Consumer Behavior
Big adapting ahead for retailers striving to succeed in post-COVID-19
COVID-19 is transforming retail in unprecedented fashion and moving forward the customer experience will be transformed as well. Keith Jelinek, managing director in the retail practice at Berkeley Research Group shares insight on what's ahead and what the retail customer experience will be once the coronavirus pandemic is over.
May 5, 2020 by Judy Mottl — Editor, RetailCustomerExperience.com & DigitalSignageToday.com
It would be an understatement to say retail has changed due to the ongoing coronavirus pandemic and that COVID-19 is reshaping the customer experience.
That's because the transformation, brought about on a global scale, is not only driving innovation to stay in business but prompting retailers to begin building a 'plan b,' in the event such an unprecedented event takes place down the road.
As business re-opens on a small scale, just six to eight weeks after shuttering all brick-and-mortar retail as well as restaurants and amusement parks and recreational outlets, the focus is swiftly turning to what's ahead this year and next.
Retail Customer Experience reached out to Keith Jelinek, managing director in the retail practice at Berkeley Research Group, a global consulting firm. Jelinek has extensive experience working hand-in-hand with retailers and insight on what retailers will need to do to attain success on everything from product merchandising to staffing strategies post-COVID-19. He believes is imperative for retailers to have a firm grasp on existing inventory and develop centralized plans for purchasing goods in the future.
Q. Let's start by putting the current COVID-19 crisis in perspective as retail has always weathered economic storms but this is unique. How would you define or describe the retail scenario at this point?
A. The global threat from the coronavirus pandemic will eventually pass and business operations will begin to return to varying stages of normal, however customer experiences and interaction will likely be vastly different. The current crisis should serve as a reminder to all retailers and consumer products and services companies that having a worst-case-scenario plan is an important part of critical strategic planning. The negative effects from the rapid implementation of tariffs taught hard lessons over the past year and had many companies scrambling for alternatives to maintain or readjust their costs, but this latest wave of disruption hammers home the point.
As we are beginning to see retail formats begin to open in other countries, depending on the channels and types of products or services being offered, customers are returning very slowly. This is difficult for companies to project their staffing needs and the re-balancing of inventory, as seasonal and trend fashion product that is past its peak needs to be liquidated or removed, while new product needs to be brought in. In addition, staffing models need to be developed with shorter operating hours, and personnel need to be brought back or re-hired, in some cases.
One thing that is paramount to being able to weather this storm, will be the amount of liquidity retailers will have to navigate the rough waters ahead, and access to capital. We have seen and experienced high waves and storms in the past, and those eventually passed in relatively short order to smoother sailing. What we see in front of us for a recovery in this case, is unlike anything any of us have had to endure or experience for over 100 years. It will take time, and that time will require the generation of liquidity and access to capital.
Q. Obviously one thing that retailers will hopefully come out of this scenario with is a plan to be prepared for anything in the future. What would you recommend or suggest in building that plan b for the future?
A. Our view is that retailers and consumer goods and service companies need to assess potential future threats and challenges on a global level through a logical set of steps that build their capability sustain the impact and then to rebound.
Our paradigm involves five stages: (1) assess the risks around customer sales patterns and traffic, and supply of product; (2) implement KPI and dashboard tracking of product supply, addressable cost structures and human capital; (3) develop a set of contingency plans to address timelines for when key decisions needs to be made, inbound product flow timing, marketing and promotional plans, contracted service agreements such as IT as well as lease obligations ; (4) react and capitalize on short term opportunities, increase product discount levels and term out deferred payments, and (5) rebound and plan for the recovery
Q. When and where (in terms of the retail vertical segments) do you expect stores will begin reopening and will that coincide with consumers going to stores or will it be two different time frames?
A. This is clearly the crystal ball. We know this will be up to the individual states, and we have recently seen many of the states on the West Coast, East Coast and Midwest band together to make aggregate decisions.
Once these areas 'open up' to where consumers can travel freely, there are going to be varying degrees of impact as to whether the company sells commodity goods or services, what type of environment the location is in. For instance, if located in an enclosed mall, it is likely that consumers will be slower to adapt, but if an open air strip mall, lifestyle center or outlet, it is likely that consumer might feel more comfortable spending time at these types of locations.
Of course, consumers have been fairly frequent to shop channels such as grocery, club, drug stores and home repair during the crisis based on limited needs, but once things open back up, we would anticipate that traffic will pick up in these channels first, as consumers stock back up on items they were limiting purchases on, or that were not available broadly, such as toilet paper, etc.
Q. Why will it be imperative for retailers to have a firm grasp on their existing inventory, and develop centralized plans for purchasing goods in the future — and is that something they can be working on before they reopen?
A. This is an area that we would expect all companies are laser focused on right now, and if they are not, they should be. There are several issues at hand. First — fashion and trend product, such as spring apparel is trapped in stores, and when stores re-open, that is not the product the consumers will be looking to purchase. Secondly, products for sports such as little league and soccer is also trapped in stores, and most athletic events have been cancelled. Thirdly it is also highly likely that these types of examples are also stagnant in distribution centers or stopped at various stages of at a port or a third party. These are examples of product that is on hand and trapped. This gets a little more complex when you add to this product that is on the way to retailers distribution centers for summer goods and back to school, as we referenced above, careful modeling needs to be developed to run scenarios as to when it is anticipated stores will open, by geography and type of location, to anticipate how much to send, and when.
It is highly likely that all of this type of product will be in excess, as traffic will likely not be returning to the sales patterns that were expected, when the product was bought six to nine months ago. Fourth, to increase the complexity, many retailers are also evaluating their store portfolios to determine which stores might not re-open at all. And fifth, to bring all of this together, companies need to make some very difficult decisions regarding seasonal buy plans that need to be developed and released to vendors now, for next spring and summer, and model what they believe those traffic patterns for sales will generate in 2021 — assuming this pandemic is behind us, and there is not another wave. All of this is extremely complex, and requires line of sight to impact to cash, which is critical for companies to survive.
Q. By the end of this year what do you predict will be the state of retail?
A. Retail always manages to adapt. It will likely be a smaller footprint with some companies decreasing their store footprint, and unfortunately some not surviving at all. We do know that thru this pandemic, consumers have become more adapt at their comfort level for purchasing product online — I think we are going to see a much higher penetration of e-commerce sales, which will take a leap and stay there. It is also highly likely that all stores will push forward their initiatives and capabilities to ship product from any retail store.
Store staffing models will also need to adapt and change, as will how we interface between sales associates and consumers — the handling of shopping carts, product, dressing rooms, cash wraps and credit card/POS terminals handling cash will all need to put safety at the forefront, for associates, as well as consumers. As we look to the holidays at the end of the year, it is unlikely that sales will have returned to a state of 'normal,' but we do know that the consumer is resilient and will adapt to changes, along with retailers and consumer facing companies, and will not forego the holidays to spend time with friends and family, which will likely be more important, then ever.
Please check here for more news and insight on how COVID-19 is impacting the retail industry.
About Judy Mottl
Related Media
Subscribe
Get the latest news and resources from Retail Customer Experience.
