Expert Analysis: Retailers Embrace a Brave New Industry

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Expert Analysis: Retailers Embrace a Brave New Industry

By Jill Standish - 05/14/2020
Jill Standish
Jill Standish

COVID-19 is altering consumer behaviors and many of these shifts could be permanent. Online ordering, curbside pickup and home delivery may have been growing in popularity before the coronavirus pandemic began, but they weren’t yet the norm. They soon could be, because once people realize the benefits of digital commerce, they are unlikely to abandon it altogether. 

New Accenture research found one in five respondents who said their most-recent grocery purchase was done online were first-time online grocery shoppers. And while 32% of current purchases of all products and services have been online, that figure is expected to rise to 37% going forward.

These developments present a double-edged sword for retailers: There is a clear opportunity here to grow the business through digital commerce, but this opportunity brings with it a higher operating cost structure, which can impact margin.  

Think of the grocers, pharmacists, special-interest stores and discount chains that consumers typically visit in person. Before the outbreak, these brands may have been developing their own digital shopping platforms, but none could have expected demand for them to grow so quickly.

If these retailers can come to grips with digital commerce, they face a huge opportunity. But making the leap isn’t easy. Many generate the bulk of their revenues through their stores, so need to revise their operating model. Moreover, launching a new service requires a higher operating cost structure, while anticipating future demand is extremely difficult when the course of the crisis remains unknown. 

Retailers can, however, take immediate steps to ensure their businesses are getting ready for the shift to digital commerce. This means taking a careful look at five core capabilities—marketing, digital ecosystem, product line, supply chain network, and stores—and assessing each for its strengths and areas for improvement. 

With that in mind, we recommend five questions that brands could ask themselves as they assess these capabilities and provide a flavor of what “best in class” looks like for each. 

How strong is our digital commerce marketing strategy? 
Retailers that are optimized for digital commerce have an integrated, customer-centric approach to marketing that is seen as a strategic growth driver and strives to create a seamless customer journey. Over time, the business can dial up or dial down marketing activity as required, drawing on automation and AI to deliver hyper-relevant campaigns across channels. 

Are our digital touchpoints configured to support increased volume? 
In the retail industry of tomorrow, digital is an integral part of a brand’s mix of consumer touchpoints to drive customer lifetime value. Leading brands configure their mobile channels, social channels, visual search and voice-shopping to deliver an intuitive and seamless experience. 

Is our product range “liquid”?
Omnichannel merchandising and assortment planning is managed by a single team. Retailers need to have insight into product availability across channels. To do so, they increasingly draw on a diversified supplier network and use advanced analytics to identify demand, build a 360-degree picture of customer needs, and tailor assortments to individual customer segments. 

Meanwhile, advanced demand forecasting and technology helps manage demand and inventory across channels and locations. 

Does our supply chain support our target digital service and increased profitability? 
Retailers implement a multichannel supply chain network with different facilities based on product segmentation, including regional centers, metro hubs, and third-party solutions depending on market needs. They should aim for a last-mile delivery platform that enhances delivery routing, provides real-time tracking, and enables redirection capability. 

Are our stores prepared to play a new role in order fulfillment? 
Digital fulfillment capabilities are integrated across the store network, with dark stores leveraged to facilitate curbside pick-up and other fulfillment options. Retailers need to think how advanced analytics and AI can help them optimize resource allocation across these facilities. They also need strategic partnerships in place with third parties and other retailers to satisfy shifts in demand. 

The Post-Crisis Normal
The immediate focus for retailers should be to leverage digital commerce to drive sales and ensure customer and employee safety. Longer term, we can expect permanent shifts in demand. All retailers will need to adapt and efficiently manage digital platforms to serve their communities. 

This doesn’t mean that stores are going to disappear. But brick-and-mortar premises—even in the grocery, discount and specialty segments—will never be the same. As with the other changes described above, the realignment is part of an exciting trend that is already in motion. The only difference is that it’s happening much faster than any of us were expecting. 

Jill Standish is senior managing director and head of retail at Accenture.
 

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