Savvy retailers will adapt and thrive in post coronavirus world
RTIH looks at how the coronavirus is fundamentally changing our shopping habits and experiences and how under pressure retailers are responding.
Things are starting to feel a little more normal in the UK. A huge part of that has been stores opening their doors for the first time in three months.
But while lockdown may have been eased, it's certainly not over. The mainstream media eagerly reported on long queues at Primark and JD Sports. Yet when I braved my local high street last week, there were more staff than shoppers in many stores.
It was not hard to see the vital importance of coffee shops, bars, pubs and restaurants to the overall bricks and mortar experience. Without them, high streets are flat (roll on 4th July!). Physical retail isn’t, after all, just about buying stuff. The social aspect of it is huge.
The coronavirus outbreak and the lockdown in particular has, unsurprisingly, been good to the online space. Former Sainsbury’s boss Mike Coupe recently commented: “Online groceries have taken 25 years to get to 8% of our business and eight weeks to get to 15%, and it’s still growing like there’s no tomorrow”
“A decade ago UK e-commerce sales were <5% of total retail sales. In March, we hit a record high of 22.4%, April 30.7%. Expect May will be closer to 35% and then we dip back to high 20s for foreseeable future even w/ shops reopening. Habits learned during lockdown will stick,” retail analyst Natalie Berg said on Twitter.
Responding to Berg’s tweet, John Roberts, Founder and CEO, AO, observed: “We saw five years of consumer behaviour change accelerate into five weeks. Now we've got to prove to our new customers that online is a better way even when it's not the only way.”
In the US, meanwhile, 29% of US retailers plan to close their physical locations to go online only, while 14% intend to downsize, according to research from Raydiant.
The company surveyed 400 American bricks and mortar operators. 43% claimed they could have survived the coronavirus without expanding into e-commerce, but 26% stated the move saved their businesses and 29% weren’t sure whether they would have made it on their own.
A new wave of customer expectations
As Berg says, the e-commerce sector will cool off in the coming months as stores reopen and bars, restaurants return to action. But a return to normality is some way off. An immersive and engaging physical retail experience will have to be paired with social distancing and other safety measures.
Being a physical-only retailer is more challenging than ever, and we should expect to see many of them taking an increasingly digital approach. It was interesting to see Starbucks speeding up plans to upgrade its US store portfolio as it looked to bounce back from the coronavirus outbreak.
Over the next 18 months, it will increase its focus on drive-thru and curbside pickup options, as well as mobile order only Starbucks Pickup locations in dense markets, including New York City, Chicago, Seattle and San Francisco.
“There is a real focus on community and locality as well as sustainability and the circular economy. These are going to be huge following Covid-19”
These will be powered by the retailer’s app which is integral to ordering and paying ahead as well as engaging its 19.4 million Rewards members.
Payments
The pandemic has also brought a paradigm shift in the payments industry. With cash often (wrongly, many argue) portrayed as a potential carrier of the virus, various types of e-commerce and contactless payments have gained traction in the wake of lockdowns across several countries.
Ayushi Tandon, FinTech Analyst at GlobalData, comments: “The pandemic induced surge in e-commerce from existing shoppers and an influx of new consumers, notably for grocery, food delivery, health and other supplies, has accelerated the digital payment adoption that was sluggish and varied by country until 2019. At the same time, consumers see contactless payment methods as the safest bet to pay in-store.”
Quick response (QR) code and near-field communication (NFC) have experienced a strong boost in recent months. While China’s WeChat Pay and Alipay rely only on QR codes, mobile wallets such as Google Pay, Samsung Pay, and Apple Pay support both QR codes and NFC payments. GlobalData also predicts that biometrics-based payments through the face and touch recognition will become routine in the future.
Also in the mix
Brits have come to value local businesses over the last few months, as recent research from RetailEXPO shows.
“There is a real focus on community and locality as well as sustainability and the circular economy. These are going to be huge following Covid-19,” says Mike Cadden, IT Director at Office Depot.
Elsewhere, the aforementioned Radiant research found that, during the pandemic, 21% of US retailers began deploying curbside pickup services, and 31% started offering delivery. Most who added these services intend to keep them.
We’ve also seen increased use of live video shopping and live streaming services. And we’re set for greater use of the smartphone as an interface generally. “Why touch a public ATM screen, for example, when a code number typed into your phone could confirm your identity?”
“Voice commands and face ID will be used more widely. Cashier-free stores will become more appealing. This is just the start,” says Julie Carlyle, EY UK&I Head of Retail.
New shopping experiences will become possible as personal technologies become more integral to everyday life, Carlyle believes. Consumers may also become more willing to share their biometric data to get clothes that fit perfectly without having to try them on. Haptic technology could allow people to “feel” products without physical contact.
Things will never be the same again, which will be bad news for those who were already in trouble before the coronavirus, but good news for others. Adapting to and thriving in a post-coronavirus world will require digital change at an extraordinary pace, but there is a clear opportunity for companies to take hold of the situation and thrive.