As the Covid-19 pandemic sparked dramatic shifts in demand, it also jolted retailers into responding rapidly to what consumers want. Now retailers are rethinking what they sell – and recognizing they can’t do it all on their own.

That’s why a growing number of retailers are collaborating with nimble, small suppliers to fill their assortment gaps promptly, delight consumers and stay competitive. This is a retail trend that will still stick beyond 202l.

Pandemic Influences Shopping Habits and Bestsellers

During lockdowns in the spring, homebound consumers migrated to ecommerce and made online shopping a powerhouse. Online shopping continues to grow and experts expect ecommerce to reach $4.2 billion globally in 2020. In 2020, online grocery sales tripled, accounting for 10.2 percent of the $1 trillion grocery market, up from 3.4 percent in 2019.

[callout]Assortment insights can help retail executives and buyers pinpoint what’s missing from their offerings and which products make them distinct. These data analytics can help retailers decide which smaller brands could make ideal partners by offering popular products consumers will actually buy. [/callout]

The pandemic also shaped consumer behavior, transforming many consumers into homebodies who seek both domestic comfort and work-from-home productivity. According to eMarketer, online sales of consumer electronics will grow 18 percent year-over-year in 2020 as more consumers work, learn and shop at home. Comfort is in fashion, with ecommerce apparel sales growing nearly 9 percent year-over-year as we replace jeans and high heels with yoga pants and running shoes. Many of us are also reimagining our use of space. Furniture and home furnishings sales are up 12 percent year-over-year as we redecorate for aesthetic and functional purposes.

Staying home has clearly influenced how we shop and what we buy in 2020. As a result, retailers need to continuously audit their online assortments to keep up with evolving consumer demand to ensure their product mix remains relevant and lucrative.

Smaller Brands Can Thrive

Small and medium brands are nimble, adapting to consumer trends and unserved niches with relative ease and speed. Retail buyers are now paying closer attention to these brands to invigorate their assortment with products that appeal to shoppers.

Vibrant smaller brands are fuelling remarkable retail growth. McKinsey found that, among health and beauty products, an astounding 51 percent of sales growth between 2016 and 2020 came from small brands compared to 18 percent for leading brands. In the competitive beverages category, 48 percent of sales growth came from small brands vs. 35 percent for leading brands.

Retailers also rely on smaller brands to adapt to popular product attributes, including organic, sustainable, plant-based and allergen-free. The pandemic has amplified many of these trends, as grocery stores sold 231 percent more fresh plant-based foods in March 2020 than the year prior. Meanwhile, McKinsey reports the pandemic sparked a do-it-yourself trend for beauty products like nail care (up 218 percent) and hair coloring kits (up 172 percent) as consumers invested in self-reliance during lockdowns.

In addition, smaller brands are hot right now because they offer artisanal quality and care, which can make them more distinct and meaningful than mass-produced merchandise. These brands also give shoppers more choice by reflecting a consumer audience that is increasingly fragmented and diverse. Also, smaller brands’ origin stories often resonate by showing the real people behind the products at a time when shoppers seek authentic, trustworthy brands.

Partnering with Small Brands Pays Off

Retailers that partner with small brands can achieve impressive results. For instance, shares of online marketplace Etsy soared more than 200 percent this year, as consumers flocked to its unique assortment of homemade and artisanal goods made by small businesses around the world.

In its 2020 Prime Day press release, Amazon celebrated the record-breaking results of the small and medium businesses that sell on its site. These brands accounted for $3.5 billion of the event’s total sales, up nearly 60 percent since 2019, proving that smaller sellers are strategically significant to the e-commerce giant’s successful assortment.

In addition, Walmart recently partnered with ecommerce platform Shopify. Walmart intends to add 1200 small businesses that sell on Shopify to its own online marketplace to inject more product variety across its digital assortment.

Data Drives Retail Assortment Planning

To stay competitive and earn consumers’ loyalty, retailers need an alluring assortment filled with in-demand items. Assortment insights can help retail executives and buyers pinpoint what’s missing from their offerings and which products make them distinct. These data analytics can help retailers decide which smaller brands could make ideal partners by offering popular products consumers will actually buy.

To mitigate the risks of supply chain bottlenecks and out-of-stocks, retailers are also turning to data insights to create contingency plans to navigate potential disruptions that could affect their assortments.

Wins All Around

As consumer and competitive trends evolve, retailers now seek actionable insights to boost online agility and sales. Building a competitive assortment with small brands helps retailers improve the customer experience by delivering the variety and speed consumers have come to expect.

Smaller brands benefit from collaborations with leading retailers as they can increase their brand awareness and reach, speed to market and sales, helping them thrive even during a pandemic.

Consumers win by gaining access to more product options that reflect their diverse needs, discovering authentic brands they trust and feeling good by supporting small businesses.
Strategic partnerships between big and small companies are shaping the future of retail. Today more retailers are collaborating with smaller brands to adapt their retail assortments to serve consumers’ changing needs. To make smart assortment decisions, retail executives need clarity. Data insights cut through the digital clutter and make sense of retail patterns so retail executives can make effective decisions, including which products and brand partners make the best fit to build a desirable, competitive assortment.