Future of Retail: Automation And Digitization
This article was written by Jens Skyman
Before the Covid-19 coronavirus pandemic it looked like e-commerce was going to continue growing steadily and traditional retail would thrive by providing shoppers with a stronger experience - the way that traditional bookstores have managed to co-exist with Amazon is just one example.
But now the world has changed. Most non-essential retail stores are closed because of the difficulty in keeping employees and customers safe from the virus. Without a vaccine one of our best weapons against the virus is social distancing, therefore it is essential to create an environment where people are not in close proximity.
One of the immediate impacts has been a boost in e-commerce, as shoppers go online to purchase anything not available at the few retail stores that remain open. Comparing March 2019 to March 2020 shows that online home product sales grew by 97% and DIY sales were up 136%. Amazon has hired over 100,000 new employees since March just to keep up with consumer demand.
Alibaba has found new markets because the Chinese site has been the only place many people can locate Personal Protective Equipment (PPE) globally. Although it is already an enormous brand in China, Alibaba may now develop long-term customers outside of China because of the experience customers are having during the crisis.
Many luxury brands have changed direction and directly worked to help fight the virus. LVMH switched production lines from making perfume to hand sanitizer. Chanel is making face masks. Burberry is making protective gowns for healthcare workers.
In the US, Ikea is going even further. Their stores and distribution centers are providing critically needed items to the American Red Cross, Feeding America, and local medial organizations. So far, they have donated over $1.6 million worth of items to help the people in these organizations stay safe. Ikea is also using their vast supply chain to produce masks, hand sanitizer, visors, and aprons for the medical community. In Europe they are producing over a million masks every week.
As I look around at all this activity I can see that there are some fundamental changes taking place. Many of these companies are operating in crisis mode, but eventually governments will allow retailers to open their doors again. The question is how will the world have changed? Here are a few changes that I believe we can expect:
1. E-commerce booms: many customers that never used e-commerce before will have been forced to shop online during the lockdown period. Many of those new customers will continue to use it, dramatically increasing the number of people shopping online.
2. Social distancing remains: while we don’t have a vaccine it is likely that social distancing rules will remain. This could be for several years so retailers may need to enforce the use of masks, improved hygiene, and even control the number of customers allowed into stores. This could all be a dramatic change to the retail customer experience, especially if customers are required to wait in line before entering a store.
3. Old retail formats will die: the department stores were already struggling, but several tired retail formats such as out-of-town malls and department stores will find their demise is accelerated.
4. Small independent stores may struggle: revenue will not just snap back to normal, it will take months or more, so small independent stores may struggle to survive, even if they do make it past the lockdown phase.
5. Chains will proliferate: the big brands are better placed to obtain government bailout funds and they will have greater cash reserves to see through the crisis. In addition, once stores are open again they will be able to expand into new locations at rock-bottom rents.
I believe that social distancing is the real issue for retail. It not only makes e-commerce more attractive, but it prevents retailers from making a rapid recovery The sooner there is a vaccine or comprehensive testing program available, the better for the entire world - including retailers.
We recently hosted a webinar with sharing insights into What’s Next in CX post-corona. Panelists included bestselling author Steven Van Belleghem, Global Thought Leader on the Future of Customer Relationships and Nicola Millard, Head of Customer Insight & Futures, BT Global Services Innovation Team. Watch the event on-demand here.
Photo by Robynne Hu on Unsplash