The pandemic has changed retailing, maybe forever

Discussion
Photo: Kohl's
Jun 18, 2020
Oliver Guy

As the pandemic shut down our shops, we adapted. We joined new online retail sites and placed orders in advance. For printer paper or new sneakers, we shopped at Amazon.com.

Many retailers did not change, however, and those without a strong online presence are now failing. This is not a temporary phenomenon. The retail industry was changing before the virus and now it is forced to change further.

There are three ways I see accelerated online adoption changing retail forever. These include:

Online shopping doubling over the next 12-18 months as people continue to focus on safety. Retailers will:

  • Invest strategically in online and omnichannel to build capacity and benefit from economies of scale;
  • Overhaul and adopt more efficient processes and enable real-time responses, enabling supply chains to build capacity and grow market share;
  • Find a way to make online profitable.

Stores being reinvented to deal with social distancing. Reducing shoppers’ anxiety and risk will go alongside brand affiliation, as customers seek the safest possible shopping experience. Retailers will:

  • Deploy robots and other automated technology in-store to limit the number of people;
  • Increase the use of Internet of Things and real-time store monitoring as ways to help with product availability and business visibility;
  • Add immersive and mixed reality platforms, like Hololens, and voice assistants, like Alexa, to aid shopping from home;
  • Use robotics for delivery to reduce the need for person-to-person contact — something that protects workers and customers.

Planning for the next crisis will be a top priority. Against a background of economic downturn, retailers will aim to minimize the impact of future peaks — or indeed any other events. Retailers will:

  • Better connect on-shelf demand signals to orders to limit shortages of key grocery items;
  • Use ecosystems to help provide elasticity of resources to meet demands.

As McKinsey said: “It could be that the decisions made during this crisis lead to a burst of innovation and productivity, more resilient industries, smarter government at all levels, and the emergence of a reconnected world.”

DISCUSSION QUESTIONS: Which of the pandemic-related challenges identified in the article will be the biggest hurdle for retailers in the years ahead? What solutions would you add to those offered?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"It’s imperative to accelerate and focus on a digital-first strategy to compete, remain relevant, and survive in a post-pandemic world."
"To say that online retail will double in the next 12 to 18 months may be a stretch. With it will come some very painful decisions for retailers and consumers."
"Within the retail experience specifically, I’d love to see a focus on improving contactless service and maximizing convenience."

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24 Comments on "The pandemic has changed retailing, maybe forever"


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Mark Ryski
BrainTrust

The COVID-19 pandemic will result in ongoing and even permanent changes to retailing. Until there is a vaccine, the biggest hurdle will be getting traffic back into physical stores. While I agree that e-commerce will ramp-up significantly, the fact is online sales generally have significantly lower margins, so getting back to in-store transactions or other ways to leverage the physical store will be most important. However, retailers’ ability to influence in-store activity will remain a challenge as long as store traffic is being regulated and restricted due to social distancing.

David Naumann
BrainTrust

Developing an agile supply chain with enterprise visibility is imperative for retailers to successfully execute omnichannel transactions. The biggest long-term consumer change as a result of the pandemic is the increased convenience of ordering more products online. Fulfilling these orders profitably and maintaining high product availability is essential to maintain customer loyalty. Changing processes in stores is much easier than re-engineering your supply chain, but the impact of supply chain efficiency is more important to achieving profitable omnichannel execution.

Neil Saunders
BrainTrust

Let’s be frank: retail was changing before this crisis. Retail has always changed because it’s a dynamic industry that is directly influenced by social, economic and technological trends. What’s different now is the pace and urgency of the change, something that the pandemic has only hastened.

There are two critical things retailers need to do to respond.

The first is understand patterns of demand and create propositions that are aligned with what shoppers want. This may sound obvious, but it’s something too many retailers have failed to do for too long. In a suppressed demand environment the tolerance for this failure will be much reduced.

The second is to invest in omnichannel solutions. I don’t believe physical stores are dead, but I do believe customers flex between channels now more than ever and that this needs to be reflected in how retail operations work. Any retailer that is not addressing this is not just at a long term disadvantage, they will have short term problems if a second lockdown or future pandemic hits.

