2020 meant that the future came early for many industries, especially retail. The rapid pace of digital adoption meant that there were some who thrived and many who didn’t. For instance, many large retailers were better positioned for e-commerce and saw an increase in revenues, whereas businesses who were not able to leverage technology effectively had to undergo significant losses and some even shut shop.
As many countries are grappling from the second wave, retailers who have not adapted to e-commerce may well be forced to undergo business disruptions amidst lockdowns. This is not an easy situation for many to be in as this is an industry that affects the lives and livelihoods of many. Based on insights from McKinsey, highlighted below are some critical facets that will determine a retailers ability to adapt to the new normal.
Becoming Omni-Channel
Offering a better retail experience to customers requires making strategic changes and adapting to the digital ecosystem. This entails the effective use of omni-channel retail strategies and the need to build supply chains with a retail focus. Once omni-channel retail is better leveraged by key players in the retail industry it would enable them to have a wide range of digital touchpoints to drive traffic and consequently sales.
As per McKinsey, two-thirds of survey respondents highlighted the growth of digital and omni-channel shopping as the key trend affecting the industry and also a critical challenge for most. The demand for seamless omni-channel experiences shall remain even after the pandemic ceases. The convenience of shopping at the click of a button shall continue with pent-up demand post the demand. Sales projections for e-commerce are set to increase by 25 to 40 percent across all categories, with leisure, home improvements and sports goods estimated to have a 2x increase in sales. Another study highlights omni-channel customers spend as much as 15 to 30 percent more than their single-channel counterparts.
Focus on value-engineering
Declining incomes and bottom-lines, job losses, and a looming air of uncertainty meant that brand loyalty had become more or less passe. It comes as no surprise that consumers changed channels, brands, and stores frequently. Data and analytics has become extremely important for sales and services in the digital age. Success has come to only those retailers who have leveraged personalization using data and analytics. Such an approach has enabled better customer satisfaction and some semblance of loyalty. However, it is not too late for those who are behind, as research has revealed that retailers are still early in their personalization journey. Omni-channel personalization has become a top five priority among 100 percent of top-quartile retailers surveyed. There is also a 10 to 15 percent uplift in revenue and retention with personalization and upto 30 percent cost-savings in marketing: Customer retention is more cost-effective than acquiring new customers.
Better lead times
Supply-chain optimization is the name of the game today. The speed at which retailers manage delivery has become a critical facet of their success in the new normal. Customer expectations in the digital age are sky high and retailers must distinguish themselves with their value proposition. The strategies used by hypermarket, grocery, and specialty retailers are bound to be decidedly different based on the buyer persona. Market segmentation is also critical as 30 percent of customers expect same-day delivery whereas the rest are fine with two to three days as a baseline.
Challenges ahead
Many retailers are still in an early phase of digital adoption. Today, anticipating uncertain future conditions is more important than ever for the survival of a business. The retail machinery must take commensurate steps to build resilience and adapt to digital ecosystems. The use of industry 4,0 technologies like AI, data and analytics, and automation among others may play a role in building resilience and strength for retail value and supply chains.
