Is there hope for retailers in the current post pandemic digital age? What retail business strategy can retailers adopt to survive and thrive in an era dominated by online brands?
Things certainly hasn’t been easy for traditional brick-and-mortar retail brands.
From the rise of digital e-commerce giants like Amazon, Alibaba, and their ilk to wave after wave of Covid-19, retailers around the world suffered virtually nonstop.
However, all is not lost if you are in the retail sector.
Thanks to the book Retail Recovery — How creative retailers are winning in their post-apocalyptic world, I’ve learned how retailers can truly win in an e-commerce first post-Covid age.
In this article, you will learn of the highly creative ways in which retail businesses are shaping up for the “new normal.”
While some of these retail business strategies involve venturing into e-commerce, many go way beyond that.
But first, let us look at how the rise of online shopping coupled with the global pandemic transformed how people shop, live and play.
E-Commerce, Gen-Z and COVID-19 — A Triple Whammy
Even before the pandemic hit, physical retailers like Sears, Kmart, Toys ‘R’ Us, and more were already in decline.
Straddled with the high costs of distribution, they failed to compete with e-commerce juggernauts. Companies like Amazon, Lazada, Alibaba, JD.com, and others could sell cheaper, faster, and more conveniently than traditional retailers.
The newer generation of consumers—Millennials and Gen-Zs—had less discretionary income than before, and hugely favoured the lower cost of online shopping.
Covid-19 drove the knife in further, with travel restrictions, social distancing measures, and lockdowns killing numerous non-essential retailers.
Malls were similarly affected, with many of the biggest REITs (Real Estate Investment Trust) registering share price losses.
The New World of Omnichannel Retail Strategy
Is it all gloom and doom for retailers? Not at all.
Several brands have not only survived but thrived, recording unprecedented growth and sales. They include brands like Nike, Bonobos, Aerie, Gymshark, as well as clicks-and-mortar retailers like Target, Walmart, Southern Co-op and Best Buy.
In particular, online marketplaces, e-commerce savvy retailers, and direct-to-consumer brands did exceptionally well in the pandemic.
Digital Retailing as the Backbone
What changed for the new stars of shopping was this:
- E-commerce becomes the “backbone” for the transactional side of the business, being lower-cost, more stock-efficient, more accessible, more convenient, while offering greater choice.
- Physical stores becomes the experiential side of the business, functioning as three-dimensional ‘live’ spaces ideal for brand theatre, community building, education and customer service.
Let us now look at how they have implemented these new retail business strategies for their brands.
From Goods to Services
Successful new retailers focus on delivering services rather than moving boxes. They seek to address consumer’s real needs—seeking ‘fitness’ rather than buying yoga pants—and fulfill them both online and offline.
A great example here is Lululemon, which provided free Yoga lessons, running clinics, and fitness classes onsite, and online when the pandemic hit.
Thus, the new retail business is focused on providing solutions to customer problems rather than selling products.
Customer Pillars of Retail in the Digital Age
Brands that do well also consider how their customers feel, using a combination of the following:
- Care: Going the extra mile to make them happy or giving sufficient time to each customer (eg Nordstrom and its legendary service).
- Individual Recognition: Use technology and customer data to personalize their experience (eg Bonobos’ Guideshop operated by ‘Ninjas’ who made hour-long appointments with customers to explore their needs and tastes in clothing).
- Involvement: Gets customers involved in the life of the brand, while seeking their feedback (eg Womenswear brand Everlane, which gets customers to co-design new products and help with fitting and testing).
- Community: Make them feel part of a larger community (eg Gymshark, which organises meet-ups and ‘expos’—fan events featuring their favourite fitness influencers).
- Social Cause: The new brands don’t just represent a product, but a cause. They will attract like-minded fans with the same values as their own (eg Aerie, a women’s underwear retailer which positioned themselves as the voice of a new generation, advocating for authenticity, inclusiveness, and body positivity).
Data-Driven Performance Marketing
In the new normal, dot-coms tap on sophisticated methods of collecting and analyzing individual client information to personalize marketing messages for them.
Working with performance marketers, they could track customer behaviours across the entire buying journey—ensuring that each touchpoint is optimized for every individual.
Likewise, retailers that pivot towards a clicks-and-mortar model can also tap on customer insights to better target and personalise their marketing.
Cutting Out Middlemen
Thanks to the Internet, new ‘unicorn’ direct-to-consumer brands have arisen. Vertically integrated, they sell their own products over the Web, and include the following:
- Dollar Shave Club (men toiletries)
- Warby Parker (eyewear)
- Allbirds (footwear)
- Away (luggage)
- Casper (mattresses)
- Blue Apron (meal-kits)
- Birchbox (beauty)
At the same time, big name retailers like WalMart and Best Buy has also gone into private label. By doing so, they can reduce their intermediary (wholesalers, distributors) costs, while taking advantage of their own shelf-spaces.
Many e-commerce giants are also doing the same, with Amazon and Alibaba launching their own private label brands.
