The changing landscape of Retail

I have been writing on LinkedIn about the impact of technology advancement in last decade and more recently due to CoVID-19 pandemic, on the Retail Industry and this particular post is in continuation with those articles. Thus I would encourage my readers to also check the earlier articles to get a complete perspective.

It has been close to 5 months since we have been witnessing one of the worse pandemic of the human kind and by now we have already understood that we simply have to learn to live with it. This crisis is changing the way businesses functions. Most of them are already re-looking at strategies to adapt to the “New normal”. One of the most affected industry during last decade and more so during this crisis, has been the Retail Industry. We may think that CoVID-19 is what disrupted the world of retail, but the reality is that ever changing consumer behavior and demand has been disrupting the retail landscape for some time, the crisis has only helped to instigate more diversification and innovations. The aftereffects of this crisis are sure to be felt long after its gone, surely changing how consumers shop, interact and prioritize their choices.

So among all other questions, one which is echoing in every retailer’s mind at this point is “Will the current crisis further rub the salt to the injury and what will change for the industry once this is out of our system”? This article tries to seek answers for this from different perspectives. The ideas are predominantly based on the knowledge gathered in recent years. We might have to tweak some of it as we move farther in the future post pandemic.

What changes are expected?

For the retail industry, the current situation demands further diversifying and innovating to stay relevant to the new consumer behaviors, requirements and market conditions.

As they say “no matter what happens in your life, you can start afresh, all over again and when the going gets tough, be creative”. So I wouldn’t be surprised if some of the best business strategies, will be devised in the near future. This thought also comes from the fact that most of the businesses have flourished and solutions for the most difficult issues had been found during the crisis situations in the past therefore the current crisis will also pave the way for some extraordinary solutions for the retail industry.

 · It is expected that the consumer behavior will change forever across generations and target segments. Consumer spending is always motivated by positive consumer sentiment and purchasing power, both of which are definitely impacted by the pandemic and the resultant lock down. It is expected that the consumers will be more conscious and more conservative in their spending although some are also arguing the case of revenge shopping.

· The production facilities will be leaner, teams will be smaller, and product offerings will be simpler—a trend that could be seen across the board.

· It's given that, moving forward, personal hygiene, health & safety for the customers and the employees will be paramount so all the retail stores have to follow the official guidelines from the statutory authorities. We will see face masks, hand sanitizers, hand gloves, face shield, foot pressed hand sanitizer dispensers, sanitizing tunnels, and all other standard social distancing measures in place across all touch points of a customer’s journey.

“It is expected that patterns of shopping will change, globally – safe shopping and social distancing will continue to remain priorities, online shopping will increase, and relationship management will change as retailers become more compassionate and conscious of their customers.”

· The bricks and mortar stores are no longer the definition of retail success. So the retailers have to look at having “Click and Mortar” presence. Viz. a physical store, an e-commerce website, a mobile app, ability to serve the customers directly, managing the road side pick-ups, develop facility to buy online pick in store (BOPIS), e-mail, SMS, WhatsApp etc along with many other innovative solutions which might come up in coming days etc.

· Retail outlets will no longer need to have many sales staff but the trained associates who are good at building customer relations. These will be the brand ambassadors defining the consumers brand experience online and offline. Brand ambassadors will be key to create more brand identity and make customers for life.

· The shopping experience with a physical store staff always being around you, should be incorporated in online mode in such a way that the customer does not feel left alone. One way of achieving this is to provide online chat service with a human interaction (not the chat bot). Also allowing the customer to speak to a sales representative or a store manager will help him convert the browsing into purchase.

· The browsing of a product has to be as smooth as in a physical store. For this the product catalog should be easily accessible to reach to the desired product’s photos, sizes, colors etc.

· The customers should be able to do a virtual trial (mainly for the apparels) and if it’s a product other than an apparel, then a video providing user demo, technical information, how it is to be operated, what all features are there and a deep dive into different elements of the product might convince the customer to buy it online.

· The retailers selling those products where touch, feel, trial and physical experience of the store is not very important, will have to think of ways to combine the digital and physical experience. One way of doing this is to provide virtual tours of their stores to the customers.

· One another way to highlight the products offered in a physical store, is to organize special events inside the store and broadcast it online for the global customers. This not only gives customers a glimpse of the store, new products etc but also keep them engaged and loyal to a particular brand.

