The seismic retail sector shift
We discuss how the retail sector’s evolution has been expedited as a result of the Covid-19 pandemic
The retail sector has been going through a slow transition period, one in which the UK high street has been in intensive care for over a decade. However, the past weeks of lockdown measures have now exacerbated the underlying reasons for the demise of brick and mortar shopping: footfall has dropped to an all-time low; non-essential shopfronts have closed (temporary or permanent) and the shift to online shopping has been exponential. The impact on the sector has been immediate, raising the question as to whether this will be the final nail in the coffin for the high street as we know it.
Outlined in this article are four key points of discussion around the recent evolution of the retail sector. I will be looking at the rapid response and quick adaptation of retailers and exploring beyond and into the post-Covid-19 period to examine how the sector will be reformed, ready for the ‘new normal’.....whatever that is.
Traditional high street brands aren’t adept at fast change and rapid pivoting. With physical infrastructure in play, and a firm reliance on human capital to manage and run operations, many retailers are having great difficulty in responding quickly to the crisis. The past few weeks have shown this to be a natural selection process where the strongest or most agile organisations will survive; those with clear strategic leadership and the ability to execute swiftly will come out of this reinvigorated.
Adaptation has been critical for the sector. We have seen numerous examples of retailers pivoting business models to meet new customer demands. Where one door closes, another one should open - and for retail - the shop door literally closing is the forceful push many brands have needed to accelerate their move online.
The move to digital
Digital is not new, but many long-established brands have taken their time rolling out transformation with long-term plans requiring years of steady progression. However, in the current market conditions this slow and steady approach has now proven to be ineffective because there is an imperative to condense years of change into just a few weeks. We are seeing retailers with a predominantly physical presence reliant on a footfall race to offer new online services. Businesses such as gyms, restaurants and cinemas are demonstrating innovation with attempts to gain a presence in the digital sphere, an example being PureGym offering online fitness classes to their members.
Those who took the initiative to create ecommerce platforms and move some of their operations online prior to the crisis, however, are not without challenges. The main points of weakness have been in the technology infrastructure. Many high-street retailers have been unable to support increased demand and as a result have been criticised for website crashes and long virtual queues. These flaws in their back-end ecommerce operations have been accentuated, bringing to light the success of the well-established, long-standing digital retailers with coherent front and back ends as well as their laser focus on user experience and customer satisfaction.
However, it hasn’t been smooth sailing for anyone in the sector as the surge in online shopping has had a catastrophic impact on logistics and distribution. This, paired with the disruption of the global supply chain, has been a major blow impacting all process from product manufacturing to order fulfilment and delivery times. In order for retailers to maintain customer satisfaction, we will see the immersive retail trend grow - it will be a distinguishing feature of the brands which come out of this crisis period stronger.
The move to digital is not just about sales but for back office operations as well. As with all sectors, remote working has been critical to operating seamlessly through this period and those who overcame changes in working practices leapt a fundamental hurdle in this evolutionary process. I think we will start to see retailers restructure their workforce, transitioning their high street teams from shop and sales assistants on furlough to support workers in the ecommerce operations where extra resource is needed.
Changing customer behaviours
The on-going weeks of lockdown measures have had a significant impact on buying habits. The mandated shop closures and restrictions on daily activities outside of the home have shifted how and what consumers are spending money on. The exercise equipment, books, gardening, DIY and video gaming categories have seen huge demand, but large ticket items and fashion has suffered. We are seeing a return to the large weekly shop, making convenience and ‘top-up’ shopping much less attractive due to concerns over social distancing. Retailers need to keep on top of these radical switches in customer priorities - but also their attitudes to shopping. As the initial flood of online shopping is beginning to subside, there needs to be an analysis of this activity to project future demand – many of the orders will have been for one-off purchases, for example. Strategic planning must incorporate the now recognised economic downturn, acknowledging the impact on the customers and the businesses.
Another trend emerging is the rise of the “silver surfers”. The older generation was once averse to online shopping but, as shops are no longer open or being advised against visiting, there has been a greater uptake of digital alternatives. The number of people over the age of 65 using online shopping for groceries has risen to 37%, from just 28% in 2019. As a demographic not necessarily considered in ecommerce design, older customers must now be factored into online offerings.
As a result of the lockdown, we have seen unique demand for direct-to-consumer subscription services. The retail trend is burgeoning specifically for food brands such as HelloFresh, Gusto and Mindful Chef. As consumers are seeking out supermarket alternatives, calling for help in the kitchen and yearning for restaurant quality, they are spending money on regular deliveries of pre-portioned meals. In line with this, fitness and nutrition subscriptions are also on the rise as more people look to maintain or boost their health. This is a trend that is gaining momentum quickly and is likely to stay post-lockdown.
The future of brick and mortar retail
The future existence of the high street is becoming increasingly precarious. As retailers increase investment in online platforms and operations, there will be a re-evaluation of running costly bricks and mortar storefronts. Although major brands may be packing up their regional small-scale productions, unable to justify the expense of, effectively, an oversized changing room, this can become an opportunity for smaller local businesses to take over retail space. This will most likely be contingent on lowering small business tax rates and cutting commercial rent prices of high street lots. More now than ever, the questions of what the future high street looks like and the role town and city centres play in this evolution need to be raised and addressed accordingly.
The collapse of the UK high street has been a slow terminal illness over many years, but the current pandemic is a tipping point for the sector, forcing it into a new mode of being. This seismic shift, the move from physical to truly digital, is going to see a complete metamorphosis of the sector. As a result, opportunities are arising as customer behaviour changes and expectations are realigned; it is now up to retailers to capture this and recognise it as an opportunity to catch up with the healthier pure play retailers in the digital race.
Andrew Garner at 02/06/2020 14:39 said:
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