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Is retail ready for a restart in the post-pandemic world?

Sam Biswas

The answer: we are creatures of habit and we need a major catalyst to break inertia. But the cost of this pandemic – the thousands of lives lost and the economic damage – has been too high. I have been engaged in the retail industry for 16 years, and I think it has been hit the hardest: millions of jobs lost, an estimated $430 billion downturn in retail revenue according to NRF estimates, 58% reduction in foot traffic across retail industries, and a more than 37% drop in online sales for apparel and footwear. At the same time, groceries are seeing unprecedented demand, which they are struggling to fulfill.

But there are silver linings: Walmart and Amazon hiring over 250,000 more people and rapidly expanding capacity, a 200% increase in grocery sales, a 229% increase in grocery app download between Shipt, Instacart, Walmart, and Kroger, and 111% increase in BOPIS sales.

As we get over the crisis-response phase and move into a recovery phase, the retail industry needs to prepare for the new normal. Retailers need to take care of the customers they lost and retain the new digital customers they gained, double down on digital shopping and digital ways of engaging the customer, drive down customer-service costs, and restart the supply chain.

In the new normal, here are the top priorities for retailers and grocers.

Digital acceleration. Most retailers don’t build their or sites to scale and perform the lion share of their business. With accelerated digital adoption, retailers need to rejuvenate digital-commerce capabilities for speed and scale. Retailers should consider making amendments for one-click crisis shopping with pre-populated shopping carts using machine learning. A ton of sites had to be throttled, with customers waiting in a virtual queue. That experience was acceptable during the crisis, but not desirable for customer retention in the future. Nike’s CEO said that even though it lost the majority of mall traffic in China during the lockdown, the net impact of the disruption was minimized by having the right online-commerce capabilities.

On the backend, they need to fulfill orders faster and at higher volumes. Grocers should consider investments in micro fulfillment center capabilities through TakeoffDematic, or AutoStore. Bed Bath & Beyond is converting some of its stores into fulfillment centers for online orders from local stores. Grocers are investing in store picking apps (with advanced wayfinding, two-way customer communication, and order queuing) and partnering with fulfillment vendors to meet online fulfillment demands. Expanding fulfillment networks and last-mile delivery with partnerships like InstacartShiptDoorDash, and Uber Eats will see a significant uptick in the short term, however this may not be sustainable due to higher cost to serve. Retailers need a marketplace strategy in place to be profitable in the long term.

Reengage the new customer. The majority of retailers acquired digital customers through the pandemic, and now they need a specific strategy to identify and retain those customers through the right content and communication by using timely campaigns. These campaigns should not be promoting more product purchases but instead communicate the purpose of the company and social impact on the community. Every customer segment will focus on purposeful shopping, with priorities being health and wellness in a post-pandemic world. The right conversation through digital channels can help engage customers and drive lifetime value. Retailers need to communicate that it is safe to shop in their stores and that they are taking care of employees through the crisis and beyond.

Retailers should also rethink loyalty programs to reward customers for brand advocacy and meaningful behavior, instead of the old transaction-based rewards.

Rethink the store experience. Every store is modifying its standard operating procedure to focus on hygiene and safety. There are screens going up in front of cashiers to protect all parties. Contactless payment, in-store contactless ordering kiosk, and contactless delivery will be the new norm. BOPIS pickup will be redefined. No-checkout experiences like Amazon Go will now be expedited. Does your store have a strategy to differentiate through the right CX in the new world? According to Capgemini’s January 2020 study on smart stores, only 25% of retailers are actively working on implementing store automation, and only about one-third intend to do so in the next three years. This needs to be rapidly expedited in the context of the current situation.

Kroger published a blueprint for this and gained millions of dollars-worth of publicity. That’s just a starting point though; the real changes are yet to come. Innovators investing in the contactless customer journey will see better engagement in the mid- and long-term.

Reset supply chains. Supply chain also saw major polarization during the crisis. While the essential services were running out of inventory, apparel and footwear saw the lowest demand. This means forecasting needs to be corrected to avoid long-term impacts on demand planning. Investing in the right algorithms to normalize the anomaly will give retailers future sustainability. Some are also rethinking their sourcing strategy, primarily to diversify and focus on cost-effective local sources, especially if automation and AI technology are used to drive down the cost of local manufacturing.

Reducing the cost of operations. With major revenue loss, every retailer will prioritize cost reduction in the near term. As consumers  are concerned about protecting themselves and their families, retailers have seen a massive surge in online shopping, with orders picked up at stores or delivered to homes. Retailers will not be able to fulfill these demands without automation technologies like micro-fulfillment centers, fully automated facilities like Amazon Go stores, or mobile apps, such as the one used by Sam’s Club, that allow customers to scan items as they shop and then checkout with a digital wallet, without coming into contact with another human. And keeping shelves full is more likely when retailers rely on a robot to stock the shelves.

Another low-cost lever to drive process efficiency through automation is using Robotic Process Automation (RPA) combined with machine learning. There is a significant benefit of robotic process automation using tools like UiPath and Blue Prism to drive automation in finance, supply chain, human resource, and store processes.

 Use AI for flexible and rapid labor ramp up. US businesses preparing to open stores and restaurants will need to rapidly rehire their workforces. Millions of jobs will come back into stores and warehouses and for last-mile delivery. Retailers need to rapidly hire the right profiles with the right experience and onboard and train them. The best way to do this is through a machine-learning algorithm that identifies the potential success of a certain profile. HR functions need to invest in automation to be ready.

My personal association with the digital grocery industry in the past few years helped me be part of this demand surge and strategize through this crisis to ensure a balance of better value for end customers while keeping the workforce safe. We know we will survive this crisis. The question, when we come out on the other side is, will we see the next evolution of retail? Are the retailers getting ready to not just survive but thrive in the new world?