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How Do Retailers Respond in a Post COVID-19 World?

How Do Retailers Respond in a Post COVID-19 World?

During the pandemic, retail sector has been hit hard, but has also risen to the challenge. What can retailers do to stabilise revenue?

A mere three months ago, the word ‘Coronavirus’ was not a part of the national vocabulary. In the world of retail, we were discussing a record-breaking digital holiday period, analysing peak performance, and thinking about the impact of Brexit negotiations on the supply chain.

However, since the outbreak of the COVID-19 pandemic, the virus has dominated news headlines and impacted all of us, in large and small ways. As a sector, retail has been hit hard, but has also risen to the challenge, from grocery workers at the front line to luxury brands donating masks, gowns, hand sanitiser and repurposing factory lines to support government efforts.

Retail has been hit hard

Ever since the UK government mandated the closure of non-essential businesses on March 26th, retail has been hit significantly (with the exception of grocery). Retailers have seen a fall in their revenues, due to store closures. Luxury and clothing are hit the hardest, with clothing recorded at a 35% drop, according to the Financial Times. Some retailers like Laura Ashley, have sadly gone into administration.

In April, the Office for National Statistics (ONS) revealed a 5.1% drop in retail sales in March. The ONS figures are the first hard indicator of the period partially covering the lockdown- and the highest drop ever recorded by the ONS since it began nearly 30 years ago. Customers are spending much less, and with the resulting impact on the UK economy predicted, consumer confidence is low, and retailers are going to have it tough.

In addition to the financial impact, Retailers have also undergone significant challenges in terms of operations, supply chain, fulfilment, and stock-outs.

There are some positives: online retail, grocery, home improvement

On the flipside, online retail has been growing. UK digital revenue is up 17% across Q1, outperforming even the 2019 peak shopping period in terms of orders, revenue, and unique shoppers, according to the Salesforce Shopping Index. As the virus spread, so did the move to online shopping, with the surge larger in the last two weeks of the quarter. Several retailers have also started releasing their annual reports showing the impact of the peak.

Particular categories, unsurprisingly, like grocery, athleisure, home improvement and toys and games were showing particularly strong performance, and we expect to see that continuing as people adjust, things stabilise, and warmer weather in Q2 leads to more spending in outdoor. Leading grocers like Tesco and Sainsbury have seen growth in grocery and essential categories spike in March and April.

In the short term, retailers need to continue stabilising and then focus on recovery

We can look to China for learnings since they are 6-8 weeks ahead of the UK in the crisis. Chinese retailers started preparing for store reopening even while their stores were being closed. They reset their thinking completely and changed their business plans.

UK Retailers need to focus on a few things over the next few months, in order to stabilise and recover:

  • Cater to online demand: Many UK retailers have been struggling to cope with increased traffic on their e-commerce site, demand on server capacity, and fulfilling orders due to closed stores/warehouses. As shoppers surge online, there are key things that can be done; such as reassessing critical workflows, increasing capacity for self-service, performing a site audit, or enhancing online ordering slots. Meeting online demand is important in the short term as the key driver for revenues.
  • Offer additional services to keep customers engaged: Sports brands have been offering at-home workouts, hotel space and raising money with influencer challenges. Beauty brands have been offering at-home consultations and collating support.
  • Prepare for store reopenings: Stores in the rest of Europe have started to open. Retailers there had to take action in terms of social distancing regulations, customer & employee safety, inventory flow etc. UK Retailers can start by preparing for store reopening: drawing up plans and communicating actively.
  • Be empathetic and supportive: In addition to managing your own challenges, step in to support those who need it. With concerns that domestic violence is likely to rise during this time, Avon has donated £150,000 to the women’s charity, Refuge. Soap & Glory has also pledged to donate 30,000 products to charities, including The Hygiene Bank, which helps provide hygiene essentials to those who cannot afford them. And Fashion brands like River Island have been leveraging the community they’ve built on social media to encourage social distancing.

The way retail will be done in future will change

After looking at the trends in the COVID-19 crisis, and also looking at China (post-COVID and also learnings from SARS), we believe there may be a few shifts in the way retail is done.

  • Online shift: A significant behavioural shift towards online. More consumers have shown that they are comfortable shopping, especially pronounced during the crisis in grocery.
  • Reimagined, contactless stores: This will also redefine the role of stores. Some retailers have already made their stores more experiential than just points of sale (for instance, Adidas on Oxford Street, London). Stores will also become more prominent to support online. In addition, there will be more contactless shopping in stores.
  • Agile operations: More flexibility in the supply chain, and diversified sources of sourcing.
  • Brand communication: More sensitive, and more personal communication to employees, customers, and stakeholders. According to Salesforce research, the most successful brands — the ones that match their customers’ values with the types of products the business offers — have many loyal customers.

Retailers will also need to transform to adapt to the new reality

To adapt to the ‘New Normal’, retailers have to fundamentally reevaluate how they do business. With the consumer going more online, retailers need to pivot to a digital-led model.

  • Digitally transform: For those who aren’t significantly online, they need to undergo a digital transformation to put online first, with online commerce, digital marketing, and supported by omni-channel service. Data silos resulting in inconsistent customer experiences don’t cut it anymore.
  • Rethink their stores: Stores will still continue to be relevant, probably with a surge after the lockdown restrictions are loosened, but how they are viewed by consumers in the long term will change. Stores will need to support a permanent move to online shopping with flexible delivery and payment options as customer purchasing power needs time to recover. Stores will also transition from just points of sale to more experiential. Some retailers were already in the process of making their stores experiential, but there’s even more of an imperative.
  • Put the customer front and centre: The crises have shown that customers will gravitate towards brands that are empathetic & supportive of their values. Retailers will need to go back to the basics, start with what the customer expects of them, and act accordingly.
  • Agile & flexible operations: Retailers will need to re-think how their supply chain is laid out, whether it will hold up in the next year or so, and what happens if there is a resurgence. In addition, how they manage their internal operations will take new assumptions into consideration.
  • Data-driven tech: Technology will help retailers in the ‘New Normal’ more than before. Be it leveraging the data from increased online shopping to drive personalised & relevant marketing, or using AI to unveil new shopping needs; or the increase in the use of voice or bots. Retailers can leverage the insights they already have to make joined-up, connected experiences that delight the returning customer.

To summarise

Retail as an industry has proved from past crises that it can take a hit, and still come back. Retail is struggling now, but is a critical part of the UK economy and heritage, and by focusing on the customer we believe it will overcome the struggles the pandemic has brought the industry. The focus should be on stabilising, getting back to recovery, and changing operations to adapt to the new normal. Those retailers quick to adapt will ride the next wave of growth.

Watch this webinar on “Re-imagining the retail experience through technology” to hear how Halfords Global IT Director, Neil Holden, is making great progress in their digital transformation and #LeadingThroughChange during this pandemic.

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