How Retailers are Innovating in 2020: 12 Examples

Amazon’s Halo fitness and health tracker.

If you rewind to a year ago if someone told you what 2020 would have in store for you, you would never believe it. It’s still hard to believe we are living in the midst of a global pandemic. The retail sector has been hit particularly hard by COVID-19. But it has created the kind of change that only adversity can.

Projects that companies were spending months or even years mulling over all of a sudden had a new found urgency. Take Pepsi. Consumer packaged goods companies have long resisted going direct to consumer. Decades long relationships with retailers made it easy to invest in that channel instead of venturing into the world of eCommerce. But once the pandemic hit Pepsi launched its own direct to consumer websites. That’s just one of a very long list of initiatives companies have implemented since the onset of the pandemic.

If you are curious about what retailers have been up to here is a list of 12 initiatives you should take a look at as they provide insight into how retailers are innovating during this turbulent time.

1. Amazon launches a new supermarket chain

Last week Thursday Amazon opened its first Amazon Fresh supermarket in Los Angeles California. This is a new chain for Amazon, sperate from Amazon Go and Whole Foods. The supermarket is 35,000 sq. ft and instead of focusing on organics like Whole Foods it sells a range of brands. “It’s likely Amazon Fresh will directly target the customer base that is in between their Whole Foods brand, which typically caters to more health-conscious and affluent customers, and discount grocery retailers like Aldi and Lidl,” said Gregory Ng, Chief Executive of digital consulting firm Brooks Bell. “This puts their sights directly on competing with Target and Walmart.” Walmart has 26% of the grocery market in the United States but Amazon’s Whole Foods chain only has an estimated 1.6% share.

The grocery store also makes use of Amazon’s technology. Customers can shop using Amazon Dash Carts which allow customers to skip the checkout line. Customers use the carts by swiping in using the Alexa mobile app then they start shopping. The carts use: "a combination of computer vision algorithms and sensor fusion," to determine what a customer has placed inside of Dash Cart and how much the customer’s groceries cost. “The cart has some convenient features for grocery shopping, including a screen at the top where you can access your Alexa Shopping List to check items oﬀ and view your subtotal. In addition, every cart is equipped with a coupon scanner where you can quickly apply store coupons as you shop,” writes Amazon on its website. Amazon also says that by using Dash it makes "a quick grocery trip even quicker by allowing you to skip the checkout line."

Photo of Amazon’s Dash Cart. Source: Amazon

Once the customer is finishing shopping their account is debited and they are emailed their receipt. If a customer expects to shop for more than two bags worth of groceries then it is recommended they use traditional checkout lines. You can see a video demonstrate of how to use a Dash Cart here.

Alexa devices are also stationed around Amazon Fresh and customers can use them to ask questions like: “where can I find peanut butter?” For now the store is open to customers by invitation only which will allow Amazon to test and make changes as required. Opening a brick and mortar store during the pandemic signals Amazon believes that stores play an important part in the future of retail.

The store is also integrated into Amazon’s delivery business. Customers can return and pick up Amazon purchases at Amazon Fresh. Customers can also receive free delivery of their grocery items if they have a Prime membership. More stores are confirmed to open in: Oak Lawn, Illinois; Schaumburg, Illinois; Naperville, Illinois; Irvine; California; and North Hollywood, California.

2. Harrods opens an outlet store

If there wasn’t a pandemic going on no one would believe it but 170-year-old storied department store Harrods opened its first outlet store earlier this month. Typically on any given day 80,000 people walk through Harrods but due to social distancing capacity is limited. “Our normal sale in the Knightsbridge store takes us four weeks to clear and that is with 80,000 people going through the store each day,” said Michael Ward, Harrod’s Managing Director. “We are currently limited to 4,500 at any one point in time. It was going to take us months [to clear inventory].” “I don’t think people understand how painful the last 90 days has been,” added Ward. “We are in a new norm and we have to adapt very quickly.”

