It’s time for retail to part ways with its legacy mindset
As much as we all wish society was rounding the corner toward a return to normalcy, the truth of the matter is that COVID-19’s effect on the retail industry is far from over.
Unfortunately, the situation will likely get worse for retail before it gets better. Think of it like “Game of Thrones” - winter is coming, and the companies that aren’t prepared for it will have a hard time surviving.
For retailers and consumer product manufacturers, preparing for a potential COVID-19 resurgence in the winter will require a detailed assessment of every aspect of their business operations. It calls for a shift away from approaching business with a legacy mindset that prioritizes past practices, and instead requires adapting through innovation.
Now more than ever, it’s vital for retailers to stray away from their legacy mindsets and adopt a more proactive approach that will help guide them for the rest of 2020 and beyond. Here are a few suggested actions.
Accelerate e-commerce expansion
It’s no secret that the pandemic has increased retail’s reliance on e-commerce. Some experts predict the industry’s shift to e-commerce has accelerated by five years. The U.S. Census Bureau’s Q2 report revealed that e-commerce sales reached $211.5 billion, which represented a 31.8% rise from the first quarter and 44.5% growth year-over-year.
First, look at what the leaders are doing. Take Best Buy, for example. The retail giant’s Q2 2020 online sales grew 242% in comparison to the prior year, elevating the company’s domestic revenue by 3.5% despite store closings and rapid demand swings.
Offering extensive product information, BOPIS offerings, omnichannel check-outs and an easy return process, Best Buy found success by tailoring its approach to the needs of customers with a painless virtual experience. It’s one thing to invest in technology, but making the right investments aligned with consumer expectations in a digital age is what will produce short-term and long-term benefits amidst the pandemic.
Develop consistent supply chain resiliency
This winter, retail supply chains must be prepared to withstand the shockwaves and volatility that plagued them in the beginning of the pandemic. Building supply chain resilience is key, and will be dependent upon end-to-end digital infrastructure and integrating the use of regionalized supply chains as a replacement to global product-driven supply chains that have been prone to disruptions from shipping delays, international disputes, and the pandemic.
With a resilient supply chain, retailers can improve their ability to manage the bullwhip effect from rapid changes in demand, and limit excess inventory that leads to severe profit losses and damage to the environment. In the past, proactive investment in supply chain digitization was not a priority for retailers. That can no longer be the case. Digital tools like advanced data analytics, automated intelligence and cloud-based platforms are the wheels that can keep supply chains moving through disruptions.
Prepare for an Unconventional Holiday Season
The 2020 holiday shopping season will feel entirely different this year. For starters, the state of the economy has led a dramatic shift to value-based shopping. Consumers simply aren’t spending as much. Secondly, there won't be an influx of customers rushing to brick-and-mortar stores for Black Friday sales. Major big-box retailers like Walmart have already announced that stores will be closed for the annual shopping frenzy.
As a result, retailers will need to strategically designate the timing and length of their Black Friday deals in order to recuperate lost profits. Consumers will also be doing their holiday shopping much earlier this season. E-commerce’s rise, coupled with Amazon delaying its Prime Day to mid-October, will significantly accelerate the holiday shopping timeline, so retailers should begin/market their holiday deals much farther in advance.
Formulate a Crisis Management Plan
An organization’s response to a COVID-19 crisis will dictate its ability to minimize damages that, in some cases, can be irreversible. Before winter sets in, it’s imperative that retailers develop a multi-tiered crisis plan that accommodates every level of the company.
From handling an internal outbreak within their staff to managing revenue forecasts and major inventory shortages, retailers must be prepared for unexpected obstacles with a designated list of prioritized actions to follow. Since an effective crisis management plan relies on cross-team collaboration between each level of the company, there should be a designated operational response team that coordinates communication between all parties involved.
For retailers to survive the rest of the pandemic, and especially a potential winter spike in cases, legacy mindsets must become a thing of the past. Now is the time to establish a newfound openness to change while putting urgency to action within a digitally-oriented business model. Embracing digitization is what will empower companies to align with COVID-19’s climate of uncertainty.
Ronen Lazar is CEO of INTURN