· Communities have a way of coming together, so we might see a growing trend among the consumers buying local to support the local community. There will be a struggle around pricing and money has more to do with relationships over the actual ability to invest.

· The crisis has taught the retailers that putting all eggs in one basket is a very dangerous thing hence now they have to rethink their strategy of manufacturing and distribution. They need to plan for shifting a portion of their manufacturing in multiple facilities in different countries to mitigate any potential future risk. This might result in higher prices for the consumers but this is a boon for those in the supply chain business.

· The pandemic has forced retailers to reconsider their 2020 business plans and forecast. 75% or more businesses are expected to spend less than their original business forecast. Most businesses will revise their expansion plans and optimize operational costs. They have curbed their spending’s for the year and will look at low-cost digital marketing solutions. Marketing plans based on festivals, events etc. will go ahead as planned.

· Getting to know the consumers better, finding a place in their heart, and predicting their behaviors is what new marketing campaigns must achieve. There will be a new breed of consumer that will emerge post this crisis so the retailers who have pioneered these times have begun to understand the psyche of their customer already. It’s why retailers need to lift their game, and fast.

What Industry should do?

· The Industry will find it difficult to thrive through the current crisis due to high fixed costs, large working capital needs and low margins. This leaves them with limited flexibility. Rents and salaries make a large part of their cost. Large capital is invested as working capital as it is a long lead time industry. As most of this is borrowed capital, retailers are already finding themselves in a deep liquidity crisis.

· The industry has to understand the collective need to pause, reset and re-purpose business as soon as possible. Moving forward the emphasis will be on the need to radically re-look cost structures, re-purpose existing resources, reduce wastage, make traditional overheads come down, get more efficient and adapt to linear business models.

· Collaboration among different stakeholders including government, financial institutions, industry bodies, businesses and even customers will be key in stimulating growth and recovery. Some retail landlords will proactively offer rent freeze for a set period. Additionally, the businesses are in discussion with the government entities to relook at the possible tax waivers and discounting licensing fees.

· The industry stalwarts need to pave the way for everyone to utilize the technology and consumer data in a most efficient way. It is the data which tells us that consumers want self-service, advice, support, customization, and an ‘in-store’ experience as part of the sales process. So It’s important to collaborate and benefit from the use of data throughout the customers experience to emerge successful in the changed retail landscape.

Conclusion

A business’ ability to survive this crisis is dependent on the ability to absorb a shock and come out of it better than the competition. The current pandemic has created an even playing field for businesses who are agile, will employ the skill set needed and are willing to take the technology risk to innovate through these times.

Converting the offine experience to a highly personalized online one is the key and way forward here. A digital space where customers can shop anywhere, anytime, from around the world. The ‘Clicks and Mortar’ business model offers consumers the opportunity to play with the product, to touch, smell and taste it in a way they cannot do online. Consumers still want to be able to see a product in person (at their choosing) and have a deeply enriching experience with the brand even before they buy it. If retailers can achieve this, they will create an improved retail experience that links the online and offline world.

This gives everyone small or big a stage to compete in the worldwide marketplace that are fast becoming the new ‘super’ market as we will know it. The new consumers have been affected physically, emotionally, psychologically and impacted economically. As a result, they want ‘convenient, fast, efficient, engagement, and advice’ delivered in the comfort of their own home. The barriers to entry for retailers has been substantially reduced, geographic location and time zone are no longer the barrier and consumer’s experience has evolved into a cross-generational and cross-cultural one.

By finding ways to create a seamless union using design, data, technology, and consumer behavior – a powerfully new online retail experience emerges. A return to good old-fashioned customer service, by genuinely fostering a relationship with the consumer first and using technology to predict future buying behavior is the face of the new retail landscape.

While there are many known and there are still a lot of unknowns (the time might show us), but we do know that consumer shopping habits will change, so retailers need to adapt in concert while remaining financially viable. With adversity comes opportunity. For retailers, focusing on customer needs and building loyalty may never be as important as it is right now. Perhaps the word ‘retail’ defined as ‘the sale of goods to consumers’ needs to be redefined from the ‘act of selling’ to the ‘art of connecting or engaging with the consumer’.