The impact on retailers
As the coronavirus continues to spread around the world, there have been significant impacts on consumer behavior, product demand, and retail store, factory, and logistics services availability. Growth estimates for global retail in 2020 will be halved from pre-COVID-19 forecasts, overall, but impacts are uneven. Fashion, furniture, and electronics retailers will be hit hardest as consumers forego discretionary purchases in favor of stocking up on food and household supplies. Grocers win, but at a higher cost of operations, and will be highly motivated to be better prepared for the omnichannel shopper and responsiveness to demand shifts.
Retail technology investments will continue to reflect digital transformation efforts, as retailers reserve capital for technology investments by reducing spending on store openings and remodels. The ability to adapt responsively to product, workforce, partner, and operations needs will separate the winners and losers during the COVID-19 crisis.
The “new normal” experiences
1. E-commerce experience
Even though most of the retail industry is facing uncertainty with the current situation around coronavirus, several US-based direct to consumer brands selling non-essential items have, somewhat remarkably, experienced record-breaking online sales in recent weeks.
This appears to be a trend. Data from ACI Worldwide shows that many online retail categories saw an uptick in sales during March—as much as a 74% year over year increase compared to March 2018.
Aiming to a fast, easy, and convenient e-commerce site offering comfort online shopping experiences could save the retailers to thrive during the pandemic.
2. Inventory optimization
Retailers faced extreme inventory management challenges in the past few months with the stock being piled up in the warehouses. Retailers need to have full control and visibility over their inventory can manage fluctuations in demand. Being able to fulfill online orders from stores and quickly move product to where it is most needed is key to success in an omnichannel world and helps reduce the need to discount and erode margins.
Here is how Nordstrom – one of the US’s leading fashion retailers was able to slash inventories by 26 percent year-over-year despite its stores being closed for 47 days during the first quarter.
First, Nordstrom decreased receipts by 30 percent, including reductions of approximately 80 percent in April and May.
Second, the retailer accelerated its promotional activities. Gross margins eroded to 11 percent from 34 percent with roughly half of the decline attributed to incremental markdowns, including a higher reserve adjustment of around $75 million.
Third, Nordstrom used its in-store inventories to fulfill online orders. For full-price stores, half of the online orders were fulfilled from stores amid temporary closures, up from 20 percent typically. In mid-April, the company enabled store fulfillment of online orders from Rack. About 25 percent of Nordstromrack.com units are now being fulfilled from Rack stores.
These are considered as smart moves of Nordstorm do to significantly improve the turnover rates.
3. BOPIS (buy online, pick-up in store)
With the socket increase of online sales, the retailers have huge trouble to deliver timely home delivery. At the same time, consumers also wish to save the cost.
The option that could be ideal in this situation is to buy online then pick-up in store.
Walmart responded to the pandemic in the same way that it has gained massive success. By unifying its digital and brick-and-mortar experiences, Walmart has turned its stores to micro fulfillment centers. As a result, Walmart also benefited from a 74 percent jump in online sales during the quarter as its grocery pickup and delivery services were in high demand. The retailer’s performance during the quarter was double its results for the same period in 2019.
It’s said that legendary supply chain capabilities and omnichannel investments have given Walmart a sizable advantage amid the pandemic and appears to position the chain for e-commerce success long after the crisis is over.
On the bright side, the pandemic has offered retailers an opportunity to adapt and innovate the business model. This is also the time that retailers, software vendors, and consulting partners work closely together toward a plan to help retailers survive in the short tẻm and thrive in the long run!