How crisis and change often go hand in hand and exploring how COVID-19 may accelerate retail’s digital transformation.
A Faster Pace of Change: Will COVID-19 Be an Accelerator for Retail’s Transformation?
Crisis and change
The relationship between crisis and change is well documented. History is full of innovations coming out of periods of extreme strife. From the collapse of feudalism after the black plague to the invention of the lightbulb during the long depression, even the technology you’re using now, the internet, was a product of the cold war. More recent examples in business (and less historically significant) include both Airbnb and Uber becoming popularised during the 2008 recession. While they both existed before the crisis that popularised them, it was due to a sudden change in customer priorities and needs, where they truly thrived.
Digital technology in a time of physical distancing
Few would argue that COVID-19 is not a global crisis on the same scale as those mentioned above, and great change will be affected by it. COVID is likely to be an engine for major change not only because of its major economic consequences but because of its social implications too.
Video conferencing application, Zoom, has seen an increase in new users of 30x year-over-year, as the platform has become a social tool as well as a business one during lockdown. Speaking of business tools, Microsoft’s team collaboration programme, teams, has had 12 million new users since COVID-19, as businesses get to grips with remote work. Even the physical world of exercise is being supported by digital technology, as applications such as Strava and Peloton have exploded in popularity.
All of these illustrate a major trend of the response to COVID-19 crisis, which has seen digital technology used to bridge the physical distance that is enforced on many worldwide.
Retail’s digital shift – accelerated
To focus on retail, the story is the same, with there being both an economic and a social impact for brands to navigate. The financial impact of COVID-19 has been huge for retailers, with sales dropping by as much as 70%. This has left almost all brick-and-mortar retailers looking at negative cash flow as a result of closed stores. But even when they reopen, consumer confidence and low foot traffic will still be a concern. Brands will need to find ways to engage with their customers and serve their needs in new ways, as well as to adapt operating models to deal with the major financial strain.
The trend of people relying on and embracing digital channels during this crisis could not be truer in the retail industry. Since becoming the only sales channel available in many categories, eCommerce has soared during the pandemic, with increases of 25-80% depending on the country and industry. Whilst eCommerce is by no means ‘new’, the coronavirus has certainly accelerated its use and numbers are expected to remain higher than before even after the pandemic is over.
Leveraging physical stores in a digital world
This change presents some challenges for brick-and-mortar stores. Even though most brands will have seen an increase in their online sales, stores are still the backbone of retail. But with reduced foot traffic and increased competition from online, stores may need to adapt to stay competitive. Like many trends that have seen sudden surges in popularity during the crisis, the means to do this already exist, but they have suddenly become far more significant.
What are some examples of retail innovations likely to be accelerated by COVID-19?
Retail digital transformation
These developments are just one side of an ongoing digital transformation in retail, that is now more important than ever for retailers to get right. Retailers need the visibility, stock accuracy and item-level data to not only reliably serve customers across channels, but to reduce costs and improve business efficiencies in a challenging economic climate. Some retailers are ahead of the game in this regard and will more than likely absorb the impact of the crisis better than others.
Technologies like RFID, the IoT and advanced analytics modules are driving this digital transformation and creating more agile and resilient operating models. Whilst the current situation in retail is bleak, brands coming out of the other side are likely to be more resilient in the long term, as well as more accessible and seamless for customers across channels.
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Apparel Retail’s New Normal: COVID-19 Impact and Future Trends
Now stores are facing new social distancing guidelines, the formula for customer experience has changed. With reduced foot traffic and higher levels of eCommerce, the digital evolution of the retail store is now or never. Join us on the 16th of June as we dive into the physical and digital transformations behind retail’s ‘new normal’.