The long-term impact of the COVID-19 pandemic is still indeterminate across social, economic, and health dimensions. In this mire of uncertainty, retail companies need to have a measured and well-defined strategy if they wish to swim through these troubled waters. But the retail business isn’t unfamiliar with change.
The retail business has been in a constant state of change for decades, especially during the digital renaissance. The pressures to evolve have been rising for years, leading to new innovations on the part of landlords, stores, retail operations, service providers, and suppliers alike. Now more than ever before, retail operations will need to be reinvented again, if the sector has to weather this pandemic storm.
Retail companies have an opportunity to use this moment to outperform their competitors and reimagine their retail business foundations in a more sustainable, digital, customer-centric, and Agile business process, more suited to the 21st century. Here are some essential ways that retail executives can grow their businesses by adopting radical thinking to not only survive the pandemic but thrive after it:
- Make your business leaner and fitter
Recent reports suggest that retail volumes have declined up to 90% due to shutdowns. Given the magnitude of this crisis, it is imperative that leaders enhance their focus on activities which are in line with their business continuity plans. As part of this effort, they must first identify the critical operational functions so they can manage excessive cost factors that threaten business longevity. In order to be competitive, they need to adopt methods that enable their business to be leaner, Agile, and cost effective for survival in the short term. By enduring the crisis at its worst, they can then consolidate and drive growth as the situation improves.
- Fewer store formats
If we look closer at certain retail formats, we recognize that department stores were already on the decline before the economic upheaval caused by the virus. This is likely to continue due to the mandated shutdowns and low/zero footfalls. In addition, there is enough evidence to forecast that mall-based retail will struggle.
High profile stores such as Neiman Marcus and J. Crew have already filed for bankruptcy while it is a matter of time before J.C. Penny does exactly the same. Lord & Taylor, on the other hand, is expected to liquidate its stores upon reopening, and Stage Stores– having more than 700 department stores, including Gordmans, Bealls, and Goody’s– is on the verge of filing bankruptcy.
Some department stores like Kohl’s with its stores situated within standalone strip malls and open-air shopping centers may be better equipped as America emerges from the restrictions in place. In a post-COVID world, the concept of open-air shopping is sure to flourish.
Toward this end, some analysts believe that up to 25% of all mall-based stores will eventually face closure. A lot of retail is going to go away from malls or otherwise. Just a few recent examples include Macy’s that is projected to close around 250 of its 800-odd stores, J.C. Penney is expected to reduce their count from 850 to just 500 stores, and Nordstrom will forever close about 20% of its 120 stores. And this is only the beginning.
- Follow the lead of grocery, drug, and mass merchant retailers
There is a fair amount of learning from how the grocery, mass, and drug retailers have operated through this pandemic. Best practices need to be implemented for organizing the stores, the checkouts, and putting precautions in place for store personnel and customers. There is also the possibility that new measures such as temperature scanning for all customers, single flow aisles, in-store social distancing mandates, and mask requirements, may continue for many more months.
- Consumer behavior will change for good
Much of what will change going forward stems from the changing consumer behavior. There is no doubt that we, as consumers, will behave differently in a post-COVID world. Factors such as hygiene, selflessness, and empathy will be paramount, and retailers will need to demonstrate these values if they wish to meet customer expectations.
Retail environments will need to be clean and planned in a way that encourages social distancing. If best practices in the areas mentioned above are demonstrated by retail businesses, it will hold them in good stead when normalcy resumes. Consumers have always rewarded businesses that have striven in the area of community service, and they will continue to do so in the future.
In essence, retail chains that practice honestly, value people over profit, and use resources for the greater benefit of the community will be the ones that will emerge as victors. A lot of what they did during the crisis will factor in in their standing post the pandemic.
- Rapid growth of e-commerce
As per reports, e-commerce currently accounts for 12-20% of retail revenue, and this range is expected to expand in the medium term. Some online retailers may gain about 30% increase in revenue until brick and mortar retail regains momentum.
E-commerce platforms are well poised to claim a sizable share of the retail business. This is because consumers across demographics were already embracing online shopping before the crisis and have accelerated adoption due to the restrictions posed by the pandemic.
While that is very encouraging for pure play online retailers, those operating both online and offline models have expressed concerns over the cost of online order fulfillment which is higher in comparison to order fulfillment in the offline model, thus raising a pertinent question on the viability of online sales.
On the consumer side, it is naturally impossible to foresee whether a large share of consumers will remain loyal to online shopping or go back to the brick and mortar store experience, once they feel safe to do so. Most of the consumers have missed the social experience of shopping for many weeks now, and the convenience of the online channel may not make up for this.
- Demand for contactless solutions
Based on Chinese consumer behavior, it looks like the demand for contactless commerce will remain high, even as consumers come back to stores— ordering online or via mobile for going to the store, sustained use of home delivery or nearby pickup, and buying online and picking up in the store— that doesn't involve interacting directly with a store associate.
Consumers have modified normal day-to-day activities to be as contactless as possible and also altered in-store forms of payment— choosing various forms of digital payments over cash or simply using cards, if they must, according to Astound Insight's COVID-19 Consumer Survey Report.
- Stale merchandise
A significant challenge for retailers reopening their stores will be to manage new merchandise owing to their high level of debt alongside a large portion of old stock still occupying the shelves.
Current stock came right before the onset of spring when lockdowns were initiated worldwide. Opening now with that assortment when customers may be shopping for summer merchandise will mean that existing stock will lose over 50% of its value. If stores are closed for much longer, it will bring us closer to fall and back to school, bringing more challenges to an already diminished and financially struggling supply chain. Many retailers have abandoned scaled-back orders and have delayed or even cancelled payments to vendors to preserve cash. The trickle-down consequences are factory closures at a mass scale and the dismissal of millions of workers in some of the poorest countries in the world.
While some of this is good news for companies like Burlingtons, TJX, Ross Stores, B.J. Wholesale, Costco, and Sam’s Club who typically pick fashion merchandise from stores like Macy’s, J.C. Penney, Kohl’s, and others, at low prices and pack them away to offer them to their customers the following year at the right time; for most, this will worsen the liquidity crisis in retail.
- Keeping in touch with customers
With marketing budgets being slashed at a time when marketing is becoming more important, it's arguably never been more important for brands to keep in touch with their customers, whether it be to inform them of limited services or just to stay on top of their minds during a time when most stores are shuttered. Marketing makes up millions of dollars in a company's expenses per year but it's something that doesn't pay the bills at a moment where most retailers have entered a survival mode.
But retailers should make efforts to stay in touch with shoppers where appropriate, be it reminding them of their existence, promoting availability and offers, or providing some useful content for these strange times. The consumption of social media and screen time is at an all-time high and now is as good a time as any to work on the online presence to build a community around the brand.
Finally, at some point, social distancing will end, and consumers will once again come back to retail locations, albeit in smaller numbers. COVID-19 will have a very significant, long-term impact on retail. It's time to face that fact and start adapting retail operations and commercial decision-making rapidly to reflect this new reality.
