Pandemic Spurs a New Retail Future
By David Gruehn, Robin Barrett Wilson, Anne Taylor | 10 min read
When food supply chains became strained due to the coronavirus pandemic, UK-based Brake Bros Ltd. jumped into action. For the past 60 years, the company has supplied food to restaurants, pubs, hotels, schools, and other business facilities.
“When the UK went into lockdown, our normal business and customers stopped,” says Justin Mills, head of digital products, Brakes. “However, we could see the need among consumers. We had to think about finding a different route to market to bridge that gap and get product to those who desperately needed it.”
Brakes used its existing e-commerce platform to pivot away from the B2B space and focus on the B2C market. However, it was no small task; the company needed to build functionality such as product content and search capabilities, online ordering, and options for home delivery and curbside pickup. They also had to integrate inventory management and product catalog systems.
“It was a huge shift,” Mills says. “We also then had to communicate our offering to consumers. They hadn’t really heard of Brakes, so we had to build awareness and trust.”
Brakes was able to launch the direct-to-consumer site in seven days, with deliveries flowing out a few days later. Since then, the food supply company has distributed more than 200,000 care packages each week to vulnerable individuals at hospitals and healthcare facilities. It has also made 6,000 products accessible to 6.8 million UK households.
Brakes is not unique in its need to shift gears to respond to the pandemic. The COVID-19 crisis highlighted retailers’ need to accelerate their digital transformation initiatives to thrive and become resilient. They must find and seize new opportunities that make the customer their ground zero, reimagine their brick-and-mortar facilities, and reset the roles of sales associates.
Seeing the opportunities amid the crisis
COVID-19 has been an epiphany and an opportunity for many retailers. Despite digital transformation efforts, the pandemic introduced a chasm between retailers and their customers, who quickly and out of necessity became expert online shoppers. Brand loyalty took a back seat to factors such as product availability, frictionless interactions, and speed, as 76% of consumers shopped online at a new store or Web site, according to researchers writing in MIT Sloan Management Review.
In the United States alone, individuals spent US$199 billion in online transactions, up 37% over the same period in 2019, according to the U.S. Department of Commerce.
- 85% of consumers shopped in person at physical stores that were new to them since mid-March.
- 80% shopped at a time of day that was new for them.
- 54% purchased brands that were new to them.
Source: MIT Sloan Management Review
- Only 20% of consumers are willing to forgive retailers whose service is disrupted by the pandemic.
- 38% of consumers will only return to a store if it provides a great experience.
- 45% of the population is dealing with some sort of affordability priority in their shopping behaviors.
- 56% of consumers in February 2021 said price is important to their buying decisions, compared with 43% in April 2020.
Source: EY Future Consumer Index
“It is no surprise that there has been phenomenal growth in digital retail,” says Jeff Orshell, Americas consumer retail leader, EY. “However, what has been surprising is the boom, especially during COVID-19, that has happened across all generations. For example, one of my colleagues has a mother-in-law who is 85 years old. They gave her a tablet device and taught her how to use it, and now she uses it constantly to do her shopping.”
Retail organizations now face an opportunity to bridge the chasm between the business and its customers. To do so, they must accelerate their digital transformation efforts – and integrate online and physical store experiences.
“Some retailers, especially in the consumer packaged goods and fashion sectors, were pretty well established in their digital transformations before COVID-19,” Orshell says. “However, as the 2020 holiday season demonstrated, all retailers had to think differently in terms of logistics, shipping, customer pickup, promotions, and more. They had to make decisions in days.”
“Now, they can’t go back,” he says. “They must build, expand, and create experiences that make them an integral part of their customers’ lives.”
Make the customer your ground zero
Retailers must double down on their transformation efforts and place customers at the heart of their plans.
“From a digital perspective, you have to know more about your customers,” says Sandeep Singh, vice president and senior partner, IBM. “That includes understanding whether they’re using mobile or desktop devices to access your site, their shopping history, their preferences.”
Organizations need to collate and integrate customer purchase history, feedback, and social networking information, for example. Harness everything they’ve given permission to store and use that data to differentiate your brand.
Orshell offers some examples and considerations for gathering this information. “You have to ask yourself: Is checkout the right time to request feedback? The customer may be in a hurry or reluctant to share feedback with the sales associate. You need sufficient knowledge about the consumer’s life such that you know the right time to ask for that feedback.”
Connect with customers through surveys that get behind their behaviors to understand how they view your company. Orshell suggests questions like:
- Do you feel that we’re credible?
- Do you feel that we’re reliable?
- Do you feel like we know you?
- Do you feel like we’re only asking these questions because we want to sell you more products?
Also connect with them in more personal ways, such as using videoconferencing with key customers. For example, a clothing retailer could establish one-on-one personal styling or shopping sessions or organize small group events for new product releases. These meetings can also act as informal focus groups to gather feedback and new customer information.
Discover how they’re interacting with your organization. For example, Rack Room Shoes uses artificial intelligence (AI) tools to better understand how its customers shop online by analyzing every step a consumer takes on its footwear Web site.