Rise of Online Marketplaces
Emboldened by the successes of e-commerce giants, major retailers are developing their own online marketplaces as “endless aisles”. Examples include Myers with Myer Market, Next, Best Buy Canada, Office Depot, Kroger, and many others.
The advantage of these marketplaces is that you don’t even need to stock up! Just get the brands that wish to list on your marketplace to do so. (See Lazada and Shopee in Singapore.)
Apparently, you can now tap on “plug and play” Marketplace applications like Marketplacer, Code Brew Labs, Aracadier, Dokan and more to build your own online marketplaces.
From Shops to Clubhouses
With sales going digital, retail shops have transformed into clubhouses or “experience hubs.”
These are focused on customer recruitment (not transactions per se), and offer…
- Edutainment: Learn a new skill, learn about wines (Rose Mansion), pick up lifestyle tips, or watch a performance, or meet your favourite influencer
- Showrooming: Try on different products in different sizes or fits, pick up your online ordered products, or use iPads and other tech to mix and match
- Experience: Shoot a basketball hoop (Nike), play in a skate park (Vans), or experience gourmet chocolate bars in unique flavours (KitKat Chocolatory in Seibu Department Store, Japan).
- Community Gatherings: Stores, both their online and physical equivalents, should function as community clubs. An example is Itzy Ritzy (stylish maternity accessories), which provides educational content on motherhood on their website, feature parent profiles on their blog, and host live events in retail outlets.
Case Study — “A Living Magazine”
A good example of a brand that combined theatricality and spectacle with shopping is 10 Corso Como in Milan.
Conceived by fashion editor Carla Sozzani in 1990 as a “living magazine,” editorial choices in fashion, food, music, art, literature, lifestyle, and design are displayed in gorgeous setting.
The space includes a gallery, bookshop, exhibition area, library, garden cafe, research boutique and hotel! This concept was so successful that it was sold to a public company for 30 million euros in 2017.
From Retail Assistants to Stylists
With all that’s happening above, shop assistants and customer associates have transformed into consultants and stylists.
Focused on Customer Relationship Management (CRM) in the truest sense of the word, they spend time attending to customer needs as opposed to pushing products.
Case Study: REI Co-op
A case in point is REI Co-op, a Seattle-based outdoor clothing and equipment brand. The company bucked the trend in retail pre-Covid, achieving a record US$3.12 billion in sales in 2019.
Sales associates who are hikers and climbers themselves stand by the door. They greet customers, say goodbye to them, and enquire about their specific needs or interests. They will then tell them exactly where to go, and even alert their other colleagues to guide them to the right destination.
In short, retail associates have now morphed into star hair stylists. Most clients go to the same stylists for years, following them wherever they go. The same thinking should apply to retail associates in the future.
Technology as an Enabler
Given the need for more customer contact and service, technology can then be used to “make stores more like websites.”
Smartphone detectors can pick up individual ‘pings’ from WiFi/bluetooth apps, and track individual customer’s movements through the spaces. They can show the footfall past the store, number of people coming in and going out, time spent in store (“session duration”) as well as those who leave quickly without engaging (“bounce rate”). These trackers can even measure the level of sales conversions.
Technology can also help to automate the grunt work—with Radio Frequency Identification Devices (RFID), checkouts can be automated. Smaller stores can also be built now that purchases are made online, reducing the need to stock and arrange merchandise ad nauseum.
Robots can also help to track and detect the need to restock shelves, while digital shelf edge technology ensures that labels are automatically updated.
Retail-as-a-Service (RaaS)
Finally, with the shift towards “phygital” (physical + digital) retail, what would be the new role for property management companies?
Answer: Offer Retail-as-a-Service (RaaS), focusing on smaller, temporary “pop-up” shops, with modular designs, and digital “plug-and-play” spaces.
This greatly helps to reduce the set-up costs for digitally native brands keen to experiment with their own temporary physical shops.
Several dedicated companies now offer RaaS, including Neighbourhood Goods, Showfields, Bulletin, B8ta, and Anchor Shops.
Case Study: Neighbourhood Goods
Neighbourhood Goods features an ever-changing landscape of “thoughtful, exciting and contemporary brands, stories and events.” The firm offers a selection of 32 direct-to-consumer and other innovative brands, in 14,000 square feet of space, which is divided into smaller modular spaces. Leases range from 2 to 12 months, with a fixed fee per month.
In return, the company provides all the staffing, checkout mechanisms (online and offline), as well as access to a real-time data dashboard with metrics like customer flow, dwell time and conversions.
Conclusion
With all the demands imposed upon it, retail will re-emerge like a phoenix from the ashes of e-Commerce and Covid-19.
The new retail revolution encompasses both disintermediation and reinvention. Brands that do well here tap on online marketplaces for sales, and offline stores as experience centres. Retail associates will turn into personal stylists, with stores becoming the gateway to learning about the brands.
Retail brands — both online and offline — will also act as the nexus of brand communities. They will attract like-minded “club members” who have a stake in their success, and embrace them as their own.