The new outlet store is 80,000 sq. ft, spans two floors and will help Harrods to unload unsold inventory. It is located in a different area than the retailer’s flagship store, in a lower income neighbourhood.

3. Chili’s is behind a new ghost kitchen

Have you ever ordered wings using the DoorDash app? If you have those wings may have actually come from Chili’s. Brinker International Inc. which is the parent company of Chili’s and Maggiano has created a new business called Just Wings that only fulfills delivery orders. The concept of ghost kitchens have become popular in recent years where companies set up online stores on delivery apps like Uber Eats or DoorDash. Then the orders are made either at a commercial kitchen designed for this purpose or in the kitchen of an existing restaurant.

Just Wings is already generating $3 million per week since it launched this in June. Chili’s and Maggiano’s are servicing Just Wings orders from 1,050 Chili’s and Maggiano’s locations across the United States. This is a good move since Brinker International’s physical restaurant’s comparable sales are down 38.6% in the fourth quarter of this year.

4. Starbucks launches a new store format in Tokyo

In Tokyo Starbucks has opened a store with a new format that is a mix of WeWork and Starbucks to Go in one location. On the bottom floor of the location customers pick up their mobile orders. On the top floor customers can book different types of space. The first type are semi-private booths which customers can book for 40 minutes. These booths are fitted with videoconferencing technology and the store has four of them. Then there is a smart lounge where customers can access projectors and conference phone speakers. Finally there are 17 solo spaces that can be booked in up to 15 minute intervals. Booking can be done via the Starbucks app for $3.00 per 15 minute interval.

Photo of Starbucks’ Co Working Location in Tokyo. Source: Starbucks.

There isn’t a similar location in the United States and Starbucks does not have plans to open any more of these locations which means that it does not plan on turning the “third place” into a co-working business anytime soon.

5. Amazon launches a fitness and health tracker

Amazon is now in the fitness and health tracking business. It recently launched a new device called Halo. Halo similar to the Fitbit and the Apple Watch tracks a person’s sleep patterns, activity and temperature and several other functions. Halo also has some unique features that similar devices do not have. It tracks a user’s emotional state by identifying changes in the user’s tone of voice throughout the course of the day. If a user had a tense conversation and their voice becomes elevated it can spot that.

Photo of Halo, Amazon’s fitness and health tracker. Source: Amazon

In conjunction with a smart phone it can also track a customer’s body fat percentage. All the customer has to do is take pictures of themselves and Halo’s smartphone app can calculate the user’s body fat percentage. Halo claims that its body fat calculator is twice as accurate as leading smart home scales.

By launching this product is Amazon is trying to capitalize on the wearables market which is growing quickly and is estimated to reach a size of $50 billion in 2020.

If you are interested in purchasing a Halo device you can’t buy it outright, you must sign up for a subscription. The subscription is $99.00 for six months but it is offered right now at a discount for $64.00. After six months the cost is $3.99 per month. The belief is that if there is an ongoing cost customers will have an added incentive to use the device.

6. Uber moves into grocery delivery

Uber is continuing its transition from a ride hailing company to more of a general delivery company with its recent launch of grocery delivery. This service allows customers to get on-demand delivery of grocery items within one to two hours. “Just as Amazon went from books to overall retail and opened up their marketplaces to third parties, we think we can really extend the definition of movement from moving you from point A to B, to moving . . . anything you want to have delivered to you” said Uber CEO Dara Khosrowshahi.

While the pandemic accelerated Uber’s transition to grocery delivery, prior to this year a number of small grocery stores and merchants had already established stores on Uber Eats so they could deliver groceries to their customers. On Uber’s first quarter 2020 earnings call in early May Uber reported that its grocery and convenience store delivery business was up 117%. “We’ve really doubled down on our Eats business, extending not just in food, but from food into adjacent categories like delivery, like grocery, and essentials,” said Khosrowshahi. “There we’re seeing a pretty extraordinary acceleration, which is good for the business, but it’s also a really important lifeline for the restaurants and other local stores in every city, that frankly our customers are interested in keeping alive in an unbelievably difficult situation [with] COVID.”

