The "New Normal" for Retail Industry

The brick and mortar retail stores have been subjected to multitudinous challenges in past decade predominantly due to the advent of Omni-channel shopping avenues with focus on e-commerce. The ongoing global pandemic has exacerbated it further. There are some who are already writing obituary for the retail stores and then there are others who are taking the pandemic as the catalyst for its renaissance. This article attempts to provide a bird’s eye view of the impact made by the pandemic and then tries to recommend ways for a sustainable future for the retail industry as a whole.  

CoVID-19, is an unprecedented global event which is having enormous social and economic impact on human lives & livelihoods. It has forced nations to close down all possible external human activities. Among other things, all physical avenues of shopping have been closed and majority of the commercial activities have come to a halt. It will take long to recover and the transition back to normal will be tough and hard fought. The only brighter side of it is that the Mother Nature seems to be healing well.

In last decade, we have been experiencing the shift toward online and direct-to-consumer sales channels but during this time we did not stop going out of our homes for our specific shopping, food and entertainment needs. However this pandemic has changed all that and the uncertainly about the trajectory of the virus is giving rise to plethora of questions. Will the consumers turn to alternative shopping channels more than ever? Will there be another avenue created for shopping in the days to come? Will this kill the shopping experience and consumer sentiments? Will the retailer be able to gain back the customers’ trust and confidence? Will the customer journey change and the retail spaces need to be redesigned? Will the retailers, developers, policy makers embrace this? Does it likely to create opportunities for better synergies between the retailers and the developers? Is it a rise of a “New Normal” in retail shopping experience? We don’t yet know the answer of these and many such questions. So let’s deep dive and try to uncover the answers.

As part of the preventive measures, the retailers have been forced to shut shops. What we buy, how we buy, and when and where we buy is undergoing a seismic shift. This has impacted the retail business at multiple levels. The industry, individual retailers, retail stores, employees, consumers and products, all are impacted:

·        There has been a rapid change in the consumer behaviors, expectations, incomes and spending patterns in the past decade and this crisis has provided fuel to the fire. The crisis is leaving an imprint on children’s’ minds forever. As a result, it has impacted the stakeholders’ ability to devise a one-for-all success strategy.

·        There has been an intense increase in job losses, declining incomes and fear of an impending recession making everyone financially pressured. This has forced consumers to cut back on their spending across the categories, except household essentials and entertainment at home.

·        Social distancing and personal hygiene measures such as face masks, hand sanitizers, hand gloves, face shields, contact-less payments, self-checkouts, plastic covered items, long queues and stickers on the floor, have become a permanent feature of the retail landscape.

·        There seems to be a permanent shift in consumer thinking from “nice to have” to “need to have”. The “induced shopping” of the past has changed to “meaningful shopping”.

·        The retailers who relied mostly on the brick and mortar concepts so far are being challenged as the consumer spending has proliferated on the online channels.

·        The small businesses (SMEs) have been impacted immensely and are dying as they neither have capital to sustain nor the capability to expand in other channels.

·        The fear in consumer minds have impacted the shopping in enclosed spaces. In comparison, road side shops are having advantage.

·        Due to extended lock down, inventories have built up, most of these inventories have become outdated or non-seasonal, thus impacting the retail margins.

The changes we are seeing, while the crisis is still alive, might be profound and last well into the future. Therefore; it’s inevitable that the industry should take the holistic view and make changes at different levels. The below recommendations are made from the personal experience of the crisis and industry as a whole, in last 15 years of my dealing with it:

A. Retail Stores 

·        The brick and mortar stores need to follow all the social distancing and personal hygiene guidelines. As a bare minimum, they must continuously sanitize and keep the store cleaned at all times, hand sanitizers, hand gloves, wet wipes etc should be available in auto dispensing mode.

·        The layout of the stores need to be modified to have minimum touch points. The spacing between the isles and product displays is kept as per required social distancing standards, crowding at one zone should be avoided and contact less payments or self-checkouts, should be made mandatory.

·        The handling of shopping carts, products, fitting rooms, cash counters and credit card terminals, will all need to be dealt with, from health and safety point of view.

·        The touch and feel concept will take a back seat hence retailers need to consider this as an opportunity to innovate and develop a no or low-touch product and services.

·        There will need to be more control on what is displayed and how much (inventory) is kept in the store. Retailers need to reduce inventories and try to provide more digital means of customer experience. Retailers also need to anticipate and carefully plan the replenishment in terms of how much, when and where.

·        The stores will need to be looked at as the pick-up and service points for the online orders or repair of the devices purchased, rather than being kept as traditional sale and purchase locations.

·        The retailers need to carefully redesign their strategy in terms of sizing, location, design concept, franchisee/ownership arrangements, lease contracts, rental models etc. for their stores.