Lee Kent
BrainTrust

Nail on the head, Neil!

Bob Amster
BrainTrust

The doubling of online commerce is going to be a challenge for many. However, this hurdle is one that retailers had already started to face, pre-pandemic. Planning for the next crisis, on the other hand, is both necessary and a significant challenge. The next pandemic will happen. Neither retailers nor anyone else knows today what it will look like or for what measures the next pandemic will call. Agility within an organization will be the biggest asset. Nuclear plants and NASA launches have disaster protocols. Retail does not. Maybe it is time it started developing them. It would help to have the CDC or a similar organization develop guidelines for business that could serve as the core. Each industry could expound on the core to suit its specific needs.

Bob Phibbs
BrainTrust

I too wrote about how retail will change in this post, 3 Ways The Pandemic Will Change Retail Forever, but I don’t believe the projections that everyone would want to continue going online or working from Zoom post-pandemic. There are limits. We go online to buy, we go to stores to discover. The more retailers make themselves into just a fulfillment warehouse, the more they suffer as 80 percent of what they carry is always available cheaper online. While I believe digital innovation must be embraced, it has to serve the discovery element of in-person shopping, not the fulfillment found of online retail.

Brandon Rael
BrainTrust

While it’s clear that everything we once considered to be our everyday normal has irreversibly changed, including how, when, and where we shop, the “now normal” is not that significantly different from what we once knew, just with a few more precautions. What is different is the great acceleration of change, as the pandemic has sparked the need for an agile, flexible, digital-first retail operating model.

Consumer behaviors have irreversibly changed, as people want far more flexibility as to how they get products. Brick-and-mortar will always continue to have a significant role in influencing shopping decisions. However getting the digital experience right, along with the supportive technology infrastructure, agile supply chains and empowered store associates is key to keeping up with the ever-changing consumer.

It’s imperative to accelerate and focus on a digital-first strategy to compete, remain relevant, and survive in a post-pandemic world.

Art Suriano
Guest
There is a positive, and that consists of the benefits that have come for retailers due to the pandemic. For starters, online surely has grown immensely and at a much faster rate than before the pandemic. We have to face the fact that many retailers will no longer remain in business and that thousands of stores will close. But the good from all of this is that it will force the surviving retailers to understand the shopping needs of today and prepare them for the future. The old, outdated, and tired retailer can no longer exist in today’s environment. So many of these tired retailers were hanging on by a thread. And now, due to the impact of COVID-19, most of them will be gone forever. We can blame the pandemic but, in reality, it’s those retailers themselves who refused to develop an online presence, and it’s those same retailers who held off on investing in much-needed technology in their stores. Perhaps lower executive pay and smaller bonuses might have provided the necessary capital for… Read more »
David Leibowitz
BrainTrust

The challenge for many retailers is that budgets did not increase over the last quarter. They are looking to find ways to adapt, but by doing so with a blend of existing technology assets and new ones. A wholesale uplift of tech will take too long and isn’t cost efficient.

This is paramount: supply chain visibility from raw material to the last mile, product availability (accuracy), customer self-service and order status notifications, and shopper convenience (deliver anywhere).

I see a mix of IoT and in-store assets being required to make this a reality — to improve business visibility and monitoring and to enable front line workers to respond to customer needs (click and collect, ship from DC, ship from retail store).

Some of this won’t be built/bought. Instead, it will come through ecosystem partnerships with third-party logistics providers or other logistics companies so retailers can build this muscle without costly investment.

Ken Morris
BrainTrust

I’m all in on micro-fulfillment. The current Instacart-type models are broken. They crowd stores with shoppers walking the aisles while communicating out-of-stocks to customers at home which just increases the shop time and congestion. Real-time perpetual inventory doesn’t exist so product cannot be reserved. Something must change. We need to leverage real-time micro-fulfillment to reserve inventory, pick and pack for pick-up or delivery from semi-dark stores or malls. The times and technology are aligned to move this process forward. Much of the massive increase in online ordering caused by COVID-19 will remain after the pandemic and retailers must develop new, innovative processes to make online orders profitable.

