There’s no doubt that COVID-19 has already caused serious disruption across nearly every sector, with businesses that depend on physical retail spaces being hit the hardest.
Despite the more recent discussions and plans to relax the stay at home orders and non-essential business closures in some states, foot traffic will continue to be affected for some time.
The effects of this pandemic have disrupted BAU across the retail industry—but this will also create new opportunities for those intrepid and adaptable enough to forge an unconventional path forward. Forget traditional retail best practices: from rethinking the supply chain to refocusing on customer-centricity, changes in the short and medium term can help businesses build the resilience necessary to weather this storm.
Consumers’ Day-to-Day Behavior is Shifting Rapidly
Over the past few weeks, we’ve seen the spread of COVID-19 alter consumer behavior on the most basic level. As of March 16, 71% of consumers reported that the coronavirus outbreak was affecting what they do in their spare time, according to internal research from Google—a figure that has no doubt spiked in the weeks since.
There has also been huge growth around search terms for bottled water, online grocery shopping, and prepared foods. In other words, consumers are taking a cautious, conservative approach and focusing on the here and now, shifting their spending to “new essential” categories that are relevant to their immediate needs.
Early Retail Trends as Coronavirus Picks up Steam Globally
For many retailers, these massive shifts in consumer sentiment and spending have dealt a significant blow to sales—especially for those that offer products and services viewed as “non-essential” in the current environment. As of the first week of March, there had been a 14.7% decline in foot traffic to luxury shops and a 9.1% decline in foot traffic to retail shops in North America. Google also reports an 18% decline in searches for fashion luxury brands since March 10.
While luxury retailers have certainly been hit hard, they’re not the only ones who are scrambling to adjust: according to Klaviyo’s ecommerce marketing report, as of March 24, 58.3% of retailers across categories reported that sales had declined from the previous week. Yet, many have voiced optimism after seeing a rebound in April: as of April 15th, 61% of respondents believed that consumers would spend the same amount or more once the pandemic passes.
So, what’s a retailer to do? Taking an unconventional approach to these key areas can yield positive results not just under current conditions, but for the long haul.
1. More experimentation around conversion and sales tactics
Over the past two weeks, retailers of all sizes have leaned into heavy discounts to maintain sales volume amid turbulent markets. However, this strategy can create a vicious cycle: “the danger is the retail environment will soon echo that of the 2008 financial crisis, when retail discounts were massive — up to 80% — as stores became desperate for people to shop,” says Glossy’s Danny Parisi.
Discounts can certainly act as a worthwhile retail stimulus by boosting sales in the short term as businesses adapt more sustainable long-term strategies. However, “gaining back the trust and enthusiasm of cash-strapped consumers…cannot be achieved by discounting alone,” according to The State of Fashion 2020: Coronavirus Update report released on April 8 by McKinsey & Company and the Business of Fashion.
Crafty retailers can supplement this traditional approach by experimenting with more unconventional tools and methodologies that enhance conversion, deliver an elevated customer experience, and ultimately boost sales. To appeal to increasingly price-sensitive consumers, retailers should consider the benefits of distributing merchandise in new channels, including ecommerce marketplaces like Farfetch, Outnet, and Yoox. Offering an integrated buy now, pay later solution at checkout is another way to appeal to customers for whom budgeting has become a predominant concern.
2. A shift from in-person to digital experiences
Early ingenuity across other industries that have been massively affected by COVID-19 offers a valuable lesson for retailers. One example can be found in the entertainment space: according to Google, 21% of consumers who’ve signed up for a streaming service this year say coronavirus helped drive their decision, while 63% say they are streaming more films or TV shows since the outbreak. Movie studios, which have faced huge losses in box office sales, have been quick to adapt to these changing behaviors. Many are now offering new releases via streaming services and finding new ways to monetize these digital experiences.
This philosophy has translated into early successes for retailers in China, offering a roadmap for U.S. retailers looking to head off revenue losses resulting from COVID-19 and its effects on consumer sentiment. Nike, for example, managed to increase digital sales in China by 36% in the first months of 2020, largely because of a marketing strategy that leveraged Taobao livestream bloggers to promote its wares during the region’s lockdown.
Similarly, many retailers in China have turned towards digital channels like WeChat, through which store assistants can virtually communicate with customers to provide support and help them complete purchases. This digital-first approach has even been extended to Shanghai Fashion Week, during which designer showrooms were conducted via livestream and video conferencing.
3. Realignment around a customer-centric approach
In their fight for survival, retailers across the board are treating customer relationships with a high level of care. By really getting in tune with your existing customer base and what they need and want today, you can leverage these insights to deliver additional products and services or simply to finetune your approach to marketing and CRM.
In a sea of relatively standard messaging from retailers, Levi’s approach stands out. In a note to their community, the brand tells customers that “Levi.com and the Levi’s app are always open, but we understand shopping for jeans is probably the last thing on your mind right now.”
Rather than encouraging customers to continue shopping with a self-serving plug for its denim, Levi’s takes an utterly human approach to this crisis. And, sure: this type of empathetic messaging and consumer-centrism may lead to short-term losses, but retailers will benefit from a longer-term boost in brand image and customer loyalty. By genuinely addressing consumers’ immediate needs, you may even earn organic word-of-mouth growth via social media and other channels.
In short, it pays to be attuned to the mood your products are evoking in the current environment. Can you be truly honest with your customers in this moment of fear and uncertainty?
4. Defensive supply chain management
The sluggishness of luxury retail in Q1 has been compounded by disruptions to global supply chains—notably in China, where exports were down 17.2% in January and February, with a record high jobless rate of 5.7% in February, according to the Google report.
This type of massive supply chain disruption will lead to a need for more diverse sourcing, manufacturing, and distribution methods for many retailers, resulting in more sustainable and resilient business practices in the long term.
One example of a retailer that has been affected by these changes, but is well-poised to emerge on the other side, is Everlane. The brand “does business worldwide with a supply chain spanning four continents. It works with facilities in China, Italy, Vietnam, Spain, India, Sri Lanka, Peru and the U.S. Pressure any link in that chain and adjustments must be made,” says Bloomberg’s Kim Bhasin.
In addition to shifting sourcing away from impacted regions, the State of Fashion 2020 report offers a number of fruitful suggestions to make the most of supply chain disruptions in the short term: “For many players, repurposing existing stock for new seasons will be a more viable option than recycling or upcycling with fabric additions or extractions. Other opportunities include…a re-evaluation of the company’s fashion calendar, such as moving monthly drops into later seasons.”
While COVID-19 has had a seismic impact on retail in a relatively short period of time, retailers that embrace innovation will emerge stronger than those that take a myopic attitude towards survival in the short term. In these times of unprecedented uncertainty and change, it pays for retailers to take a page out of Everlane’s book to future-proof their supply chains—and ultimately, to build resilience for years and decades to come.
Interested in learning more about how innovative retailers are approaching the challenges of COVID-19? Sign up for our webinar on Thursday 5/7 at 2pm EST, featuring retail leaders from Famous Footwear, Violet Grey, and Summersalt.