The Impact of COVID on the Retail Sector
What is the current state of play?
The Covid-19 pandemic has hit each and every one of us hard, that’s undeniable. But the specific severity of those consequences has varied. In this article, I want to talk about one of the sectors that has been hit the hardest and whose demise has without a shadow of a doubt been the most public – retail.
The retail industry has always had to be very adaptable, it comes with the territory, those that don’t move with changing consumer trends don’t tend to stick around for very long. But rarely will it have felt a shock the size of this pandemic and just how adaptable most organisations have had to become is probably still not fully evident. One thing is for certain, we won’t ever go back to the retail model we were used to beforehand but the picture of what exactly the “new normal” entails isn’t fully formed yet. Even within the sector the impact hasn’t been even. Essential retailers have fared much better than non-essential retailers. But one thing they’ve had in common is the massive increase in online activity, and leaders in the industry predict that that is here to stay.
Evidence suggests that those essential retailers that have been able to accommodate an effective omni-channel experience have had a stellar year, in some cases even outperforming their year-on-year revenue from 2019, pre-pandemic. However, non-essential retail has suffered significantly, seeing revenue fall well below 2019 levels. Survival has been dependent on the omni-channel experience they have been able to offer their customers. It is clear that a direct correlation exists between the omni-channel experience and the survival rate.
Where should retailers focus their technology investment efforts to best prepare for the future?
Retailers are keen to invest, they have been anticipating the advent of a digital future for some time now. But with the ‘new normal’ not conclusively established yet, and the risk-aversion that comes from a big shock to the global economy, they don’t want to be forced into a knee-jerk reaction. However, they are equally fretful of being left behind and so a large amount of value is being placed on the advice technologists can offer on where they should focus their efforts, today and into the future.
This isn’t anything new to incumbents who are very used to staying on the edge of survival, it’s just the nature of the industry. That’s where the phrase “keeping the lights on” initially came from, it was all about survival; if you could manage to keep the lights on, you always had a fighting chance. But very rarely has the industry felt a shock where the fundamental ways in which the lights were kept on changed so significantly in such a short space of time. This meant that the investment strategy of retailers has varied massively since the onset of the pandemic and that variation has largely been based on two key areas: their digital maturity and the evolving needs of the consumer.
At a time of great uncertainty, these were deemed critical needs that were going to significantly disadvantage the organisation if not addressed. Plain and simple, no one saw this coming and this meant that business continuity and disaster recovery plans wholly underestimated a shock of this magnitude. Existing disaster recovery plans were simply not enough to manage the continuity of operations and so a large swathe of invest has gone into making sure they are better prepared for next time.
Being better prepared all starts with business process modernisation. In the retail sector, most organisations are focused primarily on market share and increasing sales. How efficiently they are operating internally isn’t particularly high on their list of priorities. But this makes them incredibly sensitive to shocks of this nature and significantly affects their business resilience. With a more watchful eye being cast on the future, the intent will now be to sure up operations to avoid the same level of exposure next time round, and most believe there will be a next time.
Hasn’t digital transformation been on the radar of most retailers for decades now?
The pandemic has not necessarily changed the focus areas, but it has severely impacted the timelines and the priority level assigned to it. Nice-to-haves became must-haves overnight, like omni-channel e-retail as all brick-and-mortar retail was shut down.
In my view, the biggest change will be the change in perspective as the digital transformation programme shifts from a short-term tactical focus to a long-term strategic initiative. This will see a huge upturn in efforts to develop a long-term roadmap which will formulate an integrated, continuous approach to innovation.
Again, there are two reasons for this. The first being that the future the retail sector was working towards has been accelerated by the pandemic; it is no longer the future, it is the present. The second is that this will become essential to long-term competitiveness and resilience, organisations can’t click their fingers to improve their resilience to future shocks, it will take time to put the right building blocks in place.
Trends suggest many retailers are now turning to large scale platform solutions like ServiceNow that provide a single source of truth for their data so that they can leverage the insights produced to build a robust business. This robust business will be founded on integrated processes that enable automation, machine learning and powerful analytics to drive efficiency today, but even more critically, continuous improvement.
What guidance can we give at this moment in time?
The complex technological needs across the retail sector need to be addressed by a platform that views it holistically. The greatest enabler of this is data. Data is the fuel that will allow the business to continually adapt to consumer needs now and in the future.
Retailers need to have a view of the short, medium, and long term by putting together a roadmap that doesn’t just consider today’s tactical investments but also considers additional future investments that look to improve productivity. The long-term viability of the investment will be governed by the continued value it seeks to deliver.
Viewing the solution holistically means not just leveraging data and insights to drive action but also to empower and reimagine processes with digital workflows to eliminate manual effort that saps the organisation of its agility. This won’t require reinventing the wheel, but it will require better integration with systems the retailer already has in place. At this stage the best advice we can offer is to invest in technologies that focus on modernising your business processes and that enable omni-channel communication and fulfilment.
We would be more than happy to sit down with you to establish a plan of action that will help you accomplish your goals over the next 2 or 3 years. We will do this by creating an investment strategy that maximises your value realisation and looks to digitally mature your business to promote future success.
At Crossfuze, we realise that a strategic undertaking of this nature requires an established partnership that addresses core business and industry priorities. With this in mind, we have developed a unique set of Advisory Services that focus on linking technology to the core business objectives of the retailer, this has proven to deliver the most long-term value.