Jeff Sward
BrainTrust

It seems to me that there is one point that looms above all the others — finding a way to make online retail/e-commerce profitable. That is not a small thing in an environment where migration to e-commerce is now both accelerated and unstoppable — from a demand/pull perspective, not just a push for market share perspective. Some combination of cost efficiency and the whole fee structure simply must produce a path to profitability for e-commerce. And in apparel, the costs of handling and processing and restocking returns can only increase, so this creates a real obstacle on the path.

Ananda Chakravarty
BrainTrust

The doubling of e-commerce is the challenge – because e-commerce will come back down to a far smaller growth level. What this means is that retailers need to be more agile with their online-offline capabilities and more importantly be able to adjust quickly to customer demand. We may have some challenges with planning for the future, but this will be the near future (possibly including a second wave of the pandemic) as opposed to longer-term planning – which will have a much longer time span and resource commitment by most retailers. Retailers aren’t thinking about the long term while in the middle of the current crisis.

Phil Rubin
BrainTrust
3 months 2 hours ago

The crisis accelerated both the retail Darwinism that was well underway pre-COVID-19 and the evolution and changing consumer expectations tied to customer and brand loyalty. Retail Darwinism includes the move to omnichannel (or “omni-present,” a term I prefer). The evolution of consumer expectations and loyalty includes how brands are loyal to customers which is directly correlated to both how brands responded to the crisis and how they will in the future, and the extension of loyalty to employees and communities.

Shep Hyken
BrainTrust

For the brick-and-mortar retailer who hasn’t made the leap to online, they will find that playing catch-up is harder than they think. Developing a customer list will help, but there is an ever-widening gap (and it is widening faster than ever) between the traditional way of doing retail and the modern-day retailer.

Dick Seesel
BrainTrust

There are a lot of issues here, but the supply chain question jumps out. Retailers of all kinds (grocers, big box stores, online behemoths like Amazon) were caught short on a lot of essential goods and have not yet fully recovered. While nobody could have foreseen the full impact of the shutdown, the trend toward “just in time” inventory management will need to evolve toward “just in case.” If this forces retailers to carry a deeper stock of narrower assortments, that’s not a bad thing.

Andrew Blatherwick
BrainTrust
Few retailers have so far managed to trade online profitably. It is an unwanted necessity for most retailers – they cannot survive without a strong online business but they are struggling to make a profit out of it. With investment they will be able to improve productivity and manage the online business more efficiently and effectively, but how many retailers will be able to move into profit is questionable. This is partly due to the short order-to-delivery times that are been driven by Amazon and the marketing teams, but it is also due to the additional and high cost of delivering small individual orders to people’s houses. The other aspect of online retailing is that it is certainly not environmentally-friendly, with delivery vehicles filling our neighborhoods using energy and belching out pollution. I know the push to electric vehicles, driverless vehicles, etc. is moving along but it is still a ways away from reality for the bulk of retailers. To say that online retail will double in the next 12 to 18 months may be… Read more »
Lisa Goller
BrainTrust

Taking digital acceleration seriously is retailers’ biggest hurdle.

Slim profit margins make big tech investments seem exorbitant. That’s why many retailers have been stuck and indecisive for years. They’ve known they need digital prowess yet they felt intimidated by the high price tag. They disregarded digital because only 10 percnt of total retail sales took place online.

Beyond Amazon and Kroger, few retail C-suites are equally obsessed with technology and the customer experience.

This needs to change.

Successful retailers accept that retail and tech are now inextricably entwined. They forego short-term thinking and focus on the long-term infrastructure they need to keep up with consumers and competitors.

Retailers can modernize their operations by accessing tech capability through strategic partnerships. Trusted tech experts can examine each company’s unique situation and recommend suitable tech innovations that will bring their company into the 2020s.

