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Retail Reflections One Year On From the Pandemic

Business

Mar 19, 2021 - 12 minutes read

Retail Reflections One Year Pandemic 416X300
Conrad Digan Independent Consultant

Conrad supports businesses to drive profitable growth. A Retail Executive and Consultant with over twenty years of corporate leadership experience across a range of sectors including Food, Hospitality, Fashion and Marketing. My role as Director of Retail Operations and Customer Experience with Primark spanned 11 countries and I held a variety of leadership roles in central and field-based teams for Marks and Spencer across the UK and Ireland.

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Table of contents

  1. The New “Normal” Customer
  2. A Changed Customer Journey
  3. Technology Is the Retail Driving Force
  4. Customer Expectations Are on a Relentless Upward Spiral
  5. Drive Key Retail KPIs by Exploiting Customer Data
  6. Real-Time Stock Data Is Now a Minimum Standard
  7. Customers Expec Diminishing at the Swipe of a Finger
  8. Automating the Stock File Optimises Cost and Drives Conversion
  9. Addressing Stock Management Challenges
  10. Customer Experience of New Retail
  11. Grasping the Opportunity

Plato’s words “Our need will be the real creator” neatly describe the acceleration of the retail evolution that has taken place in the past 12 months. As the fear of catching COVID-19 was reinforced by rules imposing restrictions, the retail/customer model was jolted forward. Retailers who were struggling pre-pandemic folded, those that were trading reasonably either pivoted promptly or dropped into the at-risk category.

The eCommerce behemoths swallowed competitors and grew at a rate that has transformed the traditional retail model to such an extent that there is no going back. Asos and Boohoo now own Arcadia group’s key brands. In their most recent earnings report from 21st January, Boohoo reported a growth of 40% for the quarter and announced the opening of a new UK warehouse and distribution centre in April. Whereas Amazon, who is leading the way for product search, will continue to push their credentials as a clothing provider with Amazon Fashion.

However, it was not all unwelcome news for the brick-and-mortar set. Food retailers thrived in this environment of uncertainty. Home improvements drove growth for the hardware/gardening sector whilst many local businesses who fell under the now common term “essential retail” went from strength to strength. Sainsburys delivered 1.1 million online orders in the 10 days leading up to Christmas — that’s double what they experienced the year before during the holiday season —and Tesco delivered over 7 million online grocery orders containing more than 400 million individual items over the Christmas period.

Customers yearned for safety and flocked to non-contact shopping — technology inhibitions disappeared and virtual shopping became the new normal. Customers now expect flexible shopping options that suit them and will continue to use touchpoints that meet their needs in the future.

The New “Normal” Customer

As customers’ needs changed, so did their normal approach to shopping. Data shows that 6 in 10 UK households bought Christmas gifts from Amazon, according to a January 2021 Market Measures report. Customers reconsidered local options with an increasing desire to support local business. However, they did not just flock to the local shops — instead, they considered which channel worked best. Click and collect, phone and collect, roadside collection, online and social media purchasing grew exponentially.

The independent shopkeeper embraced the new channels despite the challenges caused by the abrupt change. Shopping via social media channels and shopping virtually is a new high street norm. Although the adaptation of new channels fluctuated significantly by sector and amongst individual shopkeepers, there is no doubt that two decades of transformation were crammed into a truly short window. It is no surprise then that the Market Measures report suggests that 27% of households report experiencing some “out of stock” issues while grocery shopping in the run-up to Christmas.

A Changed Customer Journey

New selling channels increased the pressure on the supply chain. Customers were disappointed as retailers promoted the latest sales channels but subsequently recognised the complexity of maintaining multichannel stock availability. Research conducted in April 2020 by Accenture found that new habits formed during lockdown will endure beyond this crisis, permanently changing what we value, how and where we shop and how we live and work. McKinsey discovered that 75% of US consumers tried a new store, brand or different way of shopping during the pandemic.

Research by Marketing Week and Econsultancy found that over half of marketers said that the pandemic had caused radical or significant journey changes. Paddy Lillis, general secretary of USDAW (The Union of Shop, Distributive and Allied Workers), went as far as to suggest that the high street's future is 'hanging in the balance' — pointing towards the 125,000 retail jobs lost in 2020.

Technology Is the Retail Driving Force

Customer-facing tech and its role in the sector has also changed dramatically for retail. I recall the battle, less than 5 years ago, within a successful international retailer about the merits of introducing contactless payments. The UK will see the contactless limit rise to £100 in the coming months, and the concerns about walking past a terminal and paying for someone else’s shopping have vanished quicker than the vaccine was created.

Digital wallets are being rapidly developed and Amazon has advanced plans to introduce palm of the hand payments. Kroger's AI shopping carts and the ever-increasing use of Augmented Reality (AR) by retailers such as Ikea is snowballing. Customers are embracing this tech and our most recent shopping experiences are becoming the new benchmark for what is expected in all future shopping journeys.

