The coronavirus pandemic has already made a colossal impact on the retail sector. Closed stores, some essential stores open but operating with reduced hours, and social distancing have had an effect on high-street footfall and engagement with retailers.
Additionally, with the rest of the economy notably slowing down, consumers are becoming conscious to reduce disposable income spending.
To combat declining footfall and sales, many retailers are strengthening their m-commerce and e-commerce offerings. For some retailers, this has accelerated their digital transformation faster than they had envisaged and planned. While many retailers opt for impromptu sales to generate web-traffic to their site, below I discuss some of the changing shifts in operations and mindsets we are seeing as retailers transform in light of the challenging market conditions.
Though retailers with physical premises have been eligible for business rates holidays and government grants to support their business in these times, the grant of up to £25,000 per site does not go far for many retailers when the associated costs of running the site are taken in to account. With the Coronavirus Job Retention scheme also allowing retailers to furlough their shop-based staff in order to save cost, many larger retailers have opted to operationalise a proportion of their shop-based staff into other roles such as online order fulfilment instead of furloughing them. John Lewis & Partners are a good example of pivoting to meet customer needs as many of its shop-based partners moved into their Waitrose & Partners brand to support the higher demand it had received for online and in-store groceries.
For some retailers with a scaled e-commerce offering, their challenge has been to meet enhanced customer demand and fulfilling existing and new orders. Many have sought to focus on delivery and supply-chain management efficiencies. With delivery drivers and fulfilment companies unable to manage demand in some locations, solving for automated delivery with last-mile delivery solutions may quickly become a relevant growth industry.
Retailers proactively have to consider who their consumers are. Some retail or wholesale businesses using a B2B model are actively seeking new customer demographics. Luxury goods may be re-prioritising their end-user to those less likely to limit their disposable income spending.
As an example of this working, a local reputable fruit wholesaler I spoke to this week had a B2B model, selling fresh fruit to businesses for their staff. When working from home became the norm a few weeks ago, his whole order book vanished and he feared the worst for his business. He pivoted his business model and started to offer smaller fruit and vegetable boxes delivered to the customer. Social distancing limitations has driven more demand through to his business than he had with his B2B model.
The biggest long-term impact on the industry may not be what the retailers are doing differently to survive and thrive, but how their consumers are being forced to change the way they shop. Social distancing and other contributing restrictions are forcing consumers to interact with businesses through different direct models, and the ease and convenience in which these customers find these new channels will quickly shape the future for some retailers who do not keep up.
UK supermarkets have reported a surge in downloads from new customers for their home-delivery apps as their customers look for alternatives to visiting their stores. With vulnerable high-risk of infection customers reliant on others to procure essentials from supermarkets, while we are advised to Stay at Home, online order and delivery has become a convenient and sensible solution. A surplus of demand over supply for delivery slots, means some usual superstore customers are utilising smaller convenience stores with a close proximity to home to buy essentials, giving an economic boost to local and village shops.
It is not a secret that operating a chain of high-street shops is more expensive than operating an online offering. Some retailers in a variety of sectors have been pushing online orders for years in an effort to improve profitability of their business. If there is one positive to come from coronavirus affecting businesses, it is that more customers will be registered and more willing to use online shopping and delivery services going forward.
It is worth emphasising that not all retailers are struggling because of the current societal challenges. Gaming, wearable tech, fitness equipment, providers of essentials and childrenís games and education sectors are just some industries seeing an upturn in sales.
The differentiator in retail may be a business's ability to pivot nimbly to meet changing customer demands. While resolving delivery automation or integrating future technologies such as cashier-less transactions are not actions many retailers can act swiftly on, there are core principles each retailer can re-evaluate and pivot where necessary, such as re-utilising staff to priority roles, reviewing effectiveness of the business model and most importantly, understanding who their core customer is and their demands and wants.
Retailers and services which rely on physical interaction and consumer placement (coffee shops, hairdressers etc.) will need to find innovative ways to engage with their existing customer base while limited by social distancing, before new competitors emerge to take their most valuable commodity, customers.
Benjamin is a Funding Solutions and Business Insights Lead for Eagle Labs in Barclays Ventures. Supporting Eagle Labs and their companies for four years, Benjamin set up and ran the first Eagle Lab incubator in Cambridge in 2015, as well as being Head of Region for the South and East Eagle Labs. Previously Benjamin worked in Barclays corporate bank in coverage-relationship roles. Throughout his career, he has supported businesses from start-ups all the way through to multinational corporates and is well placed to support a variety of businesses.