- The pandemic has changed the commerce environment for all retailers and brands.
- Some retailers are experiencing a surge in demand while others are unable to sell due to their current distribution model.
- Brick-and-mortar retailers are reimagining their store experiences and weighing digital transformation.
- Continuity will become more important than ever as consumers value the ability to replenish personal care items.
- The direct-to-consumer model may be the saving grace for some brands.
The commerce industry has endured many highs and lows throughout the years – first in the dotcom era and then during the 2008 recession – but has always come out stronger, in both cases becoming part of the solution.
However, during the coronavirus pandemic, retailers are facing a whole new wave of challenges and their current operational practices are under a microscope.
It’s clear that digitally native retailers have been more agile in navigating market volatility, as evidenced by Amazon’s recent hiring spree of 75,000 more workers.
Conversely, retailers that rely on brick-and-mortar stores for engagement are scrambling to spin up digital channels and pivot to driving virtual customer engagement.
The current commerce climate has also been extremely polarizing, creating two drastically different dynamics for brands and retailers: those who are seeing a surge in demand and others that are nearly decimated.
The double-edged sword of businesses booming
The directive to stay at home exposed a lack of scalability in online retailers’ supply chains, order management and fulfillment systems. With triple-digit orders and without the tools to meet demand, many retailers continue to leave money on the table and hinder their customers’ experiences online.
For example, the sudden shift in grocery shopping (Read more...) and feverish demand for staple goods fractured traditional retail. With limited inventories and workforces, customers saw items out of stock and retailers’ efforts to meet demand struck out.
This led to poor experiences, like customers piled into a virtual waiting room when logging on to purchase online groceries.
To meet consumer demand and cater to Americans’ shopping behaviors, retailers will have to focus on continuity commerce, smoothing out demand spikes and gaining better visibility into that demand.
Many have begun to invest in modernizing their ecommerce systems, supply chain and distribution capabilities to ensure they have insight into their operations and are well-equipped for the next surge in demand.
Additionally, retailers will begin to prioritize loyal customers as they find their footing in the coronavirus era of retail – for example, Amazon Fresh put new customers on a waiting list as it tried to fill orders from existing customers.
The other side of the coin: Dire straits
There is no dispute that consumers are spending less, and with shelter-in-place orders still in effect, many brick-and-mortar retailers are in limbo. It’s not only storefronts that are impacted.
It’s also CPG brands that have products sitting in stores and warehouses. With local suppliers unable to get their products out to the market, CPG supply chains are being disrupted and their current models of selling are significantly disrupted.
Storefront retailers can use this time to reimagine their businesses in anticipation of eventually reopening.
For example, Suitsupply, a men’s suit maker, is installing standing clear dividers in its fitting room areas to protect staff and customers from each other. The retailer says this will allow for “safe up-close interaction” for people who still need to have their pants or jackets fitted and tailored.
Retailers can also evaluate digital transformation and assess how to introduce technology in stores and in operations. Customers may be reluctant to interact with sales associates.
To ease these apprehensions, some retailers will adopt touchless retail, embracing tablets in stores for food ordering or cashless payments.
Retailers will also be inclined to invest in capabilities that enhance their shipping operations and allow customers to buy online and pick up in-store (BOPIS) or pick up curbside (BOPCS).
This type of omnichannel experience will go a long way towards building brand loyalty, reassuring nervous customers and making shopping an easy and enjoyable experience again.
Distribution channels are also ripe for reinvention. While many CPG companies were hesitant to upset their retailers in the past, COVID-19 has given them the added push they needed.
In Pepsi’s recent Q1 earnings call, the company noted it will be reallocating resources from other media channels and investments to ecommerce in an attempt to retain customers who have shifted from in-store shopping to ecommerce, grocery delivery and in-store pick-ups.
This is just one example of how CPG companies are adapting, betting on ecommerce strategies to survive.
The rise of DTC
As retailers look to stay afloat, they must take note of the commerce trends and opportunities they can capitalize on.
Continuity commerce programs, where consumers buy subscriptions to products on “auto-ship,” are becoming more important than ever as consumers value the ability to replenish products.
The direct-to-consumer (DTC) model in the personal care market holds major opportunity and demand.
Traditionally sold in supermarket distribution, startups like Dollar Shave Club and CPG e-tailer Public Goods have begun to capitalize on the need for personal care goods and are profiting from delivering consistency to consumers.
Public Goods, for example, has seen a fivefold sales increase since the start of shutdowns.
Personal care startups aren’t the only ones toying with the DTC model. Notably, Pepsi announced two DTC websites aiming to win over more customers during the pandemic as part of its broader focus on ecommerce.
Even as stores begin to reopen, the retail landscape will not look the same as it once did. Consumers who have become accustomed to using digital channels will rely more on digital as an access point to brands.
Stores will need to accommodate for consumer hesitance to return to brick and mortar locations – because of health concerns and because many will have become accustomed to the convenience digital channels provide.
To differentiate and capture consumer interest, brands will need to offer unique and valuable in-store experiences that go beyond what customers can find online and will also need to shift to a mindset of digital as the primary channel of engagement with customers.
We’ve entered a new world of buying and selling products and to survive and thrive, it’s time for business to rethink their commerce strategies for today and long after the pandemic.