Kevin McNall, director of digital projects, Rack Room Shoes, tells CIO.com that his company is delivering smoother customer experiences and has been able to “introduce new revenue-generating features to our online store much faster and improve conversation rates by 25%.”
Use technology to enhance the customer experience
“Retailers have to accelerate their digital transformation initiatives if they want to survive and take advantage of the opportunities that COVID-19 has presented,” Singh says.
Analyst firm IDC – which anticipates that retail IT budgets will grow by 44% in 2021 – forecasts: “Mobility, robotics, and data-enabled automation and workforce engagement will drive costs down and enable speedy order fulfillment. Cloud-based applications and platforms… will keep the infrastructure humming and data moving.”
Retailers have to accelerate their digital transformation initiatives if they want to survive and take advantage of the opportunities that COVID-19 has presented.
Sandeep Singh, vice president and senior partner, IBM
For example, convenience store chain Casey’s has invested in data unification and e-commerce technology across its Web site, mobile app, and loyalty program to provide seamless experiences. The company uses identity management to better understand customers and store their preferences to deepen the relationships.
“It’s about providing our customers with good products and being here for the long run,” says Art Sebastian, vice president, digital experiences, Casey’s.
Cloud computing, machine learning, location technology, and more have been integrated into Commonwealth Bank of Australia’s banking app to improve the customer experience. These solutions enable the bank to seamlessly and automatically notify customers when bills are due or when recurring charges increase, provide tax advice, and protect customers against fraudulent transactions. The efforts are paying off; so far, the bank says it has saved customers $200 million in overdraft fees in one year by sending personalized messages.
As you explore which technologies make sense for your organization, think about the type of experiences customers enjoy.
“Customers want to get in and out in a few clicks and get what they need,” IBM’s Singh says. “Also, they want options: site pickup, in-store pickup, ship from store, ship from the distribution center. All these different omnichannel fulfillment capabilities become key.”
Technology also should be considered from the entire supply chain perspective, says Orshell of EY. “Think about the doorstep as the last stop in the distribution chain. Ask yourself: does my last mile now become my last five miles or my last 10 miles? What is the customer population I want to serve? And how do I best structure my supply chain to serve that population?”
Think about the doorstep as the last stop in the distribution chain. Ask yourself: does my last mile now become my last five miles or my last 10 miles?
Jeff Orshell, Americas consumer retail leader, EY
Reimagine brick-and-mortar experiences
There are multiple possibilities for retailers to transform their physical stores to provide unique, personalized customer experiences. Brick and mortar should now have a multifaceted role, providing everything from customer service to warehouse functionality to deeper customer interactions.
“I recently talked with a group of retail CEOs who expect about 50% of brick-and-mortar locations to be more experiential and to engage in more social types of endeavors,” says Orshell.
One large-scale project now taking shape is in Hamilton, Ohio, where a former paper mill is being transformed into a multi-building, multi-tiered sports-plex. The Spooky Nook Sports Champion Mill will include indoor and outdoor soccer fields, basketball courts, a swimming pool, a walking/running track, gym facilities, a rehab center, childcare, and a hotel. There are leasing opportunities for sports clothing and equipment retailers, health food stores, and any business targeting the sports or health-conscious consumer.
On a smaller scale, physical environments can be used to create experiences that can’t easily be replicated online. For example, a major fashion retailer uses its customer data systems and opt-in location-sensing technology to provide personalized shopping experiences. If a customer is near one of its locations, they will receive an alert that a sales associate has established a fitting room with styles according to the customer’s size and preferences.
Once inside the store, staff can augment the experience by adding items that meet customer preferences. Some stores, for example, give sales assistants tablet devices to reference customer purchase history and social media interactions. Using this information, sales personnel can suggest accessories or items based on previous buying behaviors.
Another idea: “Encourage customers to add items to their wish lists and then schedule try-on appointments in the store,” says Singh.
Reset the sales associate role
Appointments in brick-and-mortar locations require rethinking in-store personnel. Consider the skill sets necessary to operational aspects, which might include:
- Order picking and prepping
- Appointment-based events or personal shopping experiences
- Design skills for changing store layouts, such as more space for fitting rooms or small group events
- The need for technology skills or training to use customer data platforms
Revitalizing the sales associate role has benefits. For example, clothing retailer Chicos has rolled out an internal mobile app to nurture customer relationships. Chief customer officer David Goubert tells Bloomberg Businessweek that the thinking was: how do we get our teams in stores to truly become digital stylists? His company believes doing so can multiply customer spending by as much as six times the existing spend.
Furthermore, the customer experience can be heightened – and the role of the sales associate reimagined – by integrating online and physical store systems.
For example, build a workflow for a customer’s online shopping cart to be sent directly to a store associate. “It would let the associate know that the customer is on their way, to start packing the goods and get the order ready at the front of the store,” says Colin Wright, global director of strategy, Microsoft.
Adapt to the new retail reality
Retailers must speed up their digital transformations. They must provide personalized experiences that focus on the customer, seek ways to accelerate their use of technology, revitalize brick-and-mortar facilities, and reimagine the roles of sales personnel.
Meet the Authors
SAP Insights Newsletter
Gain key insights by subscribing to our newsletter.