Among other things, the worldwide Corona crisis has had huge impacts in the business world of retail. As things stand, after months of quarantines and anticipated phased recovery, the standard operating procedures in retail are bound to undergo drastic change and it will continue to change as health and economic implications of the pandemic evolve over the passage of time. In fact, to succeed after COVID-19, retailers are assessing their revenue management practices, operating models, digital capabilities, and capital investments and are thereby making bold moves to transform themselves.
Today, retailers are not only anticipating to induce the pace but also to thrive in a new environment and market conditions. A majority of them would need to significantly rethink their strategies and business models in the next normal vis-à-vis answering questions like, “What kinds of goods and services would consumers want and need in this changing environment?”, “What macroeconomic factors would inform their purchasing decisions?”, “What new consumer behavior may emerge?”, and so on.
Upon a closer look, it may be observed that the retailers’ ability to face the new challenge and succeed in the next normal will depend on different sectors and the sub sectors they operate. This may also depend to a large extent upon the degree to which they adopt new capabilities and draw on the new expertise, some of which they may need to leverage through mergers, acquisitions, and collaborations. In order to get this transformation process on track, retailers would need to systematically assess their capabilities critical for the retail operation to succeed by way of presence in omni-platforms, digital capability, agile operating models, critical revenue management, and prudent capital investments.
Also, retailers would need to assess the full suite of revenue levers at their disposal and then double-down on them to sustain and accelerate sales and gross margin, undertake a clean-sheet evaluation of product assortment, pricing strategy and promotion levers to optimize sales and customer loyalty. They would have to rethink their operating models by examining store footprints, labor, and supply chains to optimize cost structures and meet changing consumer preferences. Thus analyzing, they may identify new sales models or new ways of working that could help alleviate margin pressures, building more flexibility policy into pickup and delivery operations that could help reallocate resources more effectively and better balance demand & supply flows.
In addition, there is a pressing need to have a critical insight at altered consumer purchasing patterns and behaviors which may last for long. Here, it is important to remember that today consumers are at home often. And, they are shopping less, spending less when they do shop, and focusing more on health and well-being products and concerns.
Besides, significant macroeconomic, commercial, and cost shifts are changing the landscape for retailers as well. Those operating in discretionary categories are expecting a slow recovery over the next 15 months or so. Demand for discretionary products would significantly be different than that for non-discretionary products. For example, demand in the AF&L (apparel, footwear & luxury) sector has dropped significantly, along with demand in the air travel, hospitality, and commercial aerospace.
Another reality that presents itself today is that, although over time, online shopping has increased, consumer loyalty has been disrupted and switching has become more common. One of the reasons for this scenario is that consumers have learned to replace favored brands with more available or more affordable ones in the face of product shortage and partial economic scarcity. Moreover, consumers have also shown less reluctance when switching to brands they can purchase through contactless methods.
Thus we can see that the ongoing COVID-19 crisis is pushing retailers to transform their business to the next level as the next normal will not be first nature and short-term to most of them. This would certainly need an agile strategy based on the judicious use of social media marketing, business analytics and analytics-based supply-chain management. Only this kind of true transformation and reinvention will make retailers fight the turmoil and reassure sustainable growth for themselves.
