Customer behaviour has changed dramatically during the covid-19 pandemic. Many traditional retailers have responded quickly with an ecommerce offer to meet new customer needs and expectations. However, faced with new markets and new ways of selling, the transition won’t be simple or easy to maintain.
Last year we were already seeing the closure of many brick-and-mortar stores; a trend which has accelerated during the pandemic.
With added economic uncertainty retailers that have previously prioritised physical stores and face-to-face engagement over digital and omnichannel strategies now need to plan how they will respond.
How things are changing
Following the financial crisis of 2008, retailers who focussed on becoming leaders in customer experience saw a smaller downturn and a faster recovery, with shareholder returns up to three times better than the market average.
In China, grocery transactions fell by 30% during the pandemic, while the average transaction value increased by 69%.
In the United States, many customers have experimented with new omnichannel options such as buying online and picking up their orders in store or having their groceries delivered.
There’s even a new phenomenon called Generation P; the Perennial Shopper is set to change the grocery market by making a permanent move to exclusive online buying.
Generally, customers are trying new products and switching brands much more freely than ever before.
Meeting new customer expectations
Covid-19 has shifted the emphasis to digital engagement, and this change is expected to be permanent. Average ecommerce sales in apparel, department stores, and beauty products have increased by nearly 10%. In grocery, ecommerce penetration is expected be 5% to 7% by the end of 2020 which is almost double the pre-covid-19 level.
Omnichannel strategies that engage customers physically and digitally have seen significant success.
Here are five key actions that will help retailers to succeed after covid-19.
- Digital reinvention
Online sales increased at 14% compound annual growth rate (CAGR) from 2016 to 2019. In just two weeks in March 2020 sales grew by 25%, largely due to grocery shopping.
Retailers recognised the need to increase their digital presence quickly, reprioritising their channels and increasing investment in ecommerce.
With more customers now engaging through mobile devices, all digital channels must be integrated to offer consistent services such as payment options and shopping experiences in real time.
Strategies have been adapted with a new emphasis on paid search, social platforms and channels with featured products and clickable content. Almost half of retailers were already planning to introduce mobile, shopping and point-of-sale apps and will now need to accelerate their implementation. Many retailers with established mobile apps have seen increased downloads, while others are now trying to catch up.
Developing opportunities for digital engagement will be a new and necessary skill. For example, Nike China engaged with its online community by offering virtual workouts and saw an 80% increase in weekly active users.
Retailers who are new to ecommerce might be able to overtake older platforms to offer the latest and best user experiences. Established online retailers must be prepared to improve their offer to meet expectations for site speed, stability, and delivery times in the face of leading-edge competition.
- Omnichannel innovation
Established omnichannel operators must continue to look for opportunities to attract and retain new customers. Without physical visits to stores, it will be much harder to create genuinely unique, brand-specific experiences.
Some retailers have introduced online appointments as an alternative, where salespeople can use videoconferencing to deliver one to one customer experiences. They can learn new sales skills to provide excellent customer service and help customers find products. New content types such as webinars can provide entertainment and customer engagement at the same time.
For fashion retailers, digital sales mean customers can’t try before they buy, adding additional costs to handle product returns. Jewellery brand Kendra Scott tackled this problem with a Virtual Try-On option using augmented-reality (AR), machine-learning, and computer-vision techniques. Their shoppers can preview styles as they move, simulating the experience of a retail setting in their own homes.
US consumers are now using more delivery services and replacing eating out with meal deliveries and collections. Safe deliveries and returns for all types of products must be prioritised, so retailers will need to offer a wide range of options.
- Operational transformation
Social distancing and online self-service are changing the definition of customer service. Where in-store buying is an option many customers want to complete their purchases as quickly and safely as possible.
Providing safer experiences that make people feel more positive about shopping in person will be essential to complement an extended online offer. Clear policies and processes for social distancing, and sanitizing surfaces and products will have an important part to play. New standards of service and experience will also be expected, including no-contact payment methods.
To offset the financial impact of the pandemic, significant improvements in operational efficiency are also needed.
- Reimagining business models
Despite covid-19, retail watchers are predicting a return to growth in 2021 with ecommerce at its heart. A re-evaluation of brick-and-mortar stores and their contribution to customer experience will be essential.
The decision will need to take account of performance and location as well as local customer demand and preferences. Their contribution to cross-channel sales should also be considered.
The immersive experiences of retail stores can’t be replaced, but a comprehensive multi-channel strategy will be needed to get the balance right. Pre-pandemic research found that opening a new store increased traffic to a retailer’s website by 37% the following quarter.
Redefining brick-and-mortar stores as product information hubs will support brand positioning and ecommerce sales. They can also form an essential part of the fulfilment process for faster deliveries and returns.
- Improved agility
The post-pandemic world is uncertain and continual strategic reassessments will be unavoidable. Retailers will need to prioritise real-time insights into customer behaviour and new agile operating models.
Ecommerce provides valuable opportunities to collect data to help optimise customer experiences, gather feedback, identify trends, and promote recommendations.
Integrating ecommerce platforms with back office systems can provide near-real-time insights to inform decision-making. Along with agile business practices, this can create a faster paced response to changing customer needs.
Targeted customer retention plans, promotions and discounts can all be developed and refined as the quality of data improves. Adopting new dynamic testing and learning practices will help retailers to launch new offers much more quickly and minimise risks.
The priority must be to understand and redefine what customer experience means and to set clear standards and objectives.
The pandemic has accelerated an existing trend towards new models of retailing and an expansion of ecommerce. Customers have discovered the range of products and services they can access online and are unlikely to return to all of their pre-pandemic habits.
In many countries ecommerce transactions have already changed with new payment and delivery methods and sectors such as groceries have embraced the potential of ecommerce to expand their markets.
However, the implications for a significant group who are digitally excluded because of poor connectivity, finances, age or health should not be neglected.