The DynamicAction Retail Index - 2020 Year in Review & 2021 Outlook

About the Index: The DynamicAction Retail Index - 2020 Year in Review & 2021 Outlook analyzes global online consumer transactions for 2020 as compared to 2019. The Retail Index covers the retail industry within general merchandise, home goods and apparel categories, while excluding grocery and Amazon transactions.

Retailers endured an unexpectedly tumultuous 2020, and our preview of 2021 teases similar challenges ahead. Join us for a review of The Good, The Bad and The Ugly of 2020, and our key tactics and strategies to thrive in 2021.

In 2020 Retailers successfully attracted new Customers online and were able to persuade existing online Customers to shop while reducing unlimited free shipping.

• New Customer Acquisition was up 4%, pulling more consumers into the digital channel
• Reactivated Customers were up 10%, enticing lapsed customers back into the fold
• First to Second Time Purchasers were up 6%, increasing repeat purchase rates
• Churned Customers were down 14%, improving customer loyalty
• Free Shipping was down 19%, reflecting gains in customer elasticity

The Covid-19 global pandemic turned our world upside down, and Retail saw consumers react to the resulting restrictions with a massive shift from shopping in-store to embracing the digital channel. A silver lining of the chaos of 2020 led Retail to attract more new customers to their eCommerce sites and also to accelerate first-time buyers to a second purchase. In addition, Retailers improved customer retention and loyalty YoY, with a lower rate of churned customers and improved customer reactivation as compared to 2019. In 2020 Retailers also successfully began to reverse a multi-year trend of customer reliance on unlimited Free Shipping.

In 2020 the Average Order Value and Average Selling Price dipped, and customers were often frustrated by fragmented and out-of-stock products.

• Sales
  • Average Order Value was down 3%, driven by economic uncertainty
  • Average Selling Price was down 2%, with frequent use of promos and discounts
  • Units per Order was up 1%, a modest but favorable increase
• Inventory
  • Overstocked was up 1%, a key factor to control in 2021
  • Understocked was down 5%, improving the customer experience
  • Not Viewed was down 30%, a positive effect of the increase in online shoppers
• Product
  • Profit per View was up 2%, a promising improvement over 2019
  • Views Low Cover was up 48%, indicating significant challenges balancing inventory and shopping demand
  • Views Out of Stock was up 17%, highlighting missed opportunities
• Availability
  • SKU Availability was down 1%, reflecting fragmented inventory
  • Views Availability was down 3%, an impact of fragmentation and filtered searches
  • Demand Availability was down 2%, indicating reduced stock of top-selling items

Retailers hit both highs and lows across Product, Inventory and Sales, and these metrics show room for improvement. Although we saw Inventory Overstock suffer a mild increase, there were favorable dips in Inventory Not Viewed as well as Inventory Understocked. Product Profit per View also increased, although those gains were negated by alarming increases in Product Views with Low Cover and Views of Items Out of Stock. The unpredictability of 2020 was magnified in uneven inventory cover, which drove a downward trend in Views Availability, SKU Availability and Demand Availability. Across Sales the increase in Units per Order was tempered by dips in Average Selling Price and Average Order Value.

There’s no softening this blow: Customer Profit per Order was down across the board.

• Customer Profit per Order
  • New – down 6%,
  • 2-5x Buyers – down 5%
  • 6-10x Buyers – down 6%
  • VIP – down 9%
  • Overall – down 6%

While we saw encouraging increases in the number of customers shopping digitally, Customer Profit per Order suffered due to economic uncertainty and the ease of comparison shopping online. Retailers often took blunt action with their pricing and promotions levers, despite inventory that fragmented or sold out quickly, and savvy customers took heavy advantage of those discounts and promos.

Taking the Lessons from 2020 into 2021

In 2020 the economic uncertainty engendered by Covid-19 sent many Retailers into bankruptcy. Yet other Retailers not only survived but thrived, primarily by embracing their digital channel. In 2021, we forecast a market that will continue to see digital acceleration, more competition, and clear opportunities for success.

In 2021 it will be crucial for Retailers to retain the customers they gain in 2020 and continue to restrict free shipping offers. Key strategies will include keeping a close eye on the inventory level for the most highly shopped items, with a continued focus on nurturing customers along the loyalty continuum.

Looking forward, successful Retailers must be agile in reading and reacting to their data. These Retailers will rapidly adjust their product and SKU assortment based on demand, defragmenting inventory, reducing out-of-stock experiences, and reducing liability by clearing old stock and seasonal overstocks.

In 2021, Retailers who can take more precise control of pricing and promotion will clear more profit. This will require pairing improved daily visibility into product demand and inventory position with rapid action across marketing, merchandising and replenishment. Key tactics will include boosting products with high profitability and velocity while clearing unprofitable and slow-moving inventory.

In 2021 some Retailers achieved extraordinary success with exclusive product drops. The limited runs of inventory generated spectacular levels of excitement, demand and profit, while limiting stock positions. We see an opportunity to adopt the key tenets of a product drop into Retail’s approach to 2021: create shorter seasons with smaller buys, and follow-up with frequent replenishment. While smaller purchases will generate higher production and shipping expenses, those expenses will be countered with increased demand, profit per item and limited stock liability. Customers will be less likely to wait for discounts and promotions when their favorite items regularly sell out.

Agility and Speed For the Win

Emerging from a chaotic 2020, we don’t see anything slowing down: Retail’s pace has been increasing, while staff sizes are decreasing. Success in 2021 will require Retailers to equip their teams to be agile and decisive, armed with a quick read on the business, an eye on customer satisfaction, and deft control over pricing, promotion and product placement across channels.

Accelerate Profitable Decisions
Our Retail clients are using DynamicView to immediately capture more gross margin while stimulating faster revenue growth. Implemented in 3 weeks or less, DynamicView clients are gaining 25% more revenue and 48% higher gross margin by reading the business faster each day and taking more profitable actions across their ecommerce site. DynamicView is the fuel that drives the morning stand up meeting, that accelerates teams from opportunity identification to action, and increases the velocity of determining the impact of actions taken across the business. Go online at DynamicView to schedule a demo configured specifically to your ecommerce site.