Uber will first launch its grocery delivery service in Toronto and Montreal as well as select cities in Brazil, Chile, Peru and Columbia. Some of the participating retailers in Canada include: Walmart, Metro, Rexall, Costco, Longos, Pet Valu and Well.ca. Uber is planning to launch grocery delivery in the United States later on this summer.

A key part of Uber’s value proposition is that it can deliver groceries on demand within a few hours. But Walmart is planning to offer unlimited same day grocery delivery and many people make a grocery list in advance, as they run out of products during the week, making an on-demand service less necessary.

Many consumers are also already using grocery delivery services directly from strong national retailers like Walmart and Loblaws and have grown to like these services during the pandemic. They will likely stick to these retailers making it harder for Uber to establish a foothold in this market. Uber’s service may be a better fit for consumers looking to support smaller local merchants. With Uber’s main ride hailing business down by 80% in April of this year and with Uber unable to turn a profit since the company was founded in 2009 the stakes are high to generate revenue and more importantly profits.

7. Walmart plans to offer a subscription service

On September 15, 2020 Walmart is launching a subscription service called Walmart Plus. The new service is $98 per year, $21 less than the cost of Amazon Prime which now boasts 150 million members. Members of Walmart Plus receive unlimited free shipping on orders over $35 across 160,000 eligible items. Members can also access same day delivery and discounts on gas. Subscribers will also be able to skip the checkout line in-store and instead can scan items and checkout using Walmart’s Scan and Go app.

More than half of Walmart’s highest spending shoppers also have an Amazon Prime membership. Walmart is worried that those customers may eventually buy more of their groceries from Amazon as Amazon expands its grocery delivery capabilities.

Walmart’s move to launch a delivery focused subscription service is not a surprise since Walmart has really upped its eCommerce game over the years as it battles with Amazon for a larger share of the customer’s wallet. Walmart’s eCommerce initiatives have included essentially “buying” eCommerce talent and leadership through its purchase of Jet.com, increasing the number of third party sellers on its website, as well as increasing the amount of grocery pick up locations, all activities which have bolstered the retailer’s online sales. Walmart now has the second largest eCommerce share in the United States behind Amazon. Don’t expect Walmart to back down from its fight with Amazon in eCommerce anytime soon.

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8. Pepsi launches direct to consumer websites

As the pandemic shifts more shopping online one CPG company that acted quickly is PepsiCo. It is the first major CPG company to launch its own direct to consumer websites as a result of the crisis. PepsiCo’s new direct to consumer websites which launched at the beginning of May are PantryShop.com and Snacks.com. They give consumers a way to easily buy their favourite snacks and pantry staples online. Speaking about the new initiative PepsiCo’s Senior Vice President and Head of eCommerce Gibu Thomas said: “in these uncertain times, as more and more consumers are using e-commerce channels to purchase food and beverage products, PantryShop.com and Snacks.com offer shoppers another alternative for easy and fast access to products they love.” "We very early in the crisis realized that consumers were going to need an alternate way to buy snacks, given that shopping habits are changing so quickly" said Frito Lay’s Chief Transformation Officer, Michael Lindsey.

PantryShop.com sells bundles of popular PepsiCo foods. One of the bundles offered is “Rise and Shine” and for $29.95 or $49.95 (family pack) customers get Aunt Jemima pancake mix, Tropicana juices, Quaker Chewy Granola Bars, Quaker Instant Oatmeal and other products to get your day started.

Snacks.com as the name gives away is all about your favourite snacks. Unlike PantryShop.com snacks can be purchased a la carte. From Cheetos to Doritos to Lays chips there is something for everyone.

