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What’s In Store? The Future of Retail in a Post-COVID-19 World

The lockdown and economic fallout caused by the emergence of the novel coronavirus pandemic has had far-reaching consequences for many industries. While for some industries interruptions to consumption habits may prove to be temporary, some trends affecting the retail industry look set to become more enduring or even permanent.

COVID-19’s Early Impact on Retail

  • Discretionary spending has contracted sharply, down by almost 9% in March 2020
  • Sharply reduced demand for new apparel, footwear and accessories
  • May 2020 retail sales data for the US showed a 17.7% increase—a new record—but more time is needed to understand whether this is an anomaly reflecting consumers unleashing pent-up demand from March and April or if it’s the beginning of a new upward trend
  • eMarketer forecasts US total retail sales will fall more than 10% in 2020 and won’t return to pre-COVID-19 levels until 2022
  • eMarketer is also calling for e-commerce sales to increase by 18% this year
  • Coresight Research predicts between 20,000 and 25,000 store closures this year, of which 55% to 60% are within malls—a new record
  • The previous high was a loss of 9,300 locations in 2019 

Even before COVID-19 came along, retail has been engaged in a gradual, decades-long transformation. However, the pandemic has rapidly accelerated many of the changes that were either already happening or inevitable. Retailers must now quickly adjust and prepare for new customer experiences in a post COVID-19 world. 

The Impacts of COVID-19 on Brick & Mortar Stores

As noted above, traditional retailers were engaged in a battle for survival long before the pandemic emerged. Many vanguards of the brick-and-mortar retail world have been closing stores and shedding debt and lease obligations through bankruptcy proceedings for years. To date in 2020, we’ve seen JCPenney, Neiman Marcus,  J. Crew, Stage Stores, Pier 1 and Tuesday Morning all announce bankruptcy. Other venerable names, including Brooks Brothers, a leading force in apparel retailing for over 200 years, are said to be appointing advisors and may not be far behind.

 

Of course, bankruptcy can be an opportunity to regroup, reorganize, recapitalize and, hopefully, emerge as a more viable competitor. Many of the bankrupt retailers will return with a leaner physical footprint and fewer employees. For those who didn’t get their digital footprint and e-commerce strategy right the first time around, they’ll have a welcome chance for a reset.

 

There are other implications for the brick-and-mortar retail landscape, including issues impacting operational complexity and the supply chain as well as what to do with the overbuilt and now unneeded shopping mall space throughout America.

 

The oversupply of mall space has been worsening for decades. Changes to the US tax code enacted by Congress in 1954 encouraged mall development by permitting accelerated depreciation. As a result of this financial engineering, the growth rate of shopping malls between 1970 and 2015 in the US was twice the rate of growth of the population over the same period. In recent times, fewer shoppers were heading to malls. In the period following the financial crisis of 2007-2008, mall visits declined by 50% and have continued to fall since even as the economy rebounded.

 

Fashion and apparel retailers are now stuck with high inventories of the wrong season’s products, having been forcibly closed since the first days of Spring. This not only drives up storage costs but can also contribute to the tendency for retailers to sweep away distressed inventory through deep discounting. The problem is, when consumers become accustomed to buying at a discount they are less willing to consider paying full price again when the economy recovers, as we saw following the Great Recession twelve years ago.

The Impacts of COVID-19 on E-commerce

As destructive as the pandemic has been for traditional retailers, it’s been the opposite for e-commerce retailers. While there is a long-established trend of switching shopping habits from brick-and-mortar retailers to online stores, COVID-19 has accelerated this change considerably. In just three months, it caused movements that may have taken five years to manifest without the tailwind of a pandemic.

 

Italy, the European country with the highest number of infections and deaths from COVID-19, has seen e-commerce transactions rise 81 percent since the end of February. Across Europe, an additional 13 percent of consumers said they would browse online stores for the first time. While in China, large groups of new customers—specifically those aged 36 and above and those living in smaller, less prosperous cities— have begun shopping online in greater numbers.

 

But for all of its growth and potential, online shopping misses out on at least one aspect of in-store shopping— the impulse purchases that take place in-store. 89% of women and 78% of men report adding additional items to their cart during an in-store visit. 

How are Retailers Responding to COVID-19?

With the decline in in-store traffic, it’s no surprise most retailers have seen a corresponding dip in their sales. But there are opportunities to be found and nurtured with services such as curbside pickup and BOPIS (Buy Online, Pick up In Store).

