Survival of the Fittest: how COVID-19 is affecting retail

By Richard Clarke, - Retail

In all my 30 years in retail, I have never seen anything as singularly destructive, disruptive and market-changing  as COVID-19.

You don’t need me to tell you it’s a crisis on a truly global scale. Even though we’re now coming out of lockdown, countries across the world are still reeling from the containment measures that have forced businesses to shut their doors and lay off staff.

And retail, in many ways, has been hardest hit. Although grocery retail has been feeding the nations over the last few months, many high streets have been barren and shopping malls have been empty.

Now as customers begin to trickle back, retailers need to kickstart their cashflow and adapt to a significantly changed environment – whether that means driving store traffic with tempting promotions, giving confidence to shoppers to shop and store colleagues to work with new health and safety measures or investing in their online to offline capabilities to appeal to the new ‘online-savvy’ consumer.

Crisis management is the phrase that’s on everyone’s lips. But there’s something else that is equally as important: crisis innovation.

Pandemic retailing

As the world starts opening up, there almost seems to be a standard, out-of-the-box pandemic retailing approach for getting businesses back on their feet.

Part of this includes making the environment as safe as possible. Actions like widening aisles, introducing one-way systems, and using more self-service technology. In many geographies, retailers are enabling customers to scan items and pay using their phones, meaning they can bypass payment terminals and checkout ‘contact’ altogether.

Delivery is another area where there has been a fairly standardised response. Simply put, more customers are ordering online, and retailers need to meet demand. This has meant businesses like Tesco, Kroger in US, and Woolworths in Australia have increased their delivery slots and deployed more staff for picking and packing.

More retailers have also been partnering with the likes of Deliveroo and Uber to speed up delivery and provide greater convenience as shoppers feel uncomfortable about returning to stores. This has traditionally been an unattractive option for retailers – loss of brand control on the ‘last mile’ service and loss of valuable margin.

But at the end of the day, needs must. The big question is, after COVID-19, will they continue their partnerships, or improve their own delivery capabilities? I suspect partnerships will continue short-medium term as retailers work out their future models – flexibility to evolve to a changing environment is key.

Doom and bloom

We all know there will be painful repercussions from this pandemic which will affect businesses and workers alike. However, I don’t think the damage will be existential. Retail will survive, human beings needs social contact, shops will focus on their core experiential purpose, and the high street will flourish once more – but in a nod to Darwin, it’s only the fittest that will survive.

Retailers need to organise themselves for survival in the short term. Property, inventory and the workforce are the three major costs bases, and they all need to be properly scrutinised. Store bases will be trimmed, stock will be optimised via range rationalisation, more eco-friendly and healthy local sourcing and the use of monitoring technologies like RFID. And the workforce, although sadly reduced, will be revalued in terms of differentiating the store experience vs online.

The smart retailers will repurpose their assets for the new world – turning low footfall stores into online fulfilment centres and redeploying staff between store and online activities. This will be the stuff of crisis management.

But surviving is also about long-term thinking. Those who simply pare back their offerings to reduce cost are going to struggle competitively further down the line. Retailers who’ll succeed in the long run will be those who consolidate their lockdown plans with their broader strategic goals – maintaining the momentum they had in pre-COVID life.

Survival of the fittest

While retailers inevitably have less budget to play with, I think there will be a surge in innovative activity over the next 6-12 months.

The crisis is changing daily, and businesses need to constantly adapt to cope with the situation. Whether that means being smart in the way they implement store safety, improving their delivery services or using digital video technologies to connect online shoppers with instore colleagues in fashion and luxury retail environments.

I also don’t think digital transformation initiatives will necessarily be delayed; in some cases they will be accelerated. Major IT programs may be put off until the industry finds its feet, but technology will become even more part and parcel of surviving in the post-lockdown world.

Whether it be using digital cameras to monitor the number of people in stores to aid safety or speed up checkout, or using AI and machine learning to minimise expensive fresh produce waste in grocery stores. Retail innovation is key to cutting costs while prioritising customer experience.

Ultimately though, I think the Darwin analogy is what it’s about. Tragically, some retail brands – fashion specialty and hospitality – will disappear, but the ones that survive will be better, fitter and more adapted to compete.

Many retailers that will shut up shop will have already been struggling before the crisis. As COVID-19 has accelerated many digital transformation projects, it has also revealed the weaknesses of those unable to keep pace with changing consumer behaviour.

There are tough times ahead. And the industry will inevitably look leaner and a little shaken in the new world. But by putting the customer experience first, wielding technology effectively, and having the vision and nerve to adapt, retailers will give themselves the very best chance of flourishing in the future, both online and offline.

Get In touch to find out more on how you can transform and adapt your retail organization.

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