The COVID-19 crisis created a new reality for retailers and other consumer-facing businesses. Since the pandemic first hit, the entire industry has had to constantly pivot to changing restrictions and demands, while still maintaining a focus on daily operations and trying to plan for the future.
Even our lives and our livelihoods gradually recover, and things move into a new state of normalcy, the future of retail is uncertain. As a retailer, it’s crucial to get proactive about planning for the post-COVID-19 world.
But what will this retail world look like? Will it return to a pre-pandemic state? Will there be a boom in sales due to depressed demand or a significant reduction in spending due to consumer uncertainty? Will there be an increased pace in the paradigm shift from physical to digital retail?
Potential characteristics of a post-crisis retail world
There is still much uncertainty, but our best guess is that the financial, operational, regulatory, and psychological effects of the coronavirus pandemic will linger well past the social distancing and isolation phases to define a new normal for retail. Some potential characteristics post-COVID-19 include:
An e-commerce boom
Though e-commerce penetration still varies greatly by product category and retail format, COVID-19 forced many businesses to shift to a stronger online presence. This could lead to a permanent increase in the level of e-commerce sales. Grocery, prepared foods, and pharmacies are good examples, as they are candidates for increased e-commerce with a corresponding shift in employees from shelf stocking/store service to picking and fulfillment.
Accelerated closure and consolidation of physical stores
There will be a tendency to blame COVID-19 for this, but this trend has been occurring for the past two years, and the COVID crisis will accelerate the process. This trend is likely to impact restaurants and other franchise operations as well.
The crisis has created opportunities for cash-rich retailers to buy inventory, key locations, or entire competitors, at a discount.
Hyper-focus on health, safety, and cleanliness across the supply chain
Health, safety, and strict cleaning processes play a critical role in combatting the transmission of COVID-19 and these more detailed and regulated processes are likely going to stay. This can lead to longer delivery lead times and the greater need for safety stocks, particularly for cross-border goods.
With more and more workplaces shifted to remote work structures in order to remain productive while respecting physical distancing, there could be an increased expectation for flexibility and support of working from home from all levels of the organization. In addition, in order to meet the needs of an increased demand for home delivery, there will likely be an increase in the need for part-time workers.
Potential dampening of the sharing economy
A lingering effect in the post-COVID-19 world could be the hardening of social and physical distancing, leading to greater concerns about physical privacy and a preference for owned vs. shared assets.
What to do next?
The retail world must prepare for a new normal. Benjamin Franklin said “By failing to prepare, you are preparing to fail.” Part of preparing for retail businesses is to form a strategy around the main elements of their business success - their customers, their workers, their merchandise, and their finances.
Your customers' experience
A familiar shopping experience can put your customers’ very real fears of a pandemic at ease. Retailers will need to create or re-create shopping environments that emphasize cleanliness, and support a more distanced way of shopping. Actions can include:
- enhanced e-commerce and pick-up-in-store options
- re-organized physical store structures to accommodate more pick-up orders, additional self check-outs, and reduced clutter in the aisles
- increased physical protection of fresh foods while aiming to preserve an efficient and enjoyable shopping experience
- increased presence of hand-washing and sanitizer stations
- increased availability of protective equipment for employees and customers
In spite of the spike in lay-offs prompted by temporary business closures, Canada is and will still be a dominantly service-based economy post-COVID-19, and workers will be needed to deliver goods and services. Human capital planning and assessment will be critical. Retailers will need to re-align their teams after the current and expected reductions in their workforces, and will need to pivot in order to retain good employees. Expect to see:
- an increase in wages
- more flexibility on shifts
- more granting of sick leaves
- a greater availability of top performers at all levels to help retailers grow their businesses
Your merchandise and service planning
Consumers have continued to buy during the pandemic, and will keep doing so afterwards—however, their choices of goods and services will be influenced by the changes in their financial and living situations, their near-term aspirations, and over-buying of some goods. Expect to see increases in the following categories:
- value brands for staple products and services
- health, wellness, and personal safety products and services
- home delivery of goods and food, including growth in the direct-to-consumer (DTC) channel
- subscription-based services that reduce shopping trips and interactions
- electronics and other devices that support home-based transactions and experiences
- personalized and/or private service delivery, including those willing to pay a premium for them
Your financial picture
Cash management is a critical activity for retailers in this climate. Investigate and advocate for all types of cash preservation initiatives, from incentives to extended payment terms and deferrals – but remember all of these have time frames attached to them. Ensure that today's savings don't turn into tomorrow's breached covenants or contracts.
Buyer, seller, or survivor
Undeniably, the pressure on retailers is immense and there will be changes resulting from COVID-19, but change doesn't have to be negative—it just needs to be strategic.
It starts with deciding if you are a buyer, seller, or survivor. Are you in a position to buy more assets – be it product, technology, or even additional companies to grow your business? If so, then you need to carefully plan for these transactions. Does it make more sense for you to start the process of selling your business, if your projections show you running out of cash and options? If so, you need to plan on how to maximize your value and minimize the disruption to all stakeholders. Or, are you somewhere in between and able to make the necessary adaptions to survive the crisis and come out the other end? If so, then you need to think about how this post-pandemic version of your business compares to the pre-pandemic shopping experience that your customers expect.
Either way, being proactive in managing your business in these challenging times is critical. Doing nothing is not an option.
How can BDO help?
In these challenging times where implementing new strategies quickly is critical, an experienced BDO advisor can offer guidance and support. We understand that adapting your business can be overwhelming and we are here to help you navigate these changes.
Explore our retail service bundles, designed specifically to help your retail business in a post-COVID world, to get the conversation started.