The retail industry is looking at the largest upheaval and change since the Great Depression and World War II. It’s impacting every element of retail operations. This paper looks at possible scenarios of the near future and strategies to surviving and thriving. We look at strategies for dealing with each scenario.
At iKoss, we see uncertainty in the coming months and year. No one knows for certain how this is going to turn out and what we will be required to do as retailers. Just this week we are beginning to see state governments communicate multiple stage reopening plans. Pennsylvania announced on April 22, 2020 three phases based on number of cases per 100,000 people, testing capabilities, and contact tracing capabilities. These will be implemented on a county by county basis.
They are as follows:
- Red – Current state of only essential businesses operating.
- Yellow – Some in-person businesses reopen if they can maintain social distancing and other requirements. It’s not clear yet whether this will include types of retail. There is commentary about not having large crowds coming together which we interpret to include shopping malls. Some states are letting large enclosed malls re-open.
- Green – Opening of most businesses including retail. It’s noted by Governor Wolf, until a vaccine or cure is widely available, elements of the current social distancing guidelines will continue even for counties in green status.
New York state has announced non-essential businesses will be required to submit a reopening plan to the county government addressing policies and protocols.
Given the fluid situation, we believe there are sensible changes, training and policies that can be implemented at low cost. All brands are working on figuring this out right now. There are creative things happening at the essential retailers we all can learn from.
There are different situations that could develop based on science and technology, public sentiment, government policy and economics. We break these into three possible scenarios.
Scenario One: Sunny Day Optimistic
In this scenario we see a two to three-month disruption and then a quick return to near normalcy. We are seeing this in some countries further down the curve than the United States. They had a strict quarantine and are now beginning to open up businesses and daily life to their citizens. As of this writing there are only small indications of further infections. However, it’s too early to know for sure.
Medical technology research and developments are accelerated, testing and therapeutics are developed at scale. Contact tracing combined with quick turnaround testing provides a method of stopping spread without general quarantine. If testing and therapeutics are implemented by the third quarter of 2020, this would have significant impact on the confidence and attitudes of the general public. We would see the most challenging aspects of social distancing being relaxed. The majority of the public not personally impacted will feel they have turned the corner and are comfortability safe. They essentially have been restricted from shopping for about six-months, creating a pent-up demand for non-essential goods.
The US government stimulus works it’s magic and people are able to recover their financial lives quickly. Jobs come roaring back for furloughed workers and the general unemployed. Most service and hospitality businesses survive and return to normal. The economy only experiences a V shaped recession.
When shopping returns it could mean strong sales and banner holiday sales. This is the scenario we all go to bed dreaming of, right? It’s the scenario we truly wish will become a reality for all of us.
Scenario Two: Substantial Impact
Six to eight-month disruption including slow reductions or reimplementation of social distancing requirements impacting holiday sales. This may also be what health officials call the W or virus resurgence of infections causing a second wave of stay at home orders.
Technology, therapeutic treatments, and testing doesn’t come on-line quickly. This prolonged pandemic without timely mitigations could lead to many more deaths and extreme isolation. This has lasting impact to the public’s psychology and attitudes. It could change the world in fundamental ways.
Politics get in the way of an effective government response. This results in too little stimulus to address the contracting economy. Many people lose their jobs and savings. Much wealth is lost.
This affects customer attitude and their ability to spend money especially on premium and luxury goods. The demand for non-essential goods doesn’t return and holiday sales are significantly below prior years.
Scenario Three: It’s Bad
This is the Ghostbusters bad scenario.
Egon: Don’t cross the streams.
Egon: It would be bad.
Peter: I’m fuzzy on the whole good/bad thing. What do you mean “bad”?
Egon: Try to imagine all life as you know it stopping instantaneously and every molecule in your body exploding at the speed of light.
Raymond: Total protonic reversal.
Peter: That’s bad. Okay. Alright, important safety tip, thanks Egon.
We can’t plan for this right now. So, let’s focus on strategies for surviving and thriving the first two scenarios. We believe that we’ll land somewhere in-between scenario 1 and 2.
Strategies for Scenario One
- Rethink in-store visits around the new short-term realty of social distancing
- Make a compelling experience with less fixtures, displays without touch and feel, and a process for no-contact purchase
- Signage at entry sets an empathetic positive tone, clearly communicates key messages
- Tell stories visually and words via signs, exiting digital panels, and audio
- Control customer flow with floor stickers, signage and fixtures including one-way only pathing
- Space people six feet apart in a natural comfortable way
- Promote eCommerce options. Work to engage customers to get connected.
- This crisis has moved general technology adoption forward 5-10 years
- Set on-line policies and services to encourage customers to take advantage of convenience and additional safety
- Look at the in-person shopping and buying process for places to inject eCommerce opportunities in a friendly and non-pressure approach
- Buy on-line pickup in store (BOPIS)is going to be an important process
- There have been large gains in adoption of the above technology and processes by general consumers
- Ensure employee and public safety. Do not contribute to increased infections risk.
- Hygiene and cleaning procedures are manageable for employees. If it’s burdensome for them to comply they won’t.
- Budget and plan for more labor cost and lower sales per unit of time. It’s reality.
- Hand washing readily available to employees. This should include hot water, ample soap supply. Hand sanitizer readily available.
- Follow CDC, OSHA, state and local guidelines carefully. There are specific cleaning solutions and requirements to be effective against this virus.
- Provide employees all personal protective equipment needed. It’s a mistake to make this an employee responsibility.
- Minimize investments in changes. Cash is in short supply and this phase of social distancing won’t last forever.
You will want to address much of the above right away. For more detail strategies and examples see our White Paper: Principles of Retail Design and Operations with Social Distancing and Hygiene.
Strategies for Scenario Two
Having implemented the sound approach based in Scenario One, we have more challenges ahead. The impact of the pandemic has resulted in a tangible shift away from frequent in-person visits. This is because people have a heightened level of fear and anxiety about the virus in public spaces. Even after the risk is gone, the fear of contagion and new distancing behaviors become a social norm. A new reality for retail in this scenario.
- Invest in eCommerce, creating best in class experiences and efficient processes
- Reconfigure layout through the anxious eyes of customers who have been deeply impacted by multiple periods social isolation and direct impacts of loved ones during the pandemic
- Invest in employee training to turn them into brand ambassadors and great storytellers. They will also need to be technologically savvy.
- Embrace virtual customer interactions. This could include video conferencing, virtual store tours, live chat support, live casting of store events.
- The public embrace of virtual technologies resulting from the social distancing of today will make the average customer much more comfortable using them in the long-term.
- Reduce the footprint and the number of physical locations. Customers will come for experience and then buy on-line or instore kiosk with next day delivery
- Physical stores will be placed in the best retail locations configured for experience and brand building. No hunting and picking of product.
- Take advantage of inventory free retail strategies
- Invest in Information Technology, move as much talent in-house
- Invest in warehouse and delivery processes
Now is an opportunity to be there for your customers providing empathy, care and meaning. You can make deep lasting connections and impressions with customers if you play the long game. Don’t be short sighted.
Blair Koss has 25-years-experience management consulting in retail, hospitality and airlines. He is co-founder of Rosie’s Workshop, a vertically integrated brand of home décor.