Survival of the fittest: how the 2020 pandemic affected retail
In all my 30 years in retail, I have never seen anything as singularly destructive, disruptive and market-changing as the 2020 COVID-19 pandemic.
You don’t need me to tell you it was a crisis on a truly global scale, a year on from the first lockdowns, countries across the world are still reeling from the containment measures that forced businesses to shut their doors and lay off staff.
Retail, in many ways, was the hardest hit sector. Although grocery retail remained buoyant feeding the nations, many high streets were left barren and shopping malls empty.
As customers began to slowly trickle back, retailers needed to kickstart their cash flow and adapt to a significantly changed environment. For some that meant driving store traffic with tempting promotions, giving confidence to shoppers to shop and store colleagues to work with new health and safety measures, or investment in online to offline capabilities to appeal to new ‘online-savvy’ consumer – and for others, it meant all three.
Crisis management was the phrase on everyone’s lips. But there’s something else that is equally as important: crisis innovation.
As the world has started to open 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 has included 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 standardized response. Simply put, more customers are ordering online, and retailers need to meet demand. This has meant businesses like Tesco, Kroger in the 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, post-pandemic, will they continue their partnerships, or improve their own delivery capabilities? I suspect partnerships will continue in the short-medium term as retailers work out their future models. Going forward flexibility to evolve to a changing environment will be 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 need 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 organize 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 scrutinized. Store bases will be trimmed, stock will be optimized via range rationalization, 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 centers 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 costs are going to struggle competitively further down the line. Retailers who’ll succeed in the long run will be those who consolidated 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 retail 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 minimize expensive fresh produce waste in grocery stores. Retail innovation is key to cutting costs while prioritizing customer experience.
Ultimately though, I think the Darwin analogy is what it’s about. Tragically, some retail brands 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. While the pandemic accelerated many digital transformation projects, it also revealed the weaknesses of those unable to keep pace with changing consumer behavior.
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 retail 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.