hybrid retail is part of a holistic sales strategy, according to Chad Cress, Chief Creative Officer for DJM. “Brands that look at their brick-and-mortar and online businesses not as two competing entities but as one way to increase sales across the board—those are the brands that are surviving, and those are the brands we want to talk to. Internally, we’re having conversations as a landlord about how to create a platform or a sandbox of some kind where these brands can come together. How do we be an omnichannel landlord?”
Walmart and Target posted strong Q2 2021 earnings, with both retailers continuing to capitalize on the ongoing online sales surge while maintaining solid brick-and-mortar growth, reports Bryan Wassel of Retail Touchpoints.
— Walmart’s investments in stores were the “key driver” of the company’s impressive $1 billion operating income growth in Q2 2021. “Stores continued to validate Walmart’s ongoing investments as they were the key driver of the $1 billion increase in U.S. operating income on $5 billion in increased revenue, which is particularly impressive given the strength in its lower margin grocery-equivalent business that continues to grow share despite its massive scale.”
— Target’s same-day retail services, including order pickup, drive up, and Shipt, contributed to the growth of the company’s online sales. “Digital comparable sales grew 10%, following 195% growth in 2020. Much of the increase could be attributed to the retailer’s same-day services (Order Pickup, Drive Up and Shipt), and more than 95% of Target’s second quarter sales were fulfilled from stores.”
Nike is transforming into a tech-first, direct-to-consumer brand, positioning itself to sell more products through its website and brand-owned stores, highlights Business Insider’s Shoshy Ciment. “Digitalization, a term heralded at the brand as early as 2010, is a broad term at Nike. According to remarks in Nike’s latest earnings call, it encompasses everything on the nonphysical side of its business: e-commerce, direct to consumer, and mobile apps. That strategy influences product innovation, including things like the 2012 FuelBand and the wildly popular Snkrs app.”
Once digital-only brands like Warby Parker have doubled down on their store investments, reports Alicia Esposito of Retail TouchPoints. “When we ponder the future of retail, the store is always involved in discussions. In fact, experts and practitioners across the retail spectrum largely agree that the store is a crucial vehicle for customer retention, engagement and loyalty. Even once-digital only brands like Warby Parker have doubled down on their store investments. In fact, the eyewear darling plans to open another three dozen locations by end of this year. What will change, though, are the experiences that many consumers will expect, and the role that technology and data will play to support fluid, tech-agnostic experiences in the store and beyond.”
Small businesses reap the benefits from the industry’s diversity in scale and stand to lose from the overregulation of marketplaces
Broad sweeping restrictions on marketplaces would have “far-reaching negative implications” for small business sellers, explains Connected Commerce Council. “[L]egislation that would create new restrictions on how online marketplaces sell products, would almost certainly have drastic consequences for small business sellers that take advantage of Amazon’s online marketplace. While the stated purpose of this bill is to prevent large companies from unfairly disadvantaging smaller rivals the bill is so overly broad that it would have far-reaching negative implications for small sellers in those marketplaces.”
— Connected Commerce Council continues: “By empowering small businesses to find customers, access tools and win, marketplaces naturally drive prices down and quality up across product lines, industries, and regions. This model has allowed small businesses across the country and the world to participate in the retail revolution and benefitted millions of American consumers. Legislation like the one that is currently being considered what grind that progress to a halt.”
Forcing the separation of selling and marketplace functions could lead to the closure of the third-party marketplaces that have connected many small businesses to consumers, reminds Matt Schuers, President of the Computer & Communications Industry Association. “However, policymakers misapprehend the likely consequences of forcibly separating selling functions from marketplace functions, first-party from third-party. The assumption that companies will cease offering products in their own marketplace and yet continue to operate that marketplace—subject to onerous regulation一needs reexamination. Some companies may simply stop providing a marketplace. This would no doubt impair the company’s business, but that’s unavoidable in an onerous regulatory environment. When all options are bad, the question is which does the least damage. And when regulations are designed to penalize marketplaces relative to traditional retailers who don’t allow independent sellers to sell alongside their own retail operation, companies may choose to revert to more traditional models that don’t have room for independent small businesses.”
Amazon Marketplace enables third-party sellers to offer products and compete for customers. In fact, these sellers contributed to more than 55% of all Amazon sales in 2020, highlights Andrea Asoni, Principal of Charles River Associates. “Amazon Marketplace supports small businesses which can offer their products to, and compete for the dollars of, final consumers who visit the Amazon website. Third-party sales on Amazon Marketplace have increased from about 25% of total Amazon sales in 2007 to more than 55% of Amazon sales in 2020.”
— Asoni continues: “The blurring of the lines between online and traditional retailers, the growing multi-channel competition, and the growth of alternative channels for small businesses to reach their customers all point to an increased complexity of the marketplace and of the ‘market definition’ exercise.”