 

These hybrid marketing approaches offer convenience to consumers by allowing same-day (often within two-hour) collection with no additional shipping or handling costs. However, they also create new challenges for retailers in the areas of labor, inventory management, software and point-of-sale systems and even parking lot space utilization. 

 

Orders placed online for collection by these methods increased by 208% in the first three weeks of April 2020 compared to the same period of 2019. They are proving to be a popular choice with consumers who may wish to continue shopping this way even when regulations can be relaxed and stores can fully reopen. It remains to be seen whether retailers will eventually try to de-emphasize these methods due to their higher costs. 

 

Many of the hundreds of thousands of new jobs created by grocery retailers in recent months have been to staff these hybrid shopping models. And while that’s a welcome storyline at a time when millions of American workers have been furloughed or displaced altogether, time will tell whether grocers will continue to bear the additional costs when other options are once again viable.

What Will the Future of Retail Look Like?

Retailers need to evolve by redefining the role of the store and integrating technology at the right points in the customer journey to streamline and improve the shopping experience. 

 

We hope to see more integration of contactless, self-serve technology that allows customers to navigate the store and find what they need as quickly and safely as possible. Already in some retail environments, such as Apple stores, customers are able to make purchases from anywhere in the store rather than gathering in a line at a register. Integrating voice assistants and mobile technologies can assist customers in achieving their goals inside the store with innovations like wayfinding—directing customers to the aisle displaying the products they’re seeking. Elevating the customer experience and improving customer service will be key.

 

The opportunity exists to better integrate the online and in-store shopping experience. For example, customers could engage with content about a styling experience or menu plan online then be able to purchase everything needed conveniently pre-packaged and ready for purchase in the store.

 

Even once COVID-19 is somehow controlled, consumers are likely to respond well to open spaces, or at the very least the feeling of openness. Store layouts need to be reworked for a better flow of customers.

 

In certain areas of retail, it’s possible we could see wider use of some of the concierge-style services luxury merchants previously reserved exclusively for their VIP customers. Personal shoppers, private or semi-private store access and other exclusive privileges could become additional, optional elements of the shopping experience.

 

At Tallwave, we see the challenges facing retailers as opportunities to reimagine a new shopping experience. If you need help thinking through the evolution of your retail operations, give us a call. We’d welcome the chance to work with you to evolve your customer experience and keep your customers coming back time and again.

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Our Unique Approach to Successful Businesses

Successful partnerships help companies innovate and grow. However, choosing a partner is often an overwhelming process because it’s difficult to differentiate among the options. Most agencies, consultancies, and vendors operate with a mindset of doing exactly what a client asks for, often leading to identical approaches, with little distinction other than price. If you’re evaluating primarily based on price, you may be fine with all your potential partners taking similar approaches, but in the end this strategy is short-sighted, narrow minded, and often backfires in the long run.

 

At Tallwave, we take a different approach. Whether you’re a current or future client, we apply a curious and empathetic mindset to all of our work. This often means we ask a lot of questions upfront, bring in diverse team members from multiple disciplines, and seek to put ourselves in our client’s shoes. At times, we even challenge client assumptions. While this process takes a bit more discovery, it allows us to focus our efforts on the right tactics from the very beginning, which yield better long-term results and help build stronger relationships between us and our clients.

 

Whether you’re a current or future client, we apply a curious and empathetic mindset to all of our work.

Here’s our approach to successful partnerships:

We Ask Plenty of Questions to Understand Our Client’s Needs

From the initial interaction with a potential new client, we seek to understand their unique challenges and needs. We may start with the client’s request, but we also take the time to dive deeper and understand how the request truly meets the needs of the business.

 

For example, one of our media clients, who relies on readers to become contributors, recently asked us to develop a custom application to help them recruit and onboard up to 1,000 new content writers per month. After a few collaborative sessions with their team, we realized their biggest challenge was making the self-serve application more user friendly and intuitive for on-boarding writers.

 

Given this knowledge, we decided to focus on redesigning the onboarding experience and leveraged Salesforce for the backend management instead of building a full custom application from scratch. Not only did this approach speed up their timeline, it also cut development costs in half, which could then be reapplied to other critical areas of the build.

 

Ensuring our client’s success is always our main priority at Tallwave. We achieve this by