A look back at Retail in 2020. What lies ahead?

Look Back On 2020 in Retail

Heading into 2020 pre-pandemic, the key trends / areas of focus impacting the future performance of Retailers were focused in the following areas: -

Evolution of Supply Chain

As consumers start to dictate how they engage with brands, creating a customer centric supply chain is pivotal, however isn’t without its challenges. Consumers are impatient and expect dynamism in fulfilment.

This can be challenging across omnichannel engagements as fulfilment costs increase with shipping and return procedures, logistical competencies are constrained by physical distribution and store networks efficiency, inventory expectations therein from consumers lead to increased capital exposure to satisfy consumer demand, variety is expected on a aggressively moving conveyor belt to further increasing cost and predicting how consumers will engage and convert from one day to the next can be overwhelming. This is all exacerbated by supply chain systems that can stifle agility.

Responding to these challenges is the top priority of Retail for long term viability and growth.

Re-imagination of Store Experience

Extending on the need to evolve supply chain, is the need to create captivating experiences. Stores are dusty, aged and lacking life by and large. Most of the high streets in the UK had seen a rapid decline driven by increased options and choice online, lack of omnichannel consumer awareness and mundane customer service and in store experience. Finally, high street rents can be prohibitive, and in many cases have eliminated well known brands. Those that have survived have been forced to optimise their store footprint which in turn has impacted their brand presence as a result.

However, bricks and mortar is a vital part of retail future. Fulfilment costs are reduced, click and collect (BOPIS - Buy Online, Pick up In Store) services offer cross sale opportunities & face to face interactions with consumers can lead to greater brand sentiment. In store loyalty events, product line launches, experimental technology (augmented reality for example – think magic mirrors) are required with a fickle society to drive brand equity.

Hyper-Personalisation & Unification of Cross Channel Consumer Experience

Consumer confidence in sharing their data has increased dramatically as technology has accelerated. With improved technology, comes increased expectation as the retailers become a slave to the insatiable appetite for instant gratification of modern consumers.  In return for their data, consumers expect convenient, frictionless experiences. This includes retailers understanding their buying behaviours, whether necessities or frivolous purchases, and predicting their desires of the future whilst simplifying how they transact and accelerating the pace of getting that purchase in their hands without delay.

Sustainability

Modern consumers are not only more environmentally focused but concerned with working practices in the supply chain process. Commitment to cut carbon footprints is a hot topic of focus. There is a demand on retailers to demonstrate to their customers that they have appropriate ethical policies in place that mitigate risk to the environment and guarantee humane working practices. Consumers are willing to pay more where retailers can demonstrate their commitment to this in their production line of services.

What did we see in 2020?

Demise of the dinosaurs, Rise of the digital & technology maestros

Due to pandemic, many organisations were forced to pivot and accelerate their Digital Transformations that some had on pause. Unfortunately, due to this lack of preparedness, a number of retail organisations have fallen on their sword. Increasing rents in underperforming high street stores, lack of digital integration, underwhelming store experience and lack of innovation has led to a number of recognisable high street brands entering administration and liquidating.

Over the past 12 months, well established, recognisable companies and in some cases former high street giants that had previously felt the pinch but still did restructure their organisations have met their demise. Examples include Edinburgh Woollen Mill, Jaeger, Peacocks, Cath Kidston, Debenhams, TM Lewin, Arcadia Group.

Some will remain with last minute rescue packages, including store footprint restructures, operating as pop up concessions or online only though many may never be seen again. The knock on effect of which has led to financial troubles for major high street shopping centres such as the Intu group.

However, there have been a number of success stories with organisations that have been nimble enough to adapt to the challenges presented by the pandemic. Take for example Holland & Barrett that were rapidly able to improve fulfilment by partnering with DHL for their Pop up service whilst turning each of their stores into fulfilment click and collect centres. This agility has led to strong growth.

Sainsburys for example introduced Smart Shop to create an efficient, scan as you go, contactless experience addressing consumer patience and health and safety concerns all in one go.

Consumer Digital confidence has opened up increased choice. As a result, consumers have diversified their buying behaviours more than ever before. As more and more people transitioned to buying online, they were exposed to a much wider array of retailers, many born online, which delivered increased freedom and choice. Leveraging social platforms to amplify brand messaging was a critical component of the success of many online retailers in 2020.

Logistical excellence

As online transactions increased and expectations intensified, retailers were required to respond quickly, efficiently and cost effectively.

The machine that is Amazon.com has been a huge beneficiary of the pandemic and seen a dramatic rise in its revenues as its diversified to even include supermarket fresh services due to the excellent logistical model the giant has created.

However, increasing prices on Amazon.com and consumer concerns around their market monopolisation has opened opportunities to agile, forward thinking retailers that can offer low cost, one hour, same day, next day delivery services at lower costs. Equally, the introduction of Buy Online, Pick Up in Store model has grown rapidly with organisations such as John Lewis, leveraging local Waitrose locations as fulfilment hubs, have in many cases led to a better price and faster access to products for consumers as lockdowns have limited our physical shopping activity.

However, Carbon Neutral footprints will continue to be at the heart of consumer concerns where last mile delivery and click and collect will draw greater attention.

The rise, and rise of Click and Collect

Many businesses have created in store Click and Collect strategies to help deal with pressures placed upon centralised distribution centres that their pre pandemic online business models had managed on adequately, as stores become micro distribution hubs. Not only has pressure been placed on stock but equally logistical efficiency so mitigating for delays in delivery by virtue of introducing this method has been positive for these organisations. 

