The pandemic environment is creating an environment for the retail industry that is simultaneously exhilarating and petrifying. Change is happening at a dramatic rate, and both brick and mortar and online stores are scrambling to adapt during the COVID-19 pandemic. And store operators are seeking out new long term ways of engaging with customers and adding value—in imaginative and unusual ways.
A roundtable discussion with both physical retailers and online retailers shed light on the challenges facing the industry today and revealed how different companies are forging a new way forward despite the spread of the virus.
Retail 2020: The best of times, the worst of times
“This is the most exciting and terrifying time to be in retail” one participant declared. “The traditional retail rules are now out.” Laws like “Location. Location. Location.” have been turned on their head. And the retail sector has lost sway over the customer. As one participant put it “Nowadays retailers are not able to dictate how to shop. Consumers now have control. Retailers can’t dictate offers based on timing or location.”
As a result, “The number of customers shifting brands or stores is staggering. An important question now is ‘how do we impress new customers?’ Acquisition and retention are critical, and more important than ever.”
The online shopping retailers reported being big beneficiaries of this change, though this growth is not without its challenges. “We are one of the companies that benefited from these times,” an online retailer explained. “We have seen some incredible consumer spending and growth since COVID hit. Our retail sales have benefited overall, and we have acquired a lot of new customers.” While very welcome, this has caused challenges in order fulfilment, because of the sheer volume and a dramatic increase that overwhelmed infrastructure. Also, the supply chain from China was disrupted, further adding to some delays. Nonetheless, the online businesses reported adapting and thriving in Q2 and Q3.
One of the online retailers has had to become accustomed to an influx of newer, older audiences. “We have made improvements to our interface to account for that,” they explain. “We have added in some small UX improvements like larger fonts and buttons sizes have been optimized for these newer audiences.”
Bricks and mortar retailers are struggling more. Volumes are down and physical store demand was moved to curbside pick-up and online ordering. “Lots of retailers are exploring curbside pickup and alternative delivery methods. Further integrating this with apps and the website helps.” One challenge in trying to make both online and curbside pick-up profitable is figuring how to incentivise bundling. As one retailer noted “Some retailers like Target offer discounts on consolidated boxes but we still haven’t fully understood what is the value that changes consumer behaviour? For example, does it make sense to give $10 off a $300 purchase or a $30 purchase?” These are open but urgent questions.
The sense of urgency to upend the standard business model is very real for retailers with physical locations as consumers choose to stay at home. One major national chain has already begun significant layoffs at head office as their bottom line plummeted. The picture for smaller retailers is even bleaker. As one person reported, “A lot of small mom and pop businesses are shutting down. Many of them don’t have the capital to invest in shipment opportunities and are using bigger retailers like Amazon as an avenue to ship product.” Another person pointed out that, despite “buy local” campaigns, “smaller businesses struggle to negotiate lower rents and eventually capital costs end up being unaffordable.” The consensus was the future does not look bright for small retailers with physical locations.
Connecting with consumers in new and different ways
All retailers, online and off, are scrambling to find new ways to attract and, crucially, retain customers. One brick and mortar retailer has a beauty focused business. Its sales are heavily driven by sampling testers, in store. They have been quick to pivot. “We are figuring out how to engage in a digital landscape,” the retailer explained. “We recently built a one-on-one advisor tool where customers can have a video conference with specialists and beauty consultants. The early adoption levels have been really good.” And they also developed a tool that now “helps customers try on thousands of products virtually.”
“We are looking at traditional and unconventional ways to help customers sample,” they further offered. “We are coming up with options to maintain exciting customer experiences and desire to try and play. We need to build a world where safety meets fun.” That’s a world we’d all like to sign up for.
In times of upheaval there are always groups that find a bright idea and run with it. Asked about some examples they have seen, people happily chimed off a list of great ideas including:
- “The Mindbody fitness app has a two-sided marketplace – instructors list classes and users pay a fee for these classes. This is based on physical in-person classes, but they pivoted to change all of their content. They set up the infrastructure to help their trainer’s setup virtual classes and this helped create a new niche.”
- “I recently ordered delivery from a restaurant and they sent me the QR code to listen to the music that they were playing, to give a real restaurant feel.”
- “A neighbourhood bar which moved their ambience outdoor including a live band, bar stools, etcetera, to give a sense of normalcy.”
- “Early in the crisis, when toilet paper was scarce, a local pizza place in my neighbourhood gave out a roll of toilet paper for each pizza that a customer ordered. I think it was quite thoughtful.”
Necessity is indeed the mother of invention and will be fundamental in the future of retail. In these tumultuous times retailers are creating new ways to connect with consumers. In a time of people trying new channels, switching store experiences, and trying different brands, those who understand retail trends and how consumers feel, behave and think are the ones who will survive to “build a world where safety meets fun.”