The Impact of Coronavirus on Retail – Threat or Opportunity?
The retail industry was shocked by the government’s decision to close all non-essential retail outlets on 23 March 2020 in response to the Coronavirus threat.
Retail sales fell by a record 5.2% in March. The situation is likely to get worse as the lockdown drags out. Alvarez & Marsal recently predicted that non-food retailers would see a decline of 17% in sales over the entire of 2020. This amounts to more than PS37 billion in lost revenue.
Already, we have seen the first casualties with Debenhams and Oasis going bust, Warehouse, LK Bennet and Laura Ashley, as well as Arcadia Group rumoured being on the edge.
Retail’s ecommerce rivals were the main beneficiaries of the store closings. For example, the latest ONS figures show that online sales increased by 12% year-on-year in March 2020, increasing its share above 22%.
Many consumers are used to home delivery and may not want to change their ways.
If nothing is done when shops reopen they might find that their customers have disappeared.
This scenario will lead to more store closings, bankruptcies, and layoffs. If nothing changes, the implications for employment will be severe: Retail is a major employer of women, minorities, and young people – the most economically vulnerable segments of society.
It will not be just retailers who will suffer, but also brands that depend on them and retail property groups that own malls and shopping centers. Already, we have seen Intu (owner of Trafford Centre, Lakeside) on the brink of bankruptcy.
Only a complete reorganization can save this industry.
Retailers must admit that not all shopping experiences are great. Many stores are not appealing, there is poor product signage, and often the stock is out of stock. There is also a shortage of trained staff to assist you.
This is not to mention the fact that you will need to travel to the store by car, on congested roads, or via public transport networks. You will also need to pay for parking and take the heavy goods home.
This is in contrast to the ease of shopping online. With efficient search engines and well-designed product pages, one click check-out, and delivery to your doorstep, it becomes clear that online stores are no longer an advantage when it comes to the actual process of moving goods from factories into consumers.
To top it all, online shopping is often cheaper because e-commerce companies pay less in rents and rates, store build costs, staff costs, and other costs.
Retailers must offer more than just the provision of goods to make customers want to shop in stores.
Retailers can do four things to bring joy back to the in-store experience.
Brand theatre is about creating brand theatre. This requires that they take space away from stocking items and use it to create stunning displays that make the store enjoyable to shop in. Selfridges and Nike Town are two examples.
The stores can be considered ‘clubhouses’ for brand community members, hosting events and gatherings that bring people closer together. Rapha Cycling and Lululemon offer free yoga classes in-store, and Rapha Cycling offers free coffee and bike trips.
Outstanding customer service is key. The human element can be a significant advantage so it must be used correctly. It is more like personal shoppers than temp workers that fewer, better-paid, and more skilled staff are the key to success. Customers need more space and effort, which means that they should have comfortable seating, luxurious fitting rooms, and free refreshments.
Educate the customer. People love to learn about the origins of goods and how they were made.
Retailers need to cut back on non-essentials in order to afford all of it. These include having lots of space and sizing.