B. At the industry level

The crisis has hit at a time when the industry was already suffering from scarcity of cash in hand. Moreover this time of the year, the sales are down and footfall is very less. So this might further affect the business negatively. However retailers have always adapted themselves to the new realities in the past during similar crisis so they need to quickly understand the “New Normal” and what it means for them. A few pointers below:

·        React speedily and make money on the short term opportunities, increase discounts on those products which are becoming outdated/ageing.

·        Discover and shortlist top-priority and potential target areas to operate in post the crisis.

·        Drive innovation and find alternative ways to stay in business. Try to phase out pending payments to landlords, suppliers etc.

·        Identify the endless means of communication opportunities through Omni-channel. Forward-thinking retailers have already started moving towards being a marketplace and using Omni-channel to deliver a unique and personalized experience throughout the entire consumer journey.

·        In the first few days of the post crisis era, analyze the sales patterns, footfall, consumer behavior, inventory in the store, need of the human capital etc and then develop a set of contingency plans with timelines to predict when key decisions needs to be made, when will the marketing and promotional plans give benefits, and also rework on lease obligations.

·        Explore new business models to transform themselves to cater to the new realities of the retail and the new growth areas in the future.

·        There might be consolidation seen in the industry in short term. The larger retailers might use their financial capabilities and competitive advantage to venture into overtaking or partnering with other channels/brands. This might be for the brands where consumer spending will gear towards in future or in those sectors where there is less impact of the crisis.

·        Look at diversifying the current businesses or secure a new capability like a dedicated supply chain to have advantage over competition.

·        Consider at a collaborative approach to invest more in data driven analysis of the future direction of the markets and the risks of further disruption. This will help and accelerate the decision making.

·        Start working on the “Plan B”, in the event such an unprecedented event takes place again in future. The current crisis is such a reminder to all stakeholders that having a worst case scenario planning is very critical in today’s times.

C. At product level

There are ample opportunities being created by this crisis. While there are numerous products which are out of demand but there are many others which have seen increased demand as well.

·        Value for money will be practiced more across the value chain hence retailers can focus on creating private labels.

·        The shift towards generic products is anticipated as the scarcity of branded products will persist due to persistent production, manufacturing and supply chain issues.

·        Customers will seek personal hygiene products and this could positively impact the footfall due to predicted high demand.

·        The crisis has created the need for fresh food and there is also increased focus on products and services inked to health and wellness therefore; the products, process and services linked to these will need to be focused.

·        Stoppages on different outdoor sport activities, closure of gyms and cancellation of all sports events, will provide traction to all products related to sports.

·        It is also highly likely that back to school, summer products etc. will also be in high demand.

·         As we might see some stoppage to holiday plans hence travel retail might take a back seat but there will be family visits and get together so relevant retailers can plan and source products to cater to this.

·         The online product offerings need to be improved along with user experience for increased orders and extended revenues

·        The social distancing and closure of all commercial activities have deprived people of many things so It’s possible that restaurants, bars, cinemas, parks and fun destinations, will be overcrowded initially as we are all craving for a bit of entertainment for long.

D. At human capital level

The employees are an asset for any retailer as they are the ones who are on the frontline and face all the consumers hence they need to be looked after the most in this crisis.

·        First and foremost retailers need to ensure the health and safety of their frontline store employees and the customers.

·        The retailers need to look at having multi-talented workforce which could be utilized more efficiently across different locations.

·        There might be possibility of some of the retail stores not opening, retailers downsizing the existing stores and also since the inventories and consumers in store, are going to be less, so there would be a need to devise staffing requirement accordingly.

Final words

The CoVID crisis has adversely affected the retail industry and brought majority of the brick and mortar stores on the brink of complete closure. The crisis has impacted the bottom lines and financial abilities of all the retailers. One thing that is paramount to being able to weather this storm, will be the amount of liquidity retailers will have to navigate the rough waters ahead.

The retailers have to be more responsible for their employees and customers. They need to invest more on their employee well being, empathy, care and long term objectives. They need to work on overcoming consumer fears and provide enough sense of strength and calm. Primary line of thinking should be to build relationship with the consumers so that they remain connected with them. The in-store services need to provide comfort and sense of well being.

The retailers that are most adaptable to change will be the best to ride through the challenges and build stronger, more customer-centered businesses. Retailers with resilient operations and an adaptable ecosystem will be rewarded. Having an Omni-channel presence with the adoption of data driven decision making process and the ability to innovate and using the new technological capabilities for their advantage will be the key to handle the aftereffects of this crisis. Quick adoption of the new normal realities and a collaborative approach to devise a clear and damage proof business strategy, will pave the way for the long term sustainability of the industry and in turn for the brick and mortar stores.

Don’t they need to prove those who have already written their obituary!