Innovation has and will continue to enhance the customer experience. Whilst the transition is at times painful for the retailer, it presents an opportunity to improve efficiency. The acceleration of customer-facing technology, driven by the pandemic, will continue through a combination of innovation and the expansion of existing tech. This will include Quick Response (QR) codes and AR, spanning topics from product knowledge and Corporate Social Responsibility (CSR) messages, to collecting actionable customer data.

Customer Expectations Are on a Relentless Upward Spiral

The move away from the assisted selection models in store to a more considered interaction or simply a virtual shopping experience is significant. Customer service has shifted. Social media platforms and order inserts play an elevated role in the customer experience. A proliferation of retailer apps has appeared to connect directly with the customer and to drive loyalty. The term ‘personalisation’ is now on the top of retailers’ priority lists. How does all this impact the retailer? As a minimum, it creates a new lens through which to view customer experience. It provides an expanding list of available tools, which can be used to enhance the relationship with the customer. Building the emotional connection and driving advocacy is possible via the newly emerged interaction points, but it is equally possible to miss opportunities and ignore this rich source of customer data.
Cp2 Experience suggests that investment in digital capability needs to be driven back from the customer, and that any gaps in experience that digital journeys have exposed need to be closed. Retailers embrace customer feedback platforms such as Trustpilot and customers are increasingly referring to customer ratings, reviews, and photos to make purchasing decisions. Response time to queries is now measured in minutes instead of days.

According to a Power Reviews survey, the top irritation when researching a product online is poor product descriptions. It is widely accepted that incomplete product descriptions relate directly to elevated levels of returns and reverse logistics adds cost and challenges to integrating items in the product cycle. The control levers at the retailers’ hands have significantly increased in this new world.

Drive Key Retail KPIs by Exploiting Customer Data

As the volumes and sources of customer data expand, so does the opportunity to use this data effectively in the retailer decision-making forums. The trailblazers online have been doing this for years, and companies like Amazon exploit their data and personalise their customer relationships. Amazon Prime anticipates customer needs. Back in the real world of the UK high street, the big corporates have well-established marketing functions with expertise in acting on these new data sources. However, a cohort of retailers who are increasingly reliant on new channels for an essential portion of their business are missing opportunities to capitalise on the available insight. This data is invaluable right across the retail family tree.

Marketing is the obvious function that can utilise data to drive retention, acquisition or spend. Understanding the story depicted by data can be invaluable for those responsible for setting retail direction and strategy. The Ops Director and the IT Director can use this data to drive efficiency, develop the IT roadmap, and improve execution consistency. Strengthening the understanding of customer pain points helps buyers buy better, drives the supply chain agenda to improve availability, and increases opportunities to automate store processes from stock ordering to layout principles. In addition to providing all these benefits to retailers, this data is invaluable to shopping centre owners who rely on such insights to map future customer journeys.

A recent Microsoft Dynamics 365 article sums the opportunity up well:

The challenge is connecting siloed data coming in from different points of engagement throughout the customer journey and efficiently unifying that data to generate the holistic customer profiles and insights necessary for effective personalisation.

Real-Time Stock Data Is Now a Minimum Standard

The old retail adage “Product is King” is still accepted by most retailers. Another case could be made to say that data has toppled product from its pedestal. However, what is indisputable is that having the right product available in the right place at the right time is key to every successful retail operation.

Customers have always expected to get the product they wanted when they wanted it, but now, they demand it. Customer expectations are on an upward curve. Amazon continues to invest in a source, order, delivery model and recently bought an additional 11 Boeing 767-300 aircraft to support this strategy. Traditional brick-and-mortar retailers who embrace new channels to reach customers are being challenged by new allocation considerations and are ever more reliant on the inventory's accuracy. Real-time inventory is now a fundamental requirement. Real-time product availability means that both shoppers and company employees can view accurate inventory status for all products. Real-time means that inventory is updated instantaneously across sales channels when items are sold, not at the end of the day when inventory is checked.

Customers Expect an Endless Aisle

Shoppers want to be confident that sellers only offer products they physically have available in store or through another sales channel. They do not care how you manage the inventory. They want to know whether they can trust you to deliver your end of the bargain when purchasing.

Inventory accuracy is critical to providing positive customer experiences in all the sales channels. The term ‘endless aisle’ is now widely used and refers to the concept of enabling customers in your stores to virtually browse or order a wide range of products that are either out of stock or not sold in-store and have them shipped to the store or their home.

In 2021, the added complexity of a glut of last year’s carryover inventory due to the lockdowns and the reticence on behalf of many scarred retailers to place their normal large orders will add to the necessity for inventory transparency. Many retailers who hastily set up new selling channels in response to the pandemic are revisiting their stock management model to ensure it is fit-for-purpose as we face a reset period.

There may be a case that margins will improve as less stock is marked down, but again, this brings the possibility for tight inventory management into focus. Carrying less stock is a positive development for retailers, but only if customers are not disappointed by stock-outs. Revisiting the stock inventory system should be high on every retailers’ agenda as they plot their way forward into a post-pandemic environment.