Jason Goldberg
BrainTrust
More than anything, COVID-19 is a time machine that threw us five years into the future in five minutes. So it’s not creating new challenges and opportunities as much as it is accelerating ones that were already there. The shift to digital is the biggest disruption to retail. As others have pointed out, shopping is never going to be 100 percent digital; there are lots of reasons for physical retail to continue to exist. That being said, the acceleration from 17 percent of purchases being made online to 28 percent, and more importantly the acceleration from 52 percent of all purchase decisions being digitally influenced to 70 percent is enough to disrupt a lot of legacy businesses. Even if some of that digital adoption is only temporary, we’re never going back to pre-COVID-19 levels. Digital is now the front door of your shopping experience. If you weren’t ready or can’t adopt quickly, natural selection is going to play out. There are other disruptions. In the semi-normal state we’ll be in for the next 18-24 months,… Read more »
Ralph Jacobson
BrainTrust

As always the case in life, time will heal most wounds. A year or so from now, I do see lingering safety and sanitation practice enhancements in place due to the pandemic. Will restaurant servers wear masks forever? I really don’t think so — especially outside most urban areas. The whole country is not like Manhattan. Sure online shopping will increase, however that was increasing prior to the pandemic. I believe logistics costs will continue to be among the biggest challenges for retailers to overcome. I look forward to seeing innovations on the horizon in that area.

Dave Nixon
BrainTrust

Biggest hurdle? Making changes that are empathetic to customers’ need to feel safe.

Biggest opportunities? The crisis forced retailers to see the reality of where they were with their digital capabilities as they were inundated with online customers — AND it showed them that some of these new models could become long term ways to serve customers, like BOPAS (Buy Online, Pickup AT Store), drive-up, concierge services, etc.

This crisis left retailers with no excuse for not “failing forward fast” and they found that using only an operational mindset to approach their businesses won’t work any longer.

COVID-19 could revolutionize the physical store proposition and retail will be better for it.

Ian Percy
BrainTrust

I don’t think we quite “get it” yet. For example, we see our world as having “changed” as though it’s past tense. An outside force has broken our world and we struggle with how to fix it. We long to recover, to return, to reclaim to “re-our-stores” and any other “re” word we can come up with. Come to think of it, there is no “forever” either. At least not in this realm.

I hope this isn’t seen merely as a play on words, but our power is in the “ing.” Our universe is one mass of interdependent energy, constantly in movement. But it has lost its patience with us. To think change means we are still doomed, we have to be chang-ing. Be-ing. Think-ing. Dance-ing. To seek a “new normal” is to seek a new place to get stuck again.

Let me go back and correct my first sentence. There is no “get.” The enduring question is “Are we getting it?”

Gabriela Baiter
Staff

If retailers shift their customers to their online channels, they are slowly making their retail footprint obsolete. Within the retail experience specifically, I’d love to see a focus on improving contactless service and maximizing convenience. Touch screen education will no longer exist in a post-Covid world and robotic store associates lacks a personal touch. Instead, retailers should be thinking about in store companion apps, motion sensor technology and appointment based concierge services.

James Ray
Guest

One of the unexpected windfall gains for many chain store retailers with ecommerce and BOPIS capabilities is their acquisition of CRM data acquisition has surged. Traditional retail in-store shoppers who never previously self-identified or opted into digital marketing opportunities are now having to do so in order to complete their purchases. The future marketing value of these customer names and addresses is yet to be determined, but if managed well it will be substantial!

Rodger Buyvoets
BrainTrust

The most significant hurdle will be for supply chains. Since this is generally the most difficult and rigid part of a business, it will be harder to forecast demand post-pandemic. Also, the focus on omnichannel will be something retailers will invest in with renewed vigor. The pandemic is completely changing the face of consumer behavior, which means their attention will be different across channels. One other solution Oliver doesn’t mention is the future of payments. As commerce is removed from the physical environment, payment in an omnichannel perspective should also take focus. Solutions like Shopify Pay, or buying through social. Many retailers don’t have a mature enough payment strategy but this will definitely be important in the coming years.

wpDiscuz
Braintrust
"It’s imperative to accelerate and focus on a digital-first strategy to compete, remain relevant, and survive in a post-pandemic world."
"To say that online retail will double in the next 12 to 18 months may be a stretch. With it will come some very painful decisions for retailers and consumers."
"Within the retail experience specifically, I’d love to see a focus on improving contactless service and maximizing convenience."

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