2020 brought a global pandemic, worldwide lockdowns, curfews, and stay-at-home orders, but has it also accelerated the digital revolution? A deeper dive into recent consumer behavior reveals a more nuanced view of the physical-digital divide and indicates that a more holistic strategy might be necessary for retailers to create more effective, more engaging consumer experiences.

Historically, the retail industry has concentrated on strategic capabilities and operating model innovations to drive sales and margin growth. But as technology has quickly removed barriers to entry and increased market competition, retailers have sought new ways of differentiating themselves—through digital investments, simplified operations, or new cost structures—with varying success.

On top of this, COVID-19 has drastically impacted consumer behavior, especially when it comes to in-person shopping trips. This has forced retailers to think differently about how they invest, not only from a health and safety perspective, but also in terms of how their investments align to changing customer needs and expectations. This industry disruption has accelerated digital engagement for many consumers, but Deloitte’s Consumer surveys and access to granular and frequent data sources across a broad spectrum of consumer behaviors tell us there’s more to the story.

Brick and mortar is still an important piece of the puzzle

In mid-March 2020, the rapid set of restrictions related to the COVID-19 pandemic declarations pushed consumers into stores to stock up on essentials and sent the percentage of dollars spent offline soaring as areas prepared to lockdown. As the restrictions continued and consumers’ aversion to in-store visits grew, consumers quickly turned their dollars toward online channels and by April 2020, online peaked as most customers sought to limit in-person shopping activities out of safety concerns.

Since restrictions have begun to ease, however, online spend by sector from Deloitte Insight IQ indicates (Affinity Solutions Inc, InSightIQ Analysis) a return to previous month-over-month growth rates for online channels (grocery, sporting goods and footwear & apparel)—indicative more of a one-time shift that raised the overall bar a bit, than an inflection point in the digital growth trajectory.

retail spend graph

The numbers have been different across sectors too. Those, like Grocery and Drug & Convenience, that have had historically lower percentages of online spend, saw a greater increase in online spend after the initial shock from the pandemic declaration, while sectors with a traditionally higher percentage of online spend, like Footwear and Apparel, returned to their pre-COVID-19 rate much more quickly. In both cases, however, online spend remained within ~3% of pre-COVID-19 levels.

Considering that we are currently living amidst a pandemic and consumers have mostly returned to their prior levels of offline spending, it should signal to retailers that while online continues to gain share of shoppers’ wallets, there is still great value to be had in brick and mortar retail. It will be important for retailers to continue strategic investments in and improvements to physical stores and the unique role they can play in satisfying consumer needs.

Fulfilling the physical digital demand

Our current Deloitte “State of the Consumer” tracker (as of May ’21) indicated 73 percent of consumers felt safe shopping in-person (compared to 30 percent of those surveyed in April 2020). Despite this, many continue to take advantage of retailers’ BOPIS and curbside pick-up offerings.

safety concerns

During the spring of 2020, many retailers rapidly expanded these offerings in response to the need for a “safer” shopping experience (as well as to align with, in some cases, local restrictions on in-store shopping). After just six months, however, these offerings evolved into more of a preference, even over delivery, for their convenience and costs savings.

In fact, one third of consumers who used BOPIS and curbside options indicated that they preferred it as a relatively inexpensive alternative to true delivery, with 29 percent of shoppers seeing it as a faster option. As consumers increasingly turn to these options, it is critical that retailers tap into this demand for “physical digital” by scaling up their offerings and creating the most seamless experience possible.

Shifting the economics of the store

Over the years, many retailers have invested aggressively in new digital capabilities. However, doing so without a broader ecosystem strategy has led to more complex technology architectures, driving costs upwards without providing commensurate value. In this case, there is value to be gained in investing the time necessary to identify legacy applications, outdated devices, and redundant elements to allow for reductions in the cost to serve and provide fuel for increased innovation.

store capital graph

Recent work engagements by Deloitte at leading retailers have highlighted this exact potential source of value. In one example, the team analyzed a retailer’s store technology architecture and identified opportunities for modernization of point of sale, in-store networks, server infrastructure, and device consolidation.

Additionally, significant cost savings were identified, providing an opportunity for the retailer to invest significantly in improving the customer experience through innovations such as in-store geo-positioning and contactless check-out without overloading existing infrastructure or having massive cost overruns.

Ultimately, while many consumers shifted behavior in the early days of COVID-19, away from in-person shopping, they have showed a willingness to return to stores as restrictions have lifted, reinforcing the importance of creating more consistent, more integrated customer experiences across all channels.


To learn more about how we can better help you respond to shifts in consumer preferences and emerge from the pandemic in a position of strength, please check our Retail Operations website.

Rob Harrold, Stores Practice Leader, leads Deloitte’s U.S. Retail Stores Offering, helping leading retailers assess, design, and implement initiatives to enhance their overall in-store and integrated omnichannel performance as well as improve customer and associate experience. With over 20 years of industry and consulting experience, Rob helps retailers on their physical channel strategies, drive operational efficiencies (by improving, eliminating, or reallocating activities), reduce operational leakage (e.g., shrink, risk), optimize talent, and design, implement, and scale enabling in-store technologies (from inventory management solutions to customer and associate-facing technology and/or applications).

Chris Gray, Project Leader, has over 10 years of experience across retail, where he has worked to improve the integration of digital and physical retail for a variety of clients across various segments of the industry. He has deep expertise across all things “stores,” including operations, workforce, and technology, and his projects have focused on generating benefits through increased operational efficiency, improved customer experience, and enhanced associate engagement.