The COVID-19 pandemic has dramatically changed both the retail world and consumer expectations—and retailers must adjust to the new reality, according to a new report from McKinsey & Co. and the Retail Industry Leaders Association.
“The trajectory of retail evolution [has] rapidly accelerated,” said McKinsey senior partner Sajal Kohli in a video about the report, “leading to many, many more transformations…in a year than we’d seen in the last few decades in the industry.”
The change has been led by consumers, said Brian Dodge, president of the Retail Industry Leaders Association, in the video.
“Consumers have changed,” he said. “[Retailers] will need to understand that consumers have changed, and they’ll have to move quickly. Perhaps they had plans to get to this point in three or four years, but they’ll need to get there quicker.”
Among the report’s seven “imperatives for rethinking retail”:
Even if you are primarily a brick-and-mortar operation, the digital component of your business cannot be neglected, the report said.
It noted that e-commerce volume grew as much in the first quarter of 2020 as it did in the prior decade. And consumer surveys say that most will continue to buy online, even post-pandemic.
Even when consumers prefer a brick-and-mortar store, the online platform remains “the front door of [your] store,” in the words of Craig Menear, chairman and CEO of the Home Depot.
“Customers are taking us down that path—purchasing online and using online platforms as the start of the shopping experience, even if it ends in the physical world,” he said in the report.
The report recommends retailers invest in real-time analytics, based on current trends (rather than historical performance), and increase their use of digital testing.
Offer personalized service.
“The pandemic has weakened brand loyalty significantly,” the report said, noting that 76% of consumers changed stores, brands, or channels in 2020.
The antidote is personalization, which includes building better data and insights on customers (while respecting privacy laws).
The report noted that only 15% of marketers say they have fully implemented personalized marketing during the pandemic, even though it’s been shown to grow revenue by 10 to 15%.
As e-commerce accelerates, consumers want things to arrive at their door faster. Most consumers—over 90%—expect items to be delivered in two to three days, while 30% expect same-day delivery.
The report noted that more than 75% of specialty retail supply chain leaders surveyed have made two-day delivery a priority, and 42% hope to offer same-day delivery by 2022.
Retailers need to “take a stand.”
Customers are watching how companies conduct themselves, and aren’t shy on voicing their opinions about that conduct.
The report found that 33% of consumers have stopped using a brand based on its social actions, and 71% would lose trust in it if it prioritizes “profit over people.”
Hire digitally savvy talent.
Retailers need to compete for top tech talent and embrace the new, more “fluid” workplace by acknowledging that some retailers prefer to work remotely, and offer opportunities for part-time, or “gig,” employees.
Retailers are also increasingly focusing on diversity; for example, Target plans to increase its number of Black team members across the company by 20% over the next three years.
Either participate in an “ecosystem,” or develop your own.
Many major retailers now have “marketplaces” that give customers and wholesalers a chance to sell direct to consumers. If retailers can’t develop their own ecosystem, they should get involved in existing ones, like Facebook and TikTok.
Productivity will be key.
Retailers should focus on making their stores more productive. That means embracing technology by automating supply chains and administrative functions.
In addition, they should look at private brands, which increase “customer loyalty through a differentiated, innovative offering and…increase margins,” the report said.
The report concludes that, post-pandemic, retailers must look at what they “want the brand to stand for.”
“[What initiatives will] strengthen the retailer’s ability to deliver that brand promise?” the report asks.
The full report can be downloaded here.
Follow JCK on Instagram: @jckmagazine
Follow JCK on Twitter: @jckmagazine
Follow JCK on Facebook: @jckmagazine