The coronavirus pandemic has forced retailers to rethink the way they are conducting business in order to stay afloat. As in past downturns, companies that have remained successful have been able to quickly adapt their business models to the new reality and prioritize customer experience. But success during this pandemic will also mean that retailers have accounted for the unique shift in consumer shopping behavior discussed in part 1 of this article series: The Shift in Consumer Shopping Behavior.
The apparel, fashion, and luxury, or AF&L sector, felt the brunt of the COVID-19 recession. Demand has dropped for these products by about 20-45% during various stages of the pandemic according to McKinsey. Consumers are still reducing their non-essential spending which has translated to significant revenue declines for retailers. Additionally, consumers have drastically increased their use of online channels to shop which is typically more expensive for retailers. Store closures, higher supply chain costs, tentative customers, the pressure to offer discounts, and the heightened necessity for health and safety measures in brick and mortar stores have and will continue to be a burden on revenue sources for retailers.
Though online shopping has surged, the gains made there are not enough to cover the damage done by store closings and an increasingly frugal populace. The Boston Consulting Group (BCG) predicted that the retail industry could lose up to $640 billion in revenue, a 30% decrease in sales. Even discretionary spending, according to McKinsey, is expected to drop 50-60%.
To account for the rapid growth in e-commerce, brands must rethink not only how they market their products online, but how their online shopping experience functions more generally. Emphasizing convenience, excellent customer experience with their online interface, easy pickups if necessary, and personalized content will all aid brands in making their e-commerce presence more permanent.
Though a free and fast delivery remains one of the more important features a retailer can offer, consumer priorities increasingly include an easy and helpful online interface. As part of this, customers also ranked comprehensive and clear product images high in importance because they can touch and feel products or, in the case of apparel, try it on in-store.
As many consumers and retailers transition to online channels, the fate of physical stores remains to be seen. BCG expects to see flagship stores increasingly being used for brand image purposes while “the majority of physical locations are likely to be smaller, sell merchandise that’s customized for the area, and be set up to fulfill online orders.” Unfortunately for many commercial landlords, retailers will consider closing their less successful stores or negotiate rent reductions. KPMG found that the use of large stores has seen a 39% drop in the U.S., signaling the necessity for retailers to rethink their reliance on physical stores.
In this same vein, retailers have been trying different strategies to sell their products in-store and online. When the pandemic first began, companies felt pressure to offer promotions or discounts to generate business. Now, McKinsey says they have been able to reduce promotional offers as consumers loosen up their purse strings. Some retailers have even been able to charge different prices online vs. in-store to see where they have the most success. However, pricing continues to remain a key factor in whether consumers will buy from a brand. In fact, BCG found that more than 40% of U.S. consumers expect “brands to offer discounts or other promotions once stores reopen.”
Using new consumer trends to determine a brand’s next step is essential. For more information on these trends, see part 1 of this series: The Shift in Consumer Shopping Behavior. Ultimately, brands must prioritize their online presence and safety in-stores for a complete consumer experience. Bulking up their online interface so that it is easier for consumers to use and more attractive to buy from will help retailers stay competitive into the future. Not only should their physical stores boast visible safety precautions, but they should also utilize technology to enhance the consumer experience. Brands who refuse to adapt to the new way of doing business will quickly see themselves becoming obsolete. Versatility and flexibility are key in the months to come.
About AKCEL Partners
The AKCEL Partners sales consultant firm was founded by three executives with strong bonds throughout many branded and retail categories. AKCEL Partners offers a unique business proposition from other sales consultant firms. The AKCEL sales consultant firm tailors its account team and market plans specifically to each client’s needs. Unlike other sales consultant firms, AKCEL Partners acquires sales consultant talent to fit each job, securing experienced professionals who can get immediate access to decision makers at the highest levels. To learn more, go to www.AKCELPartners.com.
