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There is one constant in retail in the 21st century - change. And up until now, there has been no bigger forcing function for retailers to evolve than the rise of COVID-19 across the globe. Learn how retailers are adapting in this new reality of 2020.
2020 Spotlight: Retail
Here we are. Seven months into the year and nearly five months into the pandemic that has swept the globe. I did not want this to be another blog about COVID-19. But it is nearly impossible to write anything about business without mentioning the impact it has had on, well, everything.
Today, we shine a spotlight on the retail industry.
Pre-COVID, the buzzworthy topics related to the retail industry were Amazon, Pier 1 bankruptcy, going green, CCPA and third-party cookies. In fact, in my research for “retail pre-COVID”, I found this ominous quote from a CNBC article.
“Retail sales are forecast to rise between 3.5% and 4.1%, topping $3.9 trillion, in 2020. But the NRF says this assumes the coronavirus does not become a global pandemic.”
Pre-COVID, retail sales – and consumer spending more broadly – were expected to rise fast enough in 2020 to keep the economy expanding at a steady pace. Higher incomes and the lowest jobless rates in 50 years have given Americans a lot of confidence in the economy. (marketwatch.com February 14, 2020)
Although the retail industry began the year with a crawl in terms of sales, there was much optimism around what the year would hold.
But to loosely quote a line from a song in the critically acclaimed, Broadway musical Hamilton…” we are not throwing away our shot.”
Retail has not thrown in the towel. Our economy came to a screeching halt with mandatory shutdowns of most consumer-facing businesses and unemployment sky-rocketed, but the retail industry has pivoted. They have found ways to adapt. They have innovated on nearly every consumer touchpoint possible, finding ways to reach their customer without touching them.
Product: The shift to comfort and cozy
Many retailers have had to pivot in the products they sell. Gone are the days (only temporarily) of cocktail parties, special occasions such as weddings and prom and vacation apparel. Consumers are now staying home more for work and “leisure”.
One example of a retailer who made a pivot in parallel with their customer’s lifestyle change is Coach. The luxury accessory retailer, typically focused on selling high end products such as handbags footwear, jewelry, eyewear, watches, and fragrance, launched a comfort-focused collection to target their stay-at-home crowd. Along with this low-key apparel, the retailer started selling reusable face masks to cater to their high-end shoppers.
In addition to adapting their product line, they extended their return policies to an additional 30 days in order to encourage more people to feel comfortable with online shopping.
During this time, retailers have had to face the unpredictable purchasing patterns made by consumers combined with the unpredictable fulfillment of international suppliers.
“Retailers must assess their stores' readiness to fulfill a surge in online orders, while at the same time, reallocate staff to support areas experiencing increased customer demand. Technologies that automate inventory management and free up associates to assist with fulfillment are critical for mitigating crisis-related issues and ensure growth moving forward.” - Kelsie Marian, senior director analyst with Gartner's CIO Research Group
Another consideration for the long-term is how to pivot your supplier strategy – taking into account the challenges that international suppliers pose in a global crisis. One retailer , a women’s fashion store says pivoting her supplier strategy is something she had to do because her suppliers pre-pandemic were overseas.
When retailers were told they had to close their doors to brick & mortar stores because of the potential health risks due to the spreading the virus through human contact, the biggest question businesses had to consider was…”How do you continue to provide the products and services your customers need, in the healthiest and safest methods possible, to both your customers and employees?”
The rise of online purchasing, same-day shipping and “buy online pick up in store” or BOPIS, had already begun pre-COIVD. To many retailers, COVID accelerated the implementation of these services to customers.
You hear a lot about the “Customer Experience” and how critical it is to your marketing strategy. In fact, NaviStone has published a lot of content packed with information on this topic. This pillar of marketing, Customer Experience, quickly rose to the top when suddenly consumers began to feel uncertain, closed in and fearful of what was happening. Retailers stepped up in big ways. They put themselves in the shoes of their customer and created methods in which to serve them in ways they could never have imagined…and in record time.
In a time of social distancing, many retailers made the expansion to drive-through or drive-up services. In fact, Best Buy announced its online sales are up 250%, mostly through curbside drive up or home delivery. Lowe's, Walmart and others have altered their "buy online pickup in store" (BOPIS) strategy to allow customers to order online, drive to a designated pickup area in the parking lot, and have a store employee place pre-purchased items inside their trunks. In many locations, they are expanding the pickup spots to include specific locations for first responders, the elderly or compromised.
When it comes to unpredictable inventory and overseas shipping, retailers have scrambled to find ways to keep transparency with their customers and reassure them that their product is coming. Retailers have turned to apps, where a customer can track their order closer and receive alerts as to when an out of stock order is fulfilled. Customer call centers have become a focus point for businesses prepared to take calls and communicate on shipping times and any unforeseen issues that come up. This year truly is the year of customer.
Marketing and Promotions
According to a recent Gartner study, as CMOs entered 2020, they anticipated budgets that averaged 11.0% of revenue. Then the global COVID-19 pandemic struck, triggering a collapse in demand in some industries such as travel and hospitality, and significant disruptions to others such as healthcare and retail. Forty-four percent of CMOs surveyed in April and May 2020 said they are facing midyear budget cuts in 2020 as a result of the pandemic.
However, we do have reason to be optimistic as we look forward.
Perhaps the greatest indicator for this optimism is the nearly 18% increase in retail sales in May, and 7.5% in June. Retail sales totaled $524.3 billion in June, up from $487.7 billion in May and nearly back to pre-pandemic levels.
So, how does this dip and resurgence impact retail marketing? Decreases in ad spend causes a loss of revenue. And the longer this decrease lasts, the longer the recovery period will be.
Experts believe that those brands that completely cut advertising for the rest of 2020 could be facing revenue declines of up to 11% in 2021 AND that it will take anywhere from 3-5 years of consistent brand building efforts to recover from extended periods where media spend was completely cut.
The message here? Stay the course and try to get back on track as quickly as the environment will allow. Consumers are still out there. They are still shopping online. In fact, According to Big Commerce, US online orders increased 56% during the COVID-19 period.
Test new strategies whether that be through your messaging, content, and channels. Optimize your site traffic by reaching your website visitors at home via direct mail. Cut through the clutter of online advertising and the noise on social media and surprise them with a personalized postcard. Retail will continue to find ways to connect and reach people…contactless of course.