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Never has a single event had such a wide-ranging global impact on financial markets and the retail sector in particular, as the coronavirus outbreak. The effects of COVID-19 have sadly seen many large and smaller retailers already go out of business. Those retailers that are struggling with the sharp economic downturn have been forced to adapt and think a lot more creatively if they want to stand any chance of surviving.
More have been choosing to "shop local"
While footfall on the high street has decreased dramatically in recent months, there has been a welcome resurgence of local businesses such as greengrocers, bakers, farm shops and butchers.
Busy consumers have historically looked for instant gratification and would often choose the easiest, quickest, cheapest and most convenient way to shop prior to the coronavirus outbreak, often turning to large, faceless chains.
It seems that communities across the whole country have been actively and consciously supporting smaller, independent and local business during, and since lockdown, rather than automatically buying from national chains. A report by Brandwatch shows that shopping locally had the highest percentage increase in mentioned volume: comparing March 2020 with December 2019, conversation was up 440%. Local retailers have undoubtedly been in desperate need of extra revenue and have been very grateful for any new custom.
Will people really keep shopping differently?
Looking beyond the immediate effects of COVID-19, now that the initial panic has subsided and a "new normal" comes into view, it is clear that few consumers expect to revert back to pre-crisis behaviors.
A global survey from Ernst & Young found that 42% of consumers believe the way they shop will fundamentally change as a result of COVID-19, including 34% indicating that they would pay more for local products.
It is interesting how quickly we have all adapted to new ways of shopping, such as wearing the recently-introduced compulsory face masks and the social distancing rule, even though it's still very new and unfamiliar. Many shoppers appear pragmatic about the future of retail, accepting that there will likely be various restrictions and a compromised customer experience in favor of safety, for an extended period.
Accelerated shift towards online shopping
A recent report by Alvarez & Marsal explores how the COVID-19 crisis has impacted consumer behavior, measuring the attitudes of over 6,000 consumers across six European countries. As lockdown measures were implemented across Europe, a switch towards online channels emerged. The shift was immediate but it was felt very differently across demographic regions and sectors.
Over 40% of consumers across Europe indicated that they had bought something online for the first time in lockdown which they had only previously bought in-store. This proportion rose to 55% for consumers in Italy and Spain, reflecting heightened concerns about the impact of the virus. Some retailers struggled to cope with a sudden surge in demand, pushing websites to breaking point and exceeding fulfilment capacity.
It is the general consensus that retailers are investing online because the current situation has forced their hand and they have had no choice but to adapt. Ecommerce has increased for grocery, household essentials and personal care (with demand for online grocery only limited by available delivery slots). The high street retailers who have the capability are now relying more on their online presence to keep revenue growth and local businesses are using digital strategies to connect with consumers across a variety of channels.
With many retailers still bringing in sales thanks to their online stores, Primark, on the other hand, has definitely not jumped on the online bandwagon, despite having not sold a thing during lockdown and having furloughed 68,000 of their staff. One of Primark's selling points is its budget prices that allow shoppers—especially the younger consumer groups such as Gen Zs and millennials—to fill their baskets with the latest trends for very little money. Apparently, selling online would not make sense in terms of their low price points as the added costs that come with delivery, labor and returns would have to be included in the price, meaning Primark's budget prices would have to increase.
Retailers need to adapt to stay in the game
The future success or failure of many retail businesses is now dependent on how they adapt to consumer behavioral shifts. Retail industries across the world are currently transitioning through a readjustment period. If they adapt and innovate, they will more likely emerge stronger and more resilient to future challenges that lie ahead.
In terms of adaptability, it has been fascinating to see how some businesses switched their core business in order to produce items that were no longer readily available. Various gin distilleries diversified to produce hand sanitizer during the coronavirus pandemic to help those in need.
On the other hand, businesses that have been too slow to adapt and innovate, losing the opportunity to grasp new markets, retain loyal customers and win new ones, will sadly fail, as consumers seek alternatives to meet their expectations.
The importance of digital transformation to pull through
Consumers have naturally turned to more digital solutions in the past few months to overcome the challenges of remote working and self-isolation. The growing popularity of digital solutions such as email enquiries and web chat / chat bots is likely to remain after lockdown, giving retailers further channels through which to sell and connect with consumers. Retailers that adopt different models to reach customers, achieve operational efficiency and establish new sources of revenue will emerge stronger.
Laithwaite's Wine (Laithwaite's), part of the Direct Wines group, and customer of Platinum Cloud Partner Olive is a predominantly online global wine distributor and is a great example of digital innovation. Within hours of the coronavirus lockdown coming into effect, Laithwaites' entire call center and outbound operations teams were successfully working from home.
Laithwaite's is also one of the first UK companies to be part of a beta test for a linkup between Mitel and Google using their AI platform, integrated within their cloud platform. The full roll out will be implemented soon, delivering an automated chatbot, known as a "wine bot" integrated directly into their CRM system. The functional aspect of the bot will help with customers queries, handling routine tasks such as changing or following up on deliveries or making changes to their regular wine plans and directing customers to self-service pages. Laithwaite's are hoping to see 50,000 customer contacts interact with the bot, significantly improving staff use, allowing their people to focus upon more complex customer queries. Laithwaite's Wine were recently recognized as one of the top performing businesses, despite lockdown, reporting a 300% rise in new customers year-on-year in March and April, and has recently been awarded the Institute of Customer Service "Service Mark with Distinction" Award held by only a handful of companies.
A proactive omnichannel strategy will be a major contributor to success for retailers going forward, including artificial intelligence and machine learning, to help identify new consumers and engage with them in a sophisticated, automated and scalable way. Most retailers do not have the in-house expertise to leverage these new technologies, so strategic partnerships and collaborations will be critical in allowing retailers to leverage the benefits, while remaining flexible.
The future of retail—beyond the pandemic
In a "post-COVID world", the retail sector will look very different, irrespective of country or region. The challenge we all face is that no-one can predict what the future holds so retailers will need to remain more flexible and adaptive.
When we look back, we'll see that successful retailers will be the ones who could reinvent their business by embedding resilience, capitalizing on consumer trends and integrating new business models and technology platforms.
