Retail has faced a number of dramatic transformations and disruptions over the last few decades. Between the decline of malls and department stores, the rise of e-commerce, and ever-changing customer demands, it's an industry that has to constantly evolve to ensure it can hit a multitude of moving targets.
This year's holiday shopping season is shaping up to be especially difficult, with lingering effects of the pandemic still affecting nearly every aspect of retailers' operations, from supply chain shortfalls to logistical challenges to ensuring in-store shopping can be done safely. As we've seen in many industries, the pandemic also has accelerated some trends that were budding before the crisis but have since gone mainstream.
We spoke to consumer and retail experts from several firms to get a better sense of what retailers are expecting this year, and how consultants are helping to transform their operations to meet the unprecedented challenges.
Expect a Surge in Online Shopping
Online shopping has been a major retail force for a number of years, but this year's socially-distant holiday shopping season will see it reach new heights. Carol Raimo, Protiviti's Managing Director of Retail/Consumer Products, says she expects online shopping to spike as much as 35 percent this year, and that retailers are getting creative with their physical space in support of online operations.
"The retail industry has evolved rapidly to meet the strong consumer demand this holiday season, transforming department stores into fulfillment centers, building new warehouses, hiring hundreds of thousands of workers mostly to fill e-commerce roles, and extending curbside pickup," Raimo says.
Michael Brown, a Partner in Kearney's Consumer Products and Retail Practice, says retailers have to be strategic to keep up with an expected "explosion" of online shopping this year.
"This year we will see an explosion of online sales compared to years past, requiring a different strategic approach to the season for many retailers. Pre-Thanksgiving and Thanksgiving weekend sales have already reflected the consumers desire to shop from home," he says.
The expected increase of online holiday shopping this year will likely strain logistics services providers like shipping companies, who may struggle to keep pace with the demand.
"Due to forecasted shipping delays and early cut-offs to receive delivery before holiday, we will likely see a slowdown in 'ship-to-home' e-commerce sales much earlier than in years past," says Brown.
Alvarez & Marsal Managing Director and Practice Lead for Consumer & Retail, David Brown, says the effects of this could be severe and widespread.
"We expect a fundamental breakdown in the logistical system five to 10 days before Christmas. With the explosive growth of eCommerce, traditional logistics partners–like FedEx and UPS–will not be able to meet consumer/retailer demand and there will be an extended period of time where many retailers will not be able to deliver in time for Christmas," he says.
Retail's Necessity-Driven Transformation
One thing the pandemic crisis has made abundantly clear to retailers is that they can no longer simply open up shop and wait for customers to walk through their doors.
"Being a retailer is no longer enough. Retailers need to become 'platforms', which means engaging customers on 'Content, Community, Commerce and Lifestyle Services.' Being a platform allows for greater engagement, frequency of visit, loyalty, lower cost of advertising and the collection of data to better meet consumer needs," says Kearney's Brown.
The ongoing transformation among retailers we're seeing currently goes way beyond boosting investment in ecommerce, says A&M's Brown.
"Beyond expanding eCom capabilities, retailers are looking at category management/product portfolio shifts, store labor model re-engineering, landlord negotiation, and inventory management. All retailers really need to think about how they are going to deliver both top-level in-store experience and services, while also delivering 'pick-up-in-store' logistics, which then can't take away from the in-store experience," he says.
Keeping customers and employees safe during the pandemic is another key concern for retailers, with many adopting new technologies or services intended to minimize contact and mitigate the risk for exposure.
"Most digital and contactless services have seen increased adoption since April, with more than half new and increased users. Touchless checkout is becoming widespread and on-line ordering and delivery has allowed many grocery stores and restaurants to survive during the coronavirus lockdown," says Raimo.
"Companies are implementing new technologies to ensure safe shopping environments to their clients: virtual fitting rooms, for example, are attractive to both retailers and consumers. Also allowing customers to try before they buy will help prevent items from being returned, which negatively impacts margin. These changes are positive and will help retailers compete better for years to come."
Opportunities Abound for Retail Consultants
Of course, consulting is an industry that thrives during challenging times, and the industry experts we spoke to see no shortage of consulting opportunities to help their clients weather this storm.
"We see a big opportunity to digitize the retail operating model in order to reduce costs and enable investments of capital; there's also a need to free up leadership priorities so that executives can focus on growing the business as opposed to running it," says Kearney's Brown.
Raimo points to the numerous areas in which retailers need outside expertise to effectively implement the needed change.
"Because most retail companies have quickly moved to selling their brands online, omnichannel strategy and digital supply chains have created huge consulting opportunities. Companies are undertaking several strategic initiatives to enhance their business models and quite often they do not have the right mix of expertise and competencies to lead them successfully. They need a team of subject-matter experts in different areas, such as Information Technology and Digital Innovation, Marketing, Retail Operations and Supply Chain, who can advise and drive the transformation in each specific area without losing the focus on the overall program implementation," she says.
A&M's Brown points to emerging opportunities for growth in retail-adjacent industries that have pivoted to serve the consumer directly, such as Consumer Packaged Goods.
"We are seeing an increasing [number] of CPG brands that are going direct to consumer. This is really the convergence of CPG and retail, with small and large CPG companies effectively becoming retailers through the introduction of direct to consumer. To do that, CPG companies need expertise in reinventing their supply chains," he says.
The New Normal, or the 'No Normal'?
With the first doses of coronavirus vaccines having just been administered in the U.S., there's finally some light at the end of the tunnel indicating we could be nearing the beginning of the end of this crisis. What we still don't know is how the retail landscape will change long-term as a result. The term 'new normal' has been thrown around a lot since the early days of the pandemic, but Kearney's Brown says the firm has its own descriptive term for the reality we're about to step into.
"Our approach has been to refer to current times and the near future as the "no normal'. The 'new normal' is still to be created when the dust settles and free choice, as opposed to fear or safety, dictate consumer actions. Retailers have the opportunity to influence it now," he says.
"The most successful retailers will be those that create their own new normal while there still is no normal."
A&M's Brown says moving forward he expects retailers to embrace a longer Black Friday/Cyber Monday seasonal shopping period, as opposed to a one or two-day blitz that tests the limits of supply chains.
"In many ways, the pandemic simply further exacerbated challenges retailers had felt for years. We expect that some, but not all, of the innovative responses will be here to stay. Specifically, we strongly believe that will continue to see an extended Black Friday/Cyber Monday promotional period versus one to two days. Inventory challenges associated with these two huge sales spikes had long caused supply chain headaches. Given customers have lived a longer cycle, we expect these promotions to be longer enabling retailers to smooth out their supply chain," he says.
Raimo says that even after the pandemic is in our rear-view, consumers are unlikely to be in a hurry to go back to the way things were, and that retailers must continue their efforts to win new customers and retain existing ones.
"This is a dynamic time in which brick-and-mortar businesses are pivoting like mad to ensure customers have convenient ways to shop and eat and to provide safe and innovative interiors. Also, consumers show growing preference for contactless and digital services, and I don't think they are willing to change back," she says.
"This is the start of the new normal and the retail market will continue to innovate to make sure the customer continues to stay loyal."
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