New Trends in Business: How Will Retailers Survive the Times of Crisis

The COVID-19 pandemic will be one of the defining events of lifetimes. The economic consequences will last years and forever change consumer behavior. Over the last 30 years, experts have been studying the slow-burn of consumer adoption of new technologies. Never have we witnessed the adoption rate of new tech accelerate to the degree we saw in the last 60 days in e-commerce and video-conferencing. This massive change in consumer behavior is enough of a trigger for Dr. Geoffrey A. Moore to rewrite his famous book, Crossing The Chasm, for the third time.

Though e-commerce has been developing since the early 2000s and was tracking with a hockey-stick growth pattern, products sold through retail stores in comparison to online sales were approximately 80/20 respectively. Today, everything we know about retail and how it compares to and most importantly competes with e-commerce needs to be revisited. The pandemic, in all its destruction, has provided the opportune time to turn a new page and finally figure out how to converge offline and online retail as a whole and come out as winners. 

For this discussion, let’s put aside obvious sectors like groceries and essentials, that received unprecedented growth during the pandemic, and focus on the opposite spectrum of the consumer spend - the fashion industry. 

A bit of a history… 

It used to be simple - manufacturers (brands) were responsible for manufacturing goods and retailers were responsible for selling them to consumers. This standardized supply chain began to alter as brands figured out that the direct-to-consumer (DTC) model brings better margins, control of the brand message, and receiving direct feedback from the consumers. A DTC web store (e-commerce) has accelerated this movement even further. 

Additionally, there is a new breed of Digitally Native Brands - which sell exclusively online; but lately, we’ve seen them add branded retail stores. Sooooo, clear as mud, right?  A big mix of different ways to sell, but all have a common goal - to understand the customer and to drive higher lifetime value (LTV), achieve higher dollar value from each order (AOV), and to maximize conversion rate (CRO); in short - happy customer equates to a happy brand.

Luxury retailers went online to keep up with the evolution, despite the fact that it was practically impossible to recreate the high-touch experience they offer in stores. Sophisticated websites with smart searches, beautiful imagery with 360-views, AI chatbots - all the bells and whistles could not replace the human-to-human connection that builds a relationship between the consumer and the brand. The inability to properly service the remote shopper was an ongoing pain, this became much more apparent with store closures due to COVID-19.

The evolution of commerce

Regardless of the business model a brand chooses, one thing is certain, the faceless/transactional relationships with customers are no longer enough. Both brands and consumers want deeper, meaningful connections. Brands need to hear directly from their customers to be agile, and the consumer is eager to give feedback and be heard. The relationship between the two is more bound than ever before. The brands that don’t understand the importance of this equation will struggle to survive. 

There is a tremendous economic benefit to running an online store. With no rent or utilities to pay and fewer people to support, it drives higher profit margins. Would you be surprised to learn that a 2% conversion rate for an online store is considered to be good in comparison to 30% in retail? Most online fashion convert around 1%; which means, they must advertise the site to 100 visitors to get a single order. That’s expensive and inefficient. 

Branded retail stores, although very expensive to set up and keep up, can be very profitable if they manage to get the walk-in traffic. However, the retail traffic comes in waves, generating a ton of downtime for sales associates and diminishing the ROI per sq/ft. Retailers that win today are the ones that build personal customer experiences, transform online presence, and converge the online and offline experiences.

What if we could blur the line between the online and offline? What if we could connect the professionally trained sales associate with customers browsing aimlessly through dozens of pages all alone without any help? What if we can easily get them into an interactive two-way shoppable video session? Whoa! Mind-blowing right? Not anymore. 

Progressive brands like Lululemon implemented virtual personal shopping using facetime or zoom. Estee Lauder is offering live shoppable makeup tutorials. Lucchese Bootmaker has implemented both trunk shows and connecting remote shoppers with sales associates via an integrated Shop Live With Us platform. 

