Will you make it through the year without going on retail life support?
Updated: Apr 9, 2020
In a matter of a few weeks, COVID-19 has exposed huge weaknesses in some of the nation’s retailers. With the need to limit human-to-human contact many retailers are scrambling to figure out how they are going to cope with the spike in online delivery and demand for click and collect.
Many retailers have poo-pooed innovation and investment in these areas and there are still significant players who have incredibly poor online stores. This is going to require investment and dedicated resource and here is the rub. The growing crisis will impact businesses of all sizes (unless you own a supermarket in which case you will be rolling in it), but the earliest casualties are going to be those saddled with significant debt.
Instore traffic will take some time to regain and it was in many cases in decline. With retailers trying to keep costs low but trying to invest in digital transformation, there are a bunch of retailers stuck in the middle who are likely to be shaken out before the year ends.
Unfortunately, it is a perfect storm.
1. The need to socially distance will sit in consumers heads for some time to come. It will hurt foot traffic and shoppers (even those who have been slower to adopt online shopping) will alter their behaviour. Heck, in our team alone, 3 people have signed their parents up to online grocery shopping and click and collect and they have been surprised just how easy it all is.
2. Consumer confidence is likely to decrease for many reasons, notwithstanding the number of businesses laying off staff and shutting up shop. This will result in a lack of demand for non-essential products. This that will be hard hit will include luxury goods, locally made fashion (simply because it is more expensive due to our labour costs) and big-ticket discretionary spend including furniture and new cars.
3. The spread of the virus will impact international supply chains, and no one really knows what the implications are for that.
So how do you prevent your retail from heading to the ICU
1. Ensuring an eye on your cash – it is King and it is your lifeline.
With retailers closed right across the country, customers locked down and not spending on anything other than essentials the portion of our GDP which is driven by consumption is largely paralysed.
We have a bunch of retailers over-leveraged, struggling for top-line sales and bottom-line performance and struggling to digitally transform to provide a seamless customer experience (case in point pre-COVID, one fashion retailer I have a significant amount of loyalty points with couldn’t provide LayBuy if I use my Loyalty Points against the purchase. I could only do via the online store which runs off a different platform. So, they had to contact Head Office to move all my points across to the online store by which time I lost interest in the items and they lost a $1,200 sale. Now I am hanging on for their online Easter sale which means I will likely now only spend my loyalty dollars (if at all) as we are watching every single dollar).
The number one tool to stay afloat is liquidity, meaning they need to find as much cash as possible to weather the storm – and we have no idea when that storm is going to end, but I reckon it’s going to take at least a year for things to get back to normal – or at least our new normal.
The pandemic does provide some cloud cover to make the hard calls that you may have been delaying. Waiting just to see if it comes right. So, cut back costs and ensure the dollars are being channelled into the parts of the business that will make a difference. You still need to be pivoting to move forward. You cannot simply standstill.
2. Make stronger customer connections
Businesses and retail more than ever need to be seen providing something of real value to serve their customers. Any business that simple “sells something” is out of step with what retail is all about. Customers will listen and give your brand a moment to connect but they aren’t interested in being talked at and talked to.
3. Build an authentic connection with the community we operate in
In times of crisis, we pull together, share our thoughts and feelings and bond. This pandemic has made us stop doing what is natural which is to get together hug and connect 121. That is going to have lasting consequences as we will be want to stay with the safe and the familiar. We will want to talk and spend quality time together when we can. We will want to travel and have experiences locally and appreciate the stuff that we have that is close to us. That will create new opportunities for retailers.
For the immediate future consumers will want to see brands and retailers engaging and supporting the people around them. They will revert to buying local and push against big brands and look to support those in the community. They will also want to understand what steps brands and retailers are taking to care for their communities and how they are giving them a hand up.
4. Acknowledging conscious consumption will grow
Consumers will re-evaluate what is important to them and what they actually need. Having to go without and seeing the impact both financial but environmentally this has had to mean they will be more conscious of the impact a purchase has on the world’s resources. I think we all want to stop unnecessary waste and many of us have seen, just in a few short weeks that we can all do with less.
5. Having the capacity and culture to pivot
What this pandemic has taught us is that disruption can come suddenly and can morph and change in a matter of days. And more waves of change and consequences means we have to constantly pivot. Businesses need to be able to adjust their model for disruption in order to adapt to serve their customers differently. As we have seen it can be through many different means from physical experiences, digital experiences, merchandise range and customer connection.
6. 100% safe and clean – for all of us.
There is no turning back from this. We have now all experienced a moment in history where people are pathogens and we literally cannot see the evil lurking. Consumers will be reticent to return to stores that aren’t recalibrated to deliver high levels of hygiene, personal safety and space. They will demand to understand what is going on. And safety will extend to employment. Not just health and safety, but that you are looking after your staff who literally put their life on the line to help deliver.
An interesting development to watch is natural cleaning products. In a time where we are trying to eradicate a pathogen, there has been a move back to chemical cleaners as perceptions are the nasty chemicals will at least kill the germs. Short term behaviour?
7. The ultimate in "convenience"
This moment in time will escalate both the adoption of online shopping in many categories, plus the conversion of stores into experience centres. The trend of less, better stores that provide a branded experience will accelerate and customers will expect to be served personally, have experiences tailored for them and have the ability to learn and discover by themselves. Customers will expect to be able to self-manage in their hands and may not want to interact with that “thing” that everyone else has touched.
Demand for click and collect, contactless couriers and home delivery will continue, and retailers need to be able to accommodate that demand – seamlessly.
Unfortunately, some exceptional retail offers will be a casualty of this war. Not because they were shitty experiences or products, but they were over-leveraged and couldn’t find the cash to get them through. Others in the middle will collapse because they were on the brink anyway as they had failed to make themselves relevant and had not invested in pivoting to meet the new retail normal. The new retail normal is shifting again, and the ability for a retailer to be resilient relies on focus and not standing still.