Loyalty Is Diminishing at the Swipe of a Finger

As shopping at the click of the mouse or swipe on a mobile screen spikes, customer loyalty is diminishing. If retailer ‘A’ does not have my chosen shoes, it is easier than ever to check retailer ‘B.’ A McKinsey report in July 2020 revealed that 75 per cent of US consumers reported having tried something new, such as using a delivery app or curb side pick-up, in recent months. Perhaps even more important for consumer companies, 36 per cent of respondents say they have switched to different brands, and most of these customers intend to continue using those brands in the future.

The growth in online marketplaces is best described in a Channel advisor report which highlights that consumers have come to associate marketplaces with the widest range of products, an easy shopping experience, and fast delivery. In fact, these marketplaces are replacing the traditional department store and acting as a catalyst for their demise.

It is accepted that the cost of new customer acquisition and even customer retention is a heavy burden on marketing departments. Therefore, as the eCommerce champions flex their muscles in meeting customer needs, even gobbling up former UK high street brands, traditional retailers must provide timely clarity to all customers about which product is available in each channel.

The small independent retailers found this a real stretch in the past 12 months as they moved between the brick-and-mortar system and eCommerce. The mid-tier retailers responded with several solutions, either serving customers in the local area from the closest store, selecting one store in a region, or setting up a dark site to focus entirely on eCommerce. Each comes with its challenges, but all point us back to the need to create a seamless software solution that provides accurate stock inventory information to deliver for existing and potentially new customers.

Automating the Stock File Optimises Cost and Drives Conversion

An abundance of numbers proves that counting stock in-store is an inefficient and often inaccurate way of correcting stock files. This fact applies across all categories, from food to fashion. Despite this reality, retailers still follow a rhythm of regular cyclical or daily interventions to correct the stock system. These interventions are flawed in several ways. They are resource hungry as checking stock on display and in stockrooms takes time and removes employees from customer-facing tasks. It is only as good as the inputted data's accuracy and motivating an employee to capture this data accurately is challenging. Whilst entering a stock-out on the system may correct the issue, it is also a failure for a customer who expects the product to be available. Real-time data can significantly reduce the need for manual intervention, thus driving efficiency. The system can also reduce the occurrences of sell-outs and reduce the risk of increasing customers in the detractor category. As the internal “battle for capital” amongst all the retail functions intensifies, a solution that improves productivity and grows customer advocates merits serious consideration. Improved inventory visibility can help achieve all of this.

Addressing Stock Management Challenges

Having reflected on the new retail environment and, more importantly, growing customer expectations, what does this mean for your retail proposition? Let us assume that you have recently embarked on the multichannel journey or recognise that non brick-and-mortar channels will account for an increasing proportion of your business. In that case, the time is right to assess the performance and capabilities of your systems. To do so it would be helpful to engage a software development partner experienced in the specific challenges of the retail industry (e.g. Objectivity), as they could assist you in identifying and actively addressing innovation opportunities. Does your inventory management system deliver real-time stock availability, ensuring that your customers trust that you can meet their need? What does the endless aisle model look like in your business, and are you attracting new customers by promoting the opportunity to access your entire range through multiple channels? Have you moved forward from manual stock system intervention, which wastes resources, and have you embraced the opportunity presented by computer vision or QR code scanning to eliminate stock-outs? All of these operational optimisations can be applied to increase your business success, however, it’s important to get the technology part just right. Objectivity is experienced in optimising existing stock systems to meet evolving customer needs and in creating fit-for-purpose multichannel stock solutions.

Customer Experience of New Retail

Alternatively, suppose your current retail challenge is to increase customer/brand loyalty and you need support to fully exploit your customer data — this is another area in which the engagement of a software partner can significantly help. Enhancing your Customer Data Management (CDM) system with Artificial Intelligence (AI), Machine Learning (ML) and the appropriate Business Intelligence (BI) tools will deliver game-changing results.

Innovative virtual shopping solutions will play an increasingly vital role for successful retailers. Technology such as AR will take you to the next level — imagine your customer trying on new clothes available in your online store assortment just by using the camera on their mobile phone. As we have covered in this article, retailers of all shapes and sizes are embracing innovative solutions in response to changing customer desires. Brick-and-mortar retail will continue to play a key role for customers. However, standing still as a retailer is not an option in a climate where we all as customers are moving forward.

The unique selling proposition that has been successful to date may still be relevant in the future, but it will require new thinking. Partnering with the right systems provider can shine a light on the future opportunity and how your legacy systems can flex into enablers for the customer relationships that will determine the success of your business.

Grasping the Opportunity

Finally, reflecting on the words of the Irish author, James Stephens — “Curiosity will conquer fear even more than bravery will.” — whether it is achieving real-time stock inventory, truly exploiting customer data, or simply using data to help you operate in a more efficient manner can you afford not to explore this opportunity?

1553 Devops Whitepaper News Section 416X300 EN
Conrad Digan Independent Consultant

Conrad supports businesses to drive profitable growth. A Retail Executive and Consultant with over twenty years of corporate leadership experience across a range of sectors including Food, Hospitality, Fashion and Marketing. My role as Director of Retail Operations and Customer Experience with Primark spanned 11 countries and I held a variety of leadership roles in central and field-based teams for Marks and Spencer across the UK and Ireland.

See all Conrad's posts

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