This live shopping technology just became available in the US, and if it wasn’t for COVID-19, it would probably take another year for most brands to start paying attention to the growing demand for personal interactions while shopping online. Lululemon had the live shopping project on its roadmap to go live in 2 years, but they had to accelerate the process to solve the immediate need.

As I’ve mentioned earlier, the two business sectors that benefited the most from the pandemic are the e-commerce related tech and the video-collaboration tech. What we’re about to get into here is the convergence of both - live video commerce, or simply live commerce. 

Live Commerce 

Store closings completely paralyzed the fashion industry. Retailers are in complete disarray with no precedent and very little guidance on how to survive this apocalypse. Most sales associates have been furloughed. The primary human-to-human link between the brand and its customers has vanished. Thankfully, we live in a technologically advanced era, so let’s examine how the tech can help restore the missing human-to-human experience.  

What is LiveCommerce and does it have many flavors?  

Live commerce means that the consumer and the associate are not in the same proximity and use video technology to assist the customer in making a purchase. There are two flavors to the LiveCommerce experience - one-on-one and one-to-many. 

The one-on-one experience is when two parties get on a two-way video call and use various tools to “co-shop”.  It can be as rudimentary as Facetime, where the two parties are discussing an item and using the camera to show the product; and as sophisticated as Immerss, where the two parties can co-shop using integrated systems to browse together and review recommendations in real-time. This type of interaction can be initiated by a customer while browsing through the brand’s site, or by the associate sending a dedicated direct-link to the customer, which can be used to connect in a two-way shoppable video later. The benefit of this service is the dedicated time the associate can spend with the customer. It creates a personal connection that previously was not possible to achieve online. 

The other flavor of Live Commerce is one-to-many, or a  shoppable live stream. This type of experience enables retailers to conduct QVC-like video commerce directly from their website. This is a great tool to host a trunk show, as Lucchese is doing here, or to stream an editorial content as Estee Lauder is doing here.  These are great ways to communicate and connect with many customers at once. Since this method uses video streaming, the host can see questions from all viewers in live chat and answer them as they come up. The big difference between the social live stream and Live Commerce is the latter is fully shoppable, enabling customers to have the watch and buy experience. 

It is a win/win/win. The consumer receives a personal shopping experience they could only get in person; the sales associate is enabled to sell outside the store walls, earning more commissions and creating long-lasting relationships; and the brand gets it all - happier customers, happier employees, higher conversions, uplift in AOV, higher ROI per sq/ft, and lower returns. The real omnichannel experience all brands are looking to achieve. 

The Challenge

Digital technology alters the balance of power between customers and brands. While customers gain the power of choice, digital technology dramatically improves the economics of the business. The biggest challenge is not technical though, it is cultural. It has to change at the top to drive a single-focused organization. Omnichannel became a buzzword, but most brands run a separate P&L between the e-commerce and physical stores. The sales and all the associated expenses are tracked in two uncrossing parallels. The team is rewarded based on the success of the parallel they are part of. That means a sale is NOT a sale. In the world of live commerce, which team will claim the sale?

How can any brand achieve the omnichannel experience when internal teams, profits, expenses, and commissions are so divided? Live Commerce intuitively propels collaboration between all the departments in the organization, but it’s up to the management to ensure that all parties involved are compensated accordingly. 

The New Normal

In the last three weeks, I’ve been interviewed by retail editorialists from Forrester, Gartner, and IDC. Three months ago, I could not get on their calendar. Now, everyone is looking for a new normal and new tools to survive. As I’ve mentioned earlier, this pandemic has altered consumer behaviors. McKinsey said, “Seventy-five percent of Gen Xers have shopped online for nonfood products in the past two weeks, and of those more than 40 percent are shopping more in the wake of the COVID-19 pandemic.” 

We hope this pandemic will subside soon enough for businesses to come back to pre-COVID-19 revenue, but retailers and brands absolutely must be operationally ready to accommodate consumers remotely.