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The Future of Retail (Q+A)
The following questions were asked during our live digital event, The future of retail in a post-lockdown world. As we ran out of time to answer them all, authors Martin Newman and Miya Knights have kindly provided the answers here.
Q: When it comes to recovery, who do you think will fare better - the High Street or out-of-town retail parks? What advice would you give to those responsible for managing towns and cities - what should they focus on to help optimize the return? (Anita)
Martin: I think both will do ok, although not so much in larger city centres. As more people work from home they will also shop more locally, therefore the High Street will benefit. As will retail parks - because there are fewer people shopping there, the stores are bigger so can let more people in and you can get there in your own car, thus avoiding public transport. Safety is the key driver right now.
Miya: Anecdotal evidence suggests outdoor shopping areas and centres will initially fare better due to consumers’ social distancing concerns. So, local High Streets and outdoor markets are probably higher up the list of channels that consumers are more likely to return to first. Big, urban centres will be reliant on workers returning to offices to offset any impact on tourism because of new quarantine restrictions. That means local and out-of-town centres will fare better in the near to mid-term, as some office workers continue to work from home until the end of the year. (Of course, all of this is dependent on there not being a second peak of the virus).
All channels, especially mall owners, should redouble their digital transformation efforts to communicate changes and initiatives for them to return in effective and consistent ways for consumers. This could include free parking periods, extended Sunday opening, special outdoor ‘distanced’ events and festivals (subject to any local government relaxation of highway and traffic regulations). Local authorities should similarly look to support small businesses by providing a digital hub that represents their trading communities on behalf of new visitors and existing residents, with offers, rewards, pre-booking, and order ahead capabilities. This will help create a customer database to target and remarket to, with more relevant and personalized incentives and information.
Q: Online commerce limits physical interaction with a product. Is there an opportunity for retailers to re-engage with consumers to provide them with emotional experiential shopping? (Brian)
Martin: Video content can bring the online experience to life. Products with supporting video content always convert higher than static content. Augmented and virtual reality are also likely to play a bigger part in online retail in the future, but it is still early for this at present. You can also connect an online channel to the physical store if you have a bricks-and-mortar business as well, allowing the store staff to interact with online customers and offer product knowledge and advice.
Miya: It depends on whether the ‘emotional experiential shopping’ refers to online or instore, but I would say that this is an opportunity for both channels to introduce more experiential customer experiences. Online, the use of AR and virtual fitting could certainly help compete with and enhance the in-store experience. But I would suggest also extending the use of these tools into the store and the hands of staff as well, with mobile clienteling systems, or self-service on customers’ mobiles, for example, to help enrich the physical experience.
I would also observe that, to provide more emotionally driven shopping experiences, the retailer or brand needs to know something about who they are targeting and why that customer wants to shop with them. This is where ‘surprise and delight’ becomes another good tool. This could be:
- Wishing a customer who redeems a birthday dinner offer with a free bottle of Peroni, because it is their favourite beer
- Offering spontaneous or exclusive rewards to regular customers
- Or the chance to win something extra when redeeming a voucher to use with your next basket (i.e. using gamification).
I also liked Martin’s example during the event of Home Depot empowering their store staff to offer discounts where they deem it necessary (and with obvious limits and caveats). I also think retailers should empower store sales staff to price match if they do not already (within reason, of course).
Q: Martin, you mentioned Morrisons and paying suppliers/farmers upfront - are margins staying the same? (Adrian)
Martin: I believe they are. Obviously, there are many examples of price increases. However, the grocers have all had to incur additional costs in terms of staff, making the stores safe and logistics as well. In many cases, these have not been passed on to the consumer.
Q: Miya, what was the Harvard research you touched on regarding the value of customers? (Adrian)
Miya: You can find the Harvard Business Review research that I cited here: https://hbr.org/2017/01/a-study-of-46000-shoppers-shows-that-omnichannel-retailing-works
Although it was conducted in 2017, it is still by far the most comprehensive research into the difference between single-channel and omnichannel customers I have ever seen, with a survey pool of 46,000 consumers.
Martin: Another important statistic it features is that a 5% increase in customer retention leads to a 25% to 95% increase in profitability.
Q: Martin, you mentioned that ecommerce increases 'only' 5-10%. Is this until the end of the year or the next two? Are you calculating the next generation and their use of digital access? Do you think that ecommerce will be ever increasing over the next ten years? (Linda)
Martin: I do not intend to forecast that ecommerce increases by 5% to 10%, but instead forecast that its total share of retail will increase from 19% to 20%, then 25% to 30% in the near term. However, I do not ever see ecommerce becoming more than 40% of total retail. Remember, there is a reason why Amazon has opened Amazon Go, Grocery (Wholefoods), Amazon bookstores and Amazon curated 4 * stores…
Miya: I would also like to add that current analyst estimations suggest that ecommerce will account for one-third of global retail sales and 40% in the UK by 2030.
Q: There is talk of consumers emerging from COVID-19 more interested in sustainable clothing, but will retailers be able to afford to invest in sustainability when sales and profits are so massively impacted by the pandemic? If so, how might they go about this? (Siobhan)
Martin: This is a great question. Fashion retailers clearly have a very difficult few months ahead, particularly as they will need to decide how to sell the excess stock which has been sitting in their stores for 3 months. The buying cycles for fashion are over a year in advance, so there is no reason why they should not be planning now to create sustainable ranges in the future. It’s not necessarily the costs that would be the barrier, but being able to find the suppliers that can deliver a sustainable supply chain and if the brand has to charge more as a result, can be a challenge. Will consumers be happy paying more for products that are sustainably sourced and produced?
Miya: There was a question during the event about the circular economy and I wanted to mention the rise of ‘re-commerce’. This relates precisely to the wider trend I identified of brands developing a ‘purpose’, which covers sustainability (as well as social justice, diversity & inclusion), as well as Martin’s reference to more ‘conscious’ consumption. I think the point here is that more sustainable, diverse, and inclusive businesses are also proven to be more profitable in the long term - so they cannot afford to do nothing. The current challenges may force some to push sustainability targets out, but that is out of step with the speed of direction for the consumer.
The need to decouple and diversify supply chains, to avoid points of failure and mitigate the risk of a second wave and future pandemics, is actually a great opportunity to adopt more local and sustainable suppliers, production and manufacturing processes and partnerships.
Did you miss the live event? Watch the recording of The future of retail in a post-lockdown world.