It has been a challenging year for all, and one defined by ongoing change and uncertainty. Retail is one of the key industries that experienced a rapid transformation as a result of the pandemic, with accelerated learning bringing in new operating models and routes to the market.
Whilst the centre of attention has been the immediate impact of Covid 19, it also highlighted the need to understand how it has accelerated trends that were already present, its long-term effect on how businesses trade, how consumer shop, the point and purpose of retail space in the future and the forced innovation it has resulted in, which may all leave a lasting footprint.
Here are the key observations and lessons learned from 4C’s retail subject matter experts on what has been business as unusual in 2020:
Focus on customer experience
The top retailers last year have been responsive to market conditions and not tried to trade in the same way as the year before. As many retailers have experienced first-hand, the power of the brand and historical performance is not enough anymore – customer experience is everything, and it has been important for retailers to rethink the product mix and promotional mechanics by understanding new shopper behaviour. The customer experience has moved beyond the basics of quality, service and price, and now includes confidence, certainty, reassurance, availability, safety and space. In addition, it’s been essential for retailers to provide clear and timely communication to its customers and staff, both inside and outside the store, helping them navigate around the store when they shop and reassuring everyone that the store itself is safe.
Shift to online delivery
A typical retailer on the high street sold roughly 15 percent of their stock through e-commerce before 2020 and have had to rapidly change their supply chains in order to accommodate the changes. The trend to online has accelerated dramatically with a number of effects. Those with the capacity saw it fully utilised and didn’t initially have enough to service the demand, those with no online options not only lost out on the growing sales opportunity, but in many instances were forced to close, losing their base sales as well. Some businesses rapidly sought to add online to be able to continue serving their existing and prospective new customers, and there was growth in this area for delivery, warehousing and technology services.
Acceleration of cashless transactions
Retailers are pivoting their businesses towards safe ways to meet their buyers and becoming cashless is a key piece of that. At the beginning of the pandemic, the contactless payment limit was increased to £45 and shops actively encouraged consumers to use this option due to health concerns surrounding the physical handling of banknotes and coins. Going cashless also enabled retailers to be more efficient, by speeding up the paying process. According to Visa, cash payments take between six and seven seconds to process, compared to just one or two seconds for contactless payments, helping cut down on queuing time significantly and speeding up buying decisions. Whilst the trend was already there, the acceleration to cashless has been dramatic and is unlikely to slow down. The need to pay at speed is increasingly important and the desire to avoid handling money that someone else has held is considered to be a health-related matter.
Need for speed and agility
For retailers, it has been about finding a new route to market for products and services. We have seen food retailers massively upweighting their online operations – not a simple exercise as it has involved huge recruitment drives, increasing transport fleets, renegotiating supplier deals etc. For individuals, the challenge has been to set-up home offices, managing diaries full of online meetings and balancing the now increasingly blurred line between personal and work time. This year, we’ve seen retailers launch initiatives in a matter of weeks, that would’ve previously taken months or even years to develop and launch. The pace at which decisions are taken has to be reduced and the ability to react at rapid pace will be the difference between those who are successful and those who aren’t.
The rise of omnichannel shopping
Ignoring an omni-channel model is no longer an option and the ability to serve customers using digital platforms is absolutely key. Omnichannel means being present—whether offline, online, or on mobile—to meet your buyer, and while many retailers pre-COVID didn’t have a platform to have an online or mobile presence, it has now become an essential part of the shopping experience. Retailers need to think of omnichannel as the full suite of ways a consumer can engage with the brand, including their stores, website, as well as their marketplace presence, selling on social media and through delivery partners. Omnichannel also allows retailers to learn from their customers, as well as those who are not making purchases, understanding why they are not buying, and learn what they can do to turn them into customers in the future.
Finding the right suppliers and partners
Having the right partners who will step in the hour of need is critical. The focus should be on developing strategic relationships with fewer suppliers rather than having transactional relationships with lots of suppliers. Whether a retailer is big or small, collaborations will give them a massive point of differentiation and a reason for customers to choose them as a place to shop. Collaboration in retail is not just about partnerships between retailers of complementary capabilities, but with their broader supply chains as well. The collapse of supply chains at the scale of COVID magnified the problem that the commercial race to the bottom and increased dependency on global sources have created. Today there is a push by consumers and retailers alike to prioritise supply security and the ESG benefits of nearer-shoring over the COGS benefits of Far East sourcing.
Supporting local businesses
Small independent high street retailers were deeply impacted by lockdowns, whereas many larger retail chains found ways to remain. Ability for small businesses to rethink their channel marketing is a huge drain on small owner managed businesses, such as setting up an ecommerce platform, local marketing, store repurposing, establishing local home delivery often using their own transport – and many retailers don’t have the expertise, bandwidth, knowledge or funding to set these things up. Emergence of local Chambers of Commerce promoting the high street to support ‘shop local’, less travel and more spending closer to home has given local high streets the opportunity to prosper and for new service offerings capturing work from home market to emerge.
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