Retailers have been hit hard by COVID-19. At the start of 2020, despite all the predictions of a retail apocalypse, we were seeing consistent annual growth of around 4%. Retailers who were taking the omnichannel or unified commerce approach were seeing slow but steady growth in online sales and Buy Online Pickup In Store (BOPIS) services.
But with most non-essential stores around the world closed for several months, it’s a very different story now. Although grocery sales are up by a massive 25.6% due to people stocking up and cooking at home instead of going out, clothing sales are down by 50.5%, furniture by 26.8%, and sporting goods by 23.3%.
Retailers offering online sales are seeing a huge change in customer behaviour. Overall, online sales are up by over 30%, and BOPIS has grown by a massive 62% since the beginning of March, even in sectors that were previously seeing customer resistance to online sales.
Take grocery, for example. In many parts of the world, shoppers were reluctant to let other people pick their food for them - after all, they want to physically touch their avocados to see if they’re ripe, and if an item they want is out of stock, they usually have a preferred alternative, or they may need to change their meal plans entirely. But now, they’re choosing to stay home and have their food delivered or pick it up instead of going into the store, even if that means they can’t touch their avocados. In the UK, Tesco is now doing over a million online food orders a week. The UK online grocery market is expected to grow by over 25% this year, bringing in an extra £1.9bn. In the US, the online grocery market is expected to rise from $100bn in 2017 to $150bn.
Another widespread trend we’re seeing is that more people are choosing to shop locally and using smaller stores, rather than going to large chains.
How does this affect the future of retail?
It’s essential to realize that even when lockdowns are over, things won’t go back to the way they were any time soon - if ever. Many of the shifts we’re seeing now are likely to be permanent. And these are worldwide trends: we’re seeing the same things happening in Europe, in the US, in Dubai, in Australia, in South Africa - everywhere.
Shoppers who were reluctant to try online or BOPIS have been forced to use them, and many of them have been surprised by the convenience. In the UK, over 600,000 people had their first experience of online grocery shopping in the initial weeks of lockdown: 47% of them said they’d continue to do so even stores re-open, and 36% said they’d be using more local stores.
To entice people back into stores, retailers are going to face three major challenges in the upcoming months.
Safety and regulations
The main concern will clearly be the safety of both customers and staff. Stores will be required to show that they comply with all local regulations with respect to occupancy, distancing, and other precautions to reduce the spread of COVID-19 and other contagious viruses. This will require changes to store layouts, to entrance and exit procedures, and new in-store technology.
In order to recover from the financial impact of the lockdown, many retailers will be looking at cost-cutting measures. This will take various forms. Many stores will move to smaller premises to reduce overheads. Reducing staff and replacing them with AI or automated systems will be common. In addition, many retailers will have to reduce inventory, which means they will need to invest in new sales and distribution systems in order to get customers what they want.
However, the biggest challenge for retailers may well be to convince shoppers that stores are safe. No matter what changes stores make, if they can’t communicate this to their customers, it won’t matter. People won’t go to stores if they’re scared. This will require a huge customer outreach to explain what they’ve done, and to overcome the “Stay Home” message.
How will retailers respond?
Over the last few months, we’ve been working with retailers around the world to develop their post-COVID plans. Four trends have become very clear. It almost goes without saying that adopting an omnichannel approach is no longer even a question. Brick and mortar retailers in every sector need to incorporate some form of online sales and fulfilment into their business model.
Pre-booking and smart queuing
We’re all used to the idea of going shopping whenever we feel like it, but occupancy restrictions may mean that’s no longer possible. Long lines outside your store are not always desirable: customers get frustrated and angry, and they’re also exposed to rain, wind, heat, and cold. For older or disabled customers, queuing can be strenuous.
To minimize unnecessary queuing and disappointment, you could offer your customers the ability to schedule their visit in advance - just like going to a doctor. Customers can pre-book online, or if they’re already at the store, they can reserve the next available spot using their mobile device and a QR code on a digital sign outside the store. The sign will also tell them how many people are in your store, and how long they will have to wait.
Once a customer is in a virtual queue, they don’t have to stand in a physical line. Instead, they can wait nearby, perhaps in their car. The smart queue system notifies them when it’s their turn.
Don’t demand that your customers actually enter the store. BOPIS always used to be seen as a way to get them to come in so you can upsell them, but that’s no longer the case. Now, just focus on the sale you made online. Make it as easy as possible for customers to collect what they’ve paid for without ever leaving their car.
This will involve implementing technology and processes for both staff and customers. Customers need easy ways to be notified when their order is ready for collection, and they need to be able to notify staff that they’ve arrived. Inside the store, staff need to be able to assemble pickup orders, get them to the right vehicle as quickly as possible, and log that the order has been completed.
Customers and staff are reluctant to touch communal items, especially PIN pads or other payment devices. Self-checkout will become more common, and customers will increasingly opt for touchless payment systems such as Apple Pay.
Touch-screen systems, which were starting to become widespread, will be heavily impacted. In many cases, they will need to be replaced or supplemented with equivalent voice-operated, sensor-activated or phone-operated devices.
Ultimately, in order to get people back into your stores, you will need to offer something that customers cannot get from an online store. Being able to handle the merchandise is no longer enough - shoppers will simply order online, and return it if they don’t like it. Getting goods right away won’t be enough either - 30-minute or 1-hour delivery will become common in urban areas.
Instead, retailers will need to make shopping fun again. You have to make people want to go to stores because they enjoy being there. You will need to move past practicality and convenience, and find ways to make people actually like being in a mall or store.
This is where experiential concept stores can really win. In 2019, they were a way to differentiate you from your competitors. In 2020, they’re a way to differentiate your physical store from your own Web site.