We have had seven months of the pandemic - the effect has been unprecedented and devastating at so many levels. One would think that humans are adaptable and should by now have found ways to cope, but in so many ways we are still groping with no clear path visible.
The uncertain future and elusive end point perhaps had the most destabilizing effect on attitudes and behaviour. It is easier to bear inconveniences when the destination is discernable. But when it is not, it has completely different effects on the psyche with some people in denial by ignoring the threat, and others receding into a tight shell.
They call it the new normal.
The situation is pretty much the same for retailers, most of who have been bleeding copiously in the half-year. Cost cutting has been done, stores pruned, and many of them have already run through their reserves, or will soon be doing so. Every organization is being forced to rethink, rediscover the reason for its existence, redefine purpose and realign strategies.
There is no doubt that the market of 2021 will look very different from that of January 2020, most noticeable of which will be fewer players.
What are the realities facing us:
1. Businesses need to be designed for the market in which they exist.
Globalisation and the free movement of people and goods were the sine que non for success. Profitability depended on scale for manufacturing, hospitality, tourism or retail. Successful food companies had their networks across continents and not just in the home country.
The same for hotel chains and even for retailers. Either products had to be moved across geographies, or customers had to be moved across countries.
With scale as the secret sauce, it meant that local markets and customers have inevitably been neglected... or ignored. This is perhaps visible most in the fashion space, where customers for the same brands are similar wherever in the world, and retailers aimed at just these customers.
It seems the time of global marketplaces is passing and businesses will need to be re-fitted for purpose, based on the realities of their own markets.
2. Promotions and sales have limited effectiveness and are eventually counterproductive.
This has been a growing realization among retailers over the last couple of years, but recent experience underlines the trend of customers looking beyond promotions and sales. While there is still a constituency that is looking for bargains, these events have become like a drug shot delivering an immediate high, but with a severe drop, and withdrawal symptoms after.
If people are really looking for deals today, they don’t need to wait to go to physical store events, they can find online offers practically round the clock. The effect of the stimulant is inexorably waning.
3. Why would a customer go to a store?
Products are becoming ubiquitous, as are prices and offers. Millennials started the trend and the younger generations following are clearly not loyal to brands, or driven by them. As they become more influential in the market, stores will move from being brand purveyors to presenters of trends and style.
You may be having the best names of handbags in the world, but if buyers dig canvas bags and backpacks, pure leather luxury is passé. And the same for so many other products as well.
4. So how will new retail build its relationships?
Stronger relationships with their customer are the key and many retailers have jumped onto the digital marketing bandwagon for this. There is no doubt that online presence is de rigueur today, but with extreme digital overload this is also a problem.
A recent survey I saw found that people regularly employed an average of three- to four devices using an average of 11.2 communication apps, including social media apps, every day. The sheer volume of information makes it extremely difficult to cut through the clutter to actually create an impact.
We also know that digital to digital messaging converts much easier than digital communication to physical sales. Retailers therefore have their work cut out for them. This needs not just tremendous skill and greater investment, it also makes the in-store shopping experience absolutely critical in building loyalty, trust and sales.
With less customers entering the door, conversion rates need to increase exponentially. Each aspect of the instore engagement needs focus – better equipped and more proactive staff, easy access to touch and feel products, more informed selling , quick and easy after-sales service, correct pricing… the list goes on.
The problem is that most retailers have responded to the current crisis by actually reducing people on the shop floor, chopping staff development costs and cutting marketing spend. In these circumstances how do they deliver an enhanced shopping experience?
It is time to redefine retail priorities.
- Ajai Kumar Dayal is a retail professional with over three decades experience in the field.