As nations went under lockdown almost overnight to curb the pandemic, realities transformed rapidly across industries, all over the world. The new health guidelines warranted zero physical contact and hence consumer behavior shifted phenomenally, transforming product demand patterns and buying channel preferences. The global retail industry had to shut physical outlets barring the essential sellers. But as the unlock process is unfolding, the fog of uncertainty shows no sign of departure.
In US, while the overall retail sales have rebounded, sales of apparel and accessories stores dipped by 40% in the first half of this year in comparison 2019. Bookstores and electronic retailers also took a bad hit. As the consumers show lower willingness to spend on non-essentials and prefer using online platforms for making purchases, in the time horizon of the next 3 months, situation grows grim for struggling retailers.
As per projections from Coresight Research, US could experience a surge in closure of retail stores with as many as 20,000 – 25,000 stores closing this year.
While these projections are exclusive to US, presence of a similar global trend cannot be denied. With minimally staffed offices and most people preferring to stay at home retail outlets are experiencing negligible footfall, if at all. Whatever little money consumers are spending apart from essentials, is primarily taking place through online channels. As the demand shock and uncertainty is expected to linger till the end of the year, survival of retail stores depends on speedy and thoughtful actions.
An article originally published by KPMG, suggests 5 key areas where retailers should be focusing in order to mitigate short-term shocks and prepare for the long-term implications.
Managing demand fluctuation
In the current scenario predicting and managing demand is of utmost importance. Food and beverage and general flu drugs are in high demand as consumers are inclined to stockpiling for the uncertain future, while apparels and electronics are very low in demand. Onset of the festive season might change the trend slightly in India. Globally, the demand of essentials might see a downturn since consumers would first use their stocked products before placing a fresh order. All such factors must be examined thoroughly by retailers while predicting demand and stocking inventory.
Reviewing cash reserves
Retailers with physical footprints must review their financial situation meticulously. They have to calculate how long they can sustain should the consumer demand downturn continue. Inevitable spends like cash for stock, real estate rent and staff salaries must be reviewed and renegotiated in the light of the current events. It is also a good time for retailers to review their overall financial solidity and if required prepare to take a loan or refinance.
Taking care of the staff
Following proper health guidelines for staff safety is essential while reopening businesses. Effective workforce management is also crucial, since the demand fluctuation in multiple retail sectors is not uniform. In China, grocery operators hired restaurant employees who were temporarily jobless to meet their surging delivery demands. A similar approach of thoughtful staff management would benefit the staff and the retailers simultaneously.
Preparing for supply challenges in longer-term
Non-food retailers have not experienced supply challenges yet but as the pandemic situation evolves, significant variations in supply chain disruption in terms of magnitude and timing is expected to strike across geographies. Retailers should communicate frequently with their suppliers, assess possible risks, identify potential threats and prepare contingency plans.
Communicating with customers
Maintaining a healthy customer relationship is essential in present times. Communicating with customers, informing them about any change in products and services will go a long way to refurbish consumer trust in retailer brand.
The lasting impacts of Covid-19 are not yet known. Economic projections are not bright for this year, however, 2021 is expected to restore some normalcy but smart retailers need to assess the situation with every new development and plan for multiple scenarios to survive the crisis successfully.
Sources:
Statista – Click here to visit
