Retailers were having a tough time of it as it was. And then along came COVID-19. In the high street bloodbath that followed, a number of retailers have folded and tens of thousands of jobs been put at risk. Even stalwarts of the high street are suffering – M&S announced 7000 job cuts, and John Lewis & Partners has plans to shut eight of its stores.
What are the driving forces in retail?
But out of adversity comes opportunity. And even though serious headwinds are forecast, we believe these challenging times will drive innovation, creativity, new revenue streams and new patterns of work. Here are the five themes, major driving forces in retail, and how retailers face into them will determine who emerges unscathed and who falls by the wayside:
- Business confidence: how confident companies are in the economy, their own viability and their industry is a big indicator of future developments. Confidence dictates the level of investment businesses are prepared to make (new technology etc) on the upside, or rationalisation (slashing head count, office space, shops) on the down. As we move towards the autumn, quite a few of our clients are investing in digital initiatives to help them embrace market opportunities. But in these shaky times, it takes nerve to make these investments.
- Customer experience: brand loyalty is a thing of the past and patience a rare commodity. If one retailer doesn’t have a product in stock, customers will happily head to a competitor rather than wait. Amazon’s free one day delivery hasn’t helped. Neither has price matching. Whilst customers look for price, availability and quality, they also look for delivery options, contact centre experience and convenience – everything that creates the customer experience. How retailers respond is essential – the channels you invest in, your product range, your people, your delivery capabilities – and will ultimately dictate how successful you are.
- Digital acceleration: well before lockdown, most retailers had embarked on a digital journey. Ways to optimise their omni-channel strategy, or using AI (artificial intelligence) to analyse data mined from sources like social media to make the shopping experience easy and personalised. Visual search and social shopping has been another digital trend. And COVID-19 has served to accelerate all of these, as legions of shoppers move online. Is the high street dead? Not by a long shot. But how retailers embrace digital transformation is key.
- Ethical and environmental consumerism: the rise of the ethical consumer has been stratospheric. Greta Thunberg and Extinction Rebellion have ensured that clothing mountains, and throw away fashion have become anathema to many shoppers. This opens up opportunities for retailers – H&M’s recycling programme means you can return clothing to its shops in exchange for a voucher. Selfridges has launched Project Earth, a commitment to changing the way we shop, using eco-friendly materials and launching new sustainable shopping initiatives. This change in consumer demand has opened up opportunities for retailers – and having a legacy that underpins your future ambitions means you’re in it for the right reasons.
- Supply chains: maintaining the integrity of supply chains is tough in the current conditions – issues with sourcing raw materials and distribution networks have all been disrupted in the last 20 weeks. Retailers who are importing goods have mitigated risk through measures such as switching to air freight from ocean freight to maintain product availability, but have taken a hit to profitability. And while we’ve been in the COVID-19 bubble, we’ve almost forgotten about Brexit, which is set to really upset the supply chain apple cart. Dealing with different jurisdictions, customs, delays in logistics. Retailers, brace yourselves.
These trends have been shaping retail for quite some time. And coronavirus has had its impact on them all. But retailers have to understand their own limits where it comes to navigating these choppy waters and know when to reach out for help. Rightsizing and upskilling your workforce, change management to ensure your organisation is ready, objectively assessing your business readiness – these are all important practises to help you face these challenges head-on.
At P2 helping our clients to respond to and solve these challenges is what makes us tick. If your business is encountering similar challenges and you’d like to speak to us about how we can help, please get in touch.