Beyond COVID-19: Against the Retail Apocalypse

March 22, 2023
Beyond COVID-19: Against the Retail Apocalypse

After six weeks of lockdown, UK business leaders have begun working closely with the government to establish parameters under which non-essential business can reopen while still maintaining social distancing measures. In the new normal “90% economy” there is the very real possibility that the retail sector will emerge as a shadow of its former self.

All business have lost substantial revenue as lockdowns have induced a lengthy period of industrial inactivity, consumer demand, and confidence. Unlike hospitality or travel though, the retail industry saw many companies and brands struggling for survival long before any COVID related closures. The ‘retail apocalypse’ has been steadily decimating the industry for at least a decade, dealing its first major blows when discretionary spending dropped dramatically during the 2008 recession.

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A decade’s downward dive

Even as consumer confidence steadily improved into the 2010s, department stores and the brick-and-mortar shop lined high streets were no match for the rise of e-commerce giants and an increase in direct-to-consumer brands. Major retailers regularly tumbled from household name, into administration, and then into obscurity. The CEO of PVH Corp., which owns several luxury brands including Calvin Klein, commented in an interview with CNBC that he expected 20-25% of US stores to close over the next 24-36 months. Prior to the pandemic, he estimated the same closures would have taken place over six years.

Re-opening stores will present immediate challenges to business owners and managers on two fronts; how to keep both staff and customers’ safe by injecting some much-needed cash flow into the business, while also transforming operations to keep pace with an altered retail landscape. These challenges are of course not evenly distributed, merchants with a strong online presence may struggle less to adapt than high end retailers who depend on creating a unique in store experience to drive sales.

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New trends in the consumer experience

Data from ACI Worldwide showed online consumer spending during the month of March rose by 74% compared to the same time in 2019. Analysts predict that this shift in consumer behavior, embracing even more online shopping, will last well beyond the current COVID shutdowns. In spite of enthusiasm to welcome customers back into stores, when it is safe and they feel comfortable to do so, investing in an exceptional online experience is worthwhile when many leading health experts predict that spring 2020’s lockdown will not be the last.

If or more likely when, there is another sharp decrease in footfall, a retailer’s online presence needs to be capable of attracting new customers and increasing loyalty among existing ones. Over the past decade, brick and mortar stores that have bucked the downward industry trend and outperformed their competition found new ways to bring customers back to the high street by introducing pop-up shops and concept stores. To increase online traffic, retailers should consider how they can mimic this creative approach in their online space, adopting AR and VR consumer technologies.

Health governance for non-essential retailers so far has suggested when shops re-open, fitting rooms would remain closed to protect social distancing. Retailers can counter this challenge by promoting experiences like VR fitting rooms or browsing in VR shops. IKEA allows customers create custom designs before they install fittings in-home, and Lexus lets potential buyers use VR to take a test drive from the showroom. AR tools can create unique customer experiences that drive repeat visits, conversions, and higher revenues.

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Innovative Partnerships

Even if social distancing is greatly reduced by autumn, a predicted ‘second wave’ of coronavirus could force another sudden lockdown next winter. A pre-Christmas lockdown would be a nightmare for retailers; stores which depend largely on footfall will be looking to quickly scale from fulfilling perhaps 20% of sales to 80-100% of sales online during the years busiest shopping season. How do retailers respond to this problem at speed and at scale? By leveraging existing distribution networks through collaboration and innovative partnerships. Retailers can explore alliances with aggregate ecommerce distribution companies to fulfill orders at scale and connect the retailers’ catalogue to new marketplaces and more purchasing channels. IT architecture built to support API strategies can streamline business process, and drive new revenue channels.

As buying online becomes the norm, smaller retailers need to keep pace with larger, more established platforms by offering secure, frictionless payment options, and a competitive digital customer experience. Channel expansion and scaling distribution can be used to create strategic partnerships between retailers and distributors. Retailers could consider third party collaborations unique to their brand that fulfil mutual needs; a luxury goods retailer and a high-end department store could guarantee same day delivery and other bespoke digital or real-world services such as personal stylists.

Preparing for a changed world of retail

How retailers use their physical spaces including stores and warehouses will change as more business is done online. Shops could be repurposed as alternative fulfillment centers in response to high online order volumes or difficulty accessing warehouses, but responding to these changes swiftly and effectively hinges on having a 360 degree view of stock from multiple physical locations. These operational changes and shifts in business process can be guided by pre-built integration platforms and ready-made API connectors. Mobile and web teams who can’t simply insert an API will adapt at a slower pace than their competitors with flexible integration architecture.

Long term social distancing will reshape the retail industry we knew months ago. As we engage with public spaces differently, the decade long drive towards e-commerce will continue, shifting even more of our spending online. A successful response to the retail crisis will include creativity and innovation. As they examine their reopening strategy, retail executives will have to confront whether they are capable of consistently delivering a unique omnichannel customer experience while anticipating supply chain challenges and fluctuating demand.

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If your technology investments doesn’t offer long-term efficiency and flexibility, are they really adding value to your buisness? Prolifics are no strangers to industry disruption, with experience implementing customer-centric, digital transformation solutions for global retailers. We know that the world of retail will keep changing beyond COVID-19 and we’re here to help you keep up.