The big challenge for retail businesses in 2021 is to adapt their operations to survive in a post-COVID-19 world. Retail businesses will require new strategies and a different operating model and those that embrace and invest in online are going to be better placed to survive.
There are three priority areas:
Most recognise that the pandemic has permanently changed the way we shop. New consumer behaviours, likely to continue long after the COVID-19 pandemic ends, will result in:
What we are likely to see is a rationalization of the retail sector with fewer outlets but ones that are better configured and offer higher quality, which might mean a fresh start for many operators and more working in tandem with others in the same space or supply chain.
We will see more investment in the back of house, in warehouse management in terms of space and people, and so front of house will need to be streamlined.
The strategic decisions therefore are around getting your rent cost down, having resources to invest in online infrastructure, embracing Click & Collect, delivery and personal shopping services, and accepting all forms of online payment.
Even before the pandemic, retailers needed to be on this track. For instance, since 2018 Marks & Spencer have been closing unprofitable stores across their portfolio and driving traffic through their online platform, where their target is to have at least 33% of sales by 2022. At the same time, they are investing in the remaining stores to improve customer experience and they are finding that customers are travelling further to their nearest Marks & Spencer store as a result.
There have been high-profile casualties in the retail space, as large-scale brands such as Debenhams, Topshop, Swamp, Monsoon, Mothercare, Quiz, Cath Kidston, Oasis, Warehouse, LK Bennett and Pamela Scott have all had problems during 2020 and have moved to close or reduce their physical retail footprints.
The goal for existing retailers as we start 2021 is to ensure that they have a compelling cross-platform proposition. By creating a seamless customer experience across their store and online channels, retailers can reinforce their customer value proposition and continue to create real engagement to provide a long-lasting value advantage.