Retail Reset. Prospects after the Covid19 pandemic
After the Covid19 pandemic, the world will never be the same. Coronavirus has taken the whole world by storm, having not only a huge economic but also a social impact, showing how vulnerable humanity is.
In the retail industry, apart from the “essential services” distortion, where most chains are struggling to supply groceries, prescriptions and other necessities to customers, the shakeout has been profound, as shopping, either through brick&mortar or online, has dropped to unprecedented low levels.
Store closures, layoffs, unsold inventories, billions of lost revenues,… the short term trace of the Covid19 is incredibly negative and, even everyone expects a V-shaped recovery as people resume their normal course of life, the truth is that there are some learnings that may remain set in stone for a long time from now.
Getting ready for “the new norm”
There is no doubt that, despite the sudden stop in consumption, which is something temporary, this Covid19 has changed the customer buying habits. And once the pandemic is over, the retail industry needs to transform to adapt to a new norm, which will be characterized by:
E-commerce for all ages. According to Statista, all age groups in the US would increase spending on goods from online marketplaces as a result of the coronavirus pandemic. That includes the most senior segment (those aged 65+) where, despite low online shopping usage, 31% of respondents plan to spend more online. Considering that online grocery penetration in US is relatively low (~4%) and similar to many European countries, the coronavirus may be the catalyst for an overall sharp increase in online commerce adoption for all age groups, including seniors, in all western countries, specially for groceries which is one of the challenging categories in online commerce.
Consolidation of omnichannel fulfillment. The Covid19 has brought not only sudden peak in online purchases during the first days of confinement but also the rapid development of all fulfillment options. From home deliveries to new variants of BOPIS such as curbside pickup, customers will probably keep using them long after the confinement is over.
Stores as brand experience centers. As retailers shutter stores temporarily, some may never re-open as Covid19 is presenting an opportunity to dedicate time rethinking the role of the physical store in a context of accelerated online shopping penetration. Therefore, brick&mortar channel investments will focus on creating experiences and ensuring convenience rather than improving direct transactions.
Digital platforms to build brands. Confinement has brought social distancing, well, physical distancing, to be more precise. As a result of that, TV, internet and social media consumption has boosted. So, marketing spend has shifted towards screens, either TV’s, smartphones, laptops or tablets. It’s time for brands to work on a digital marketing plan that goes further than short term conversions, as there is a thin line between being committed and being opportunistic. Brands must focus on building a community around shared values by pulling levers such as being helpful, having the ability to entertain, bringing inspiring testimonials. Once the crisis is over, there will be room for performance marketing strategies.
Sobriety in consumption. Although there are expectations about a V-shape recovery after the crisis, true is that there is no clarity about for how long the Covid19 will be among us. That “customer uncertainty” may lead to a more frugal consumption during a relative long period of time which means either cutting impulse buys or delaying big-ticket decisions.
Healthy lifestyle redefined. Covid19 has shown we are vulnerable, and customers are after goods that help them to feel safe. Therefore, new categories such as Virus Protection or Emergency Supplies and line extensions within the non-perishables section will offer room for development. The most likely is that, from now on, each of us will have a bottle of hand sanitizer in our wallet, bag or backpack.
Shared economy of resources. During this crisis, supply chains have been stressed beyond the limits they were designed for, and from both sides, either because of supply or demand distortions. The entire retail value chain has worked on innovative ways to tackle this situation, bringing collaboration and responsiveness to new standards. Retailers (from groceries to restaurants), suppliers and last mile delivery platforms are setting in place unprecedented resource leasing models to share manpower and assets that are beneficial for all stakeholders to face sudden unplanned outliers.
This pandemic has exposed the retail industry to the unknown. Although there is no doubt this situation will shortly come to pass (hopefully), the truth is that in just a few days, the shopping habits have drastically changed worldwide and most of them are here to stay. Retailers, apart from working on short term actions to reduce the impact of the crisis, need to start playing the long-term game by reviewing their strategies to connect with customers and manage supply chain distortions based on the learnings and the new picture that this pandemic has brought.