PepsiCo recognizes that it still needs to focus on its traditional distribution channels as they represent the vast majority of sales but this presents the company with a new opportunity for sales as well as better customer data.

9. Deciem launches virtual chats

Once the pandemic hit in April Deciem set up Deciem at Home leveraging the online conversational platform Hero to connect customers with a local store associate through two-way live video or messages. The virtual consultations have been very popular with more than 200,000 consultations taking place or 2,500 per day since the program launched. Virtual consultations have contributed to a 37% increase in average basket size.

“Just doing things with Hero makes it a more personal conversation, because you’re inviting customers into your home, and vice versa. There might be customers who aren’t comfortable going into stores, so this is a good way to make them more comfortable where they feel in control. I see white space in bringing the market into the home, and we need more adaptability. We get to bring ourselves into the home and customize their online shopping experience” said Anthony Clemetson, Manager of Deciem’s New York City Fifth Avenue store.

10. MAC Cosmetics allows customers to try on makeup digitally in live chats

Since the pandemic MAC Cosmetics has expanded the capabilities in its mobile app to allow consumers to try on makeup digitally in live videos. The app has the ability to “create photo-realistic simulations that can be tested on any skin tone and adapted to different textures, mattes, sheens, glosses and more than 200 shades of lip or eye colours.” Since the pandemic virtual try-ons at MAC Cosmetics has tripled.

The cosmetics brand also allows consumers to have live chats with store associates through its website or via Facetime calls.

11. Shopify enters into a partnership with TikTok

Social commerce, which is essentially eCommerce meets social media is a big business in China, expected to reach $242 billion in 2020 up 30% from last year. One of the apps facilitating social commerce in China is Douyin (TikTok is Douyin’s sister app in North America and other apps). Consumers using Douyin in China can easily buy products from their favourite influencers (known as KOLs) while looking at videos on the platform all without having to leave the app.

The potential for those types of transactions is one of the reasons Walmart is interested in investing in TikTok. “If you're watching a TikTok video and somebody's got a piece of apparel or an item on it that you really like, what if you could just quickly purchase that item,” says Walmart CEO Doug McMillon. “That's what we're seeing happen in countries around the world. And it's intriguing to us, and we would like to be part of it.”

TikTok recently entered into a deal with Shopify to enable shoppable video ads on TikTok starting with the United States market. The partnership will allow over one million merchants that use Shopify to place shoppable ads in the feeds of TikTok users enabling them to reach a young and highly engaged audience. Once a TikTok user clicks on a shoppable ad the transaction is completed on the merchant’s Shopify site. “It was obvious early on how [TikTok] was starting to influence commerce trends and trajectories,” says Satish Kanwar, who heads Shopify’s Channels division. “With direct-to-consumer brands, that relationship between storytelling and entertainment and the product they sell is so close.” “We believe video is the default form of communication online today,” says Kanwar. “We are very eager to see how video and commerce can expand.”

12. Chipotle opens its first digital only restaurant

This weekend Chipotle Mexican Grill opened its first digital only restaurant in New York, Chipotle Digital Kitchen. The location will service delivery orders as well as pick up. Customers must order in advance either on Chipotle’s app, its website or from a third party delivery service if they want to pickup their order from that location. Chipotle’s delivery sales like many other fast food chains have taken off during the pandemic. Chipotle’s digital sales are up 202.5% in the third quarter of 2020 and compromised 48.8% of total sales. Chipotle expects to sell more than $2.5 billion orders digitally this year, more than double what it sold digitally last year.

Expect to see more retailers turn to this type of store design. With consumers strapped for time more than ever retailers are turning towards store formats that cater to grab and go customers. This is a trend that started before the pandemic and will continue after the pandemic is gone. Starbucks, for example is planning to open 300 locations this year that focus on pickup and takeaway.

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Tricia McKinnonNovember 17, 2020Strategy & GrowthComment