How COVID-19 Will Change Retail — And What It Means for Brands

As the pandemic continues, retailers large and small are facing sweeping changes, unexpected obstacles, and intense leadership challenges amid COVID-19 and the end of the longest bull market in history.

Many often look to past experiences to help determine a pathway for the future. Yet this method will not get retail leaders very far. After all, how can we lead through a set of circumstances that none of us has ever experienced?

While the implications of this unprecedented pandemic—and corresponding economic downturn—will shape global consumer behavior for decades to come, lingering questions remain. What changes are coming? How can retailers survive the crisis? How is it possible to come out on top, after the pandemic passes? And—what would it take?

Navigating Change
In late spring, Walmart U.S. CEO John Furner went on record saying many of the changes from COVID-19 could be permanent, such as consumers ordering clothes, grocery supplies and household items online.

In doing so, he confirmed what many hypothesized to be true—that the rules of retail success have changed seismically and indelibly.

In a time of economic uncertainty and increased unemployment, necessities may eclipse wants in households across the country. Rather than splurging on clothing items, families across the nation may be more focused on putting food on the table. Other changes within the retail environment include a flood of e-commerce buying; disrupted supply chains for retailers who have been heavily reliant on China and other global manufacturing hot spots for inventory; increased interest in categories like home goods, athleisure-ware and groceries as consumers continue to shelter in place; and decreased interest in less relevant categories, such as workwear and luxury accessories.

The customer experience has and will continue to experience waves of change. Short-term implications could include new in-store rules of engagement to establish crowd control, enforce social distancing and regulate the use of masks. Though long-term implications remain uncertain, possible shifts could include an expansion of curbside pickup and an increased focus on work/life flexibility for those working off the retail floor. As we move through this pandemic, employees will continue to crave a leader who communicates authentically and transparently, rather than simply “telling them what they want to hear.”

It is therefore critical that retail leaders split their focus between managing short-term needs and developing a long-term vision for the future—one that includes a strong investment in innovation, to keep from falling behind.

Diminishing Fear
Fear is the biggest driver of our crisis response—and it is often fueled by lack of predictability, lack of control and a lack of an end in sight.

With mounting economic uncertainty, social unrest, and a climbing COVID-19 death toll, it is no surprise that emotions like anxiety and worry are magnified.

Scenario planning can help leaders shine a light into the darkness. Asking, “What scenarios could manifest amid this crisis?” and “How can we educate employees based on those potential realities?” is a great place to start.

While no one can predict the duration of COVID-19 or the severity of the ensuing economic contraction, retail leaders can help re-establish a sense of control among their people by helping employees and managers differentiate between what they can and cannot control, thereby helping them to refocus on what is in their power. Frequent, planned communications and strong feedback channels will be critical to keeping employees engaged and ensuring their voices are heard.

As stores reopen, leaders will also need to provide floor workers with education and emotional support around controlling store traffic, enforcing the use of masks, and managing capacity, as these are all new skills that need to be developed and cultivated to minimize stress, keep employees and shoppers safe, and provide great service in the process.

Innovating Through A Crisis
Emerging strongly from the pandemic will be no easy feat.

Cutting costs (including real estate), where possible, and managing inventory to offset the damage that COVID-19 has caused the business are important steps for retailers to take. Investing in innovation is also critical, especially to adapt to the new dynamics re-shaping the industry.  

Traditionally, retail has not been at the cutting-edge of innovation. We can see the ripple effects of this stagnancy in some of those who have been hurt most by COVID-19, like J.C. Penney, Pier 1, and Lord & Taylor. Brands that have failed to dive into the online and mobile space and engage with their customers through personalized experiences have been pushed over the edge.

While COVID-19 has certainly exacerbated the need for retailers to rethink how they connect with customers and evolve to meet their changing needs, one could argue that these forward-looking thought processes should always be happening—crisis, or no crisis. The sudden shift presented by coronavirus only gave retailers a bigger push for the transformation that needed to occur.

For example, rightsizing the physical footprint is occurring at an accelerated rate—something that was already called for in the industry. We are also seeing more retailers fall into the footsteps of groundbreaking companies, like Warby Parker, by investing more in online personalization initiatives, social shopping efforts and the use of mobile and social channels to increase interest in products.

Continuing to create and innovate within back-end systems—such as improving inventory management and distribution systems and ensuring a fast and flexible supply chain—will also be critical to making an increasingly multi-channel experience seamless for the customer. While these systems are often invisible to the customer’s eye, they are critical to gaining their loyalty.

Moving Past “Normal”
Amid this pandemic, many of us have asked, “When will life get back to normal?”

For retailers, however, the goal should not be to return to what was. Rather, leaders should strive to create a new reality in which there is no stasis—a world in which the only certainty is constant change and evolution.

By investing in innovation and inviting employees at all levels to share ideas on how the brand can engage customers and foster that much-needed loyalty in a drastically altered shopping environment, retailers will be able to weather the storm and stay one step ahead of the curve.

Embracing the uncertain—and learning how to thrive without knowing all the facts—is the only sustainable path forward.

Kathy Gersch is an executive VP at strategy execution and change management firm Kotter. She can be reached at [email protected].