This offered a safe and convenient experience for consumers, especially around the holiday period for collection of gifts for loved ones, but it has created a habit that will be ingrained into the day to day life of consumers moving forward opening opportunities to reignite the high street, rebalance the cost of fulfilment and increase incremental sales opportunity in store.

2021 Outlook for Retail

Given 2020 was as much of a stop start year as it was the kick up the backside to transform that many retailers needed, the trends remain much the same with acceleration in a few areas to augment those focus areas

Experimental Retail Experiences in store and Agility to fail fast

Retailers must cultivate a continuous innovation ideology at the heart of their businesses. Finding new and engaging methods to captivate consumer attention will be key to accelerate growth. Leveraging new technologies such as augmented reality with Magic Mirrors, smart shelves that provide product information and consumer feedback, accelerated customer service through RFID implementations that enable assistant to consumer conversion and transaction (think store assistant with tablet engaging you in store as you browse to avoid the need to queue), store autonomy for local promotions and events, and consistency in cross channel experience as retailers connect to consumers on their mobile devices through store apps using beacons, facilitating a personalised experience every step of the way.

There are endless possibilities for innovation to increase customer sentiment but not all technologies will be a success. The agility to execute and fail fast to identify and accelerate new innovation must be incorporated into the ideology to maximise the opportunity.

Enhancing Customer Service and rewarding loyalty

Consumers are fickle, impatient and have high expectations. They expect quality from their first interaction with your business through to return of goods with solid information every step of the way. Get this right and you are golden. They will pay more for a service but expect quality, consistency and value for money.

This however can be costly to execute impacted by the multiple tiers of interaction be it staff in store, customer contact centre, through social networking platforms, customer contact forums, logistical partners and more.

Say for example you are a retailer that specialises in selling high quality wallpapers and textiles, providing a white glove service for all customers through your customer contact centre, educating on specific product detail, whether the material is fire retardant, how best to cut the material, sizes dimensions – this simply is not sustainable. This should only be delivered to your most elite customers where required and instead prioritise implementing a number of robust steps in your product definition processes ensure that these products are digitally represented, with "how to" videos where required in order to enable customers to self-serve and return to content as and when they desire.

Equally, if you are an online retailer and you do not provide transparency on the individual steps of the delivery of an ordered item, this can lead to unnecessary load on the customer contact centre which can cost a number of pounds per call to navigate and inform. Enabling customers greater visibility of your supply chain process is more important than ever before as margins become finer.

There is also an opportunity for Retailers to leverage Machine Learning and AI in order to drive efficiency in how they respond to customer queries, accelerating the speed in which consumers gather information and increasing satisfaction.

As consumers trust retailers with more of their data, creating a unified view of their customer journey, its incumbent on retailers to reward brand loyalty with meaningful offers. In order to compete with the industry giants, retailers must diversify and consider partnering with complimentary businesses, for example; if you spend 30￡ on “x” we will give you a free coffee up to the value of “y” from Starbucks or if you park in an NCP car park we will give you “x” discount off your fuel at petrol station “y”. Creating cross retail community loyalty will be an important part of engaging consumers as businesses better understand their behavioural characteristics over time. 

Retraining for growth and experience

As the roles of functions for a number of retail employees are replaced by technology, it is incumbent on Retailers to take advantage of this and retrain their employees to be customer advocates and proactively grow their business. Emphasis upon growth initiatives should be established within the workplace, rewarding behaviours that lead to superior company performance and increase market share.

Greater emphasis upon health and safety

Given the impact of the pandemic and extending upon the likes of innovation such as smart shop in Sainsbury and additional protocols such as Tesco introducing traffic light systems in store that measure footfall and the ability to execute social distancing, or simple measures such as disposable socks for shoe fittings, technology will have a greater part to play than ever before in safety as additional focus is placed upon contactless experiences. In addition to that, heightened by health concerns, product diversity will accelerate with the expectation that plant based foods will flourish and be a part of branding to promote healthy living in supermarkets.

Impact of Brexit on Supply Chain and Globalisation

Brexit in essence was two fingers up at globalisation. Stepping away from the single market naturally has its pitfalls as we are no longer Zen with the EUs trade and regulatory principles that seek to harmonize frictionless trade across the member states. However some of those very principles were controversial (I’d cite the universal metric measurements implementation) which brits rejected.

It’s imperative though that the UK continues to shape trade agreements globally over the coming months ahead in order to simplify and ease concerns of the impact Brexit will have on supply chain, tariffs, custom controls and goods availability (for example in agriculture) at this prevailing time.

Let’s face it, no one really knows how the next 12 months will play out when it comes to supply chain. We have seen the situation exacerbated by the pandemic so it’ll be difficult at this stage to measure efficiency under the current conditions and what things will look like post pandemic. We have already seen a few examples of hold ups at the border due to trivial documentation issues and shortages in stock where retailers have multi country fulfilment partners. Retailers will need to rapidly adapt to the landscape as it evolves given the impatience and fickleness of consumers, delays will not be tolerated and alternatives will be sought. 

In summary, it's fair to say the months ahead with be tough. As we rally together to battle the final stages of the pandemic, lockdown eases and society is restored to some semblance of normality, the retail battle will ensue as consumers put to work their hard earned cash on goods to reward them for the tough times we have faced in the past year. Those that are ready to captivate the imagination of their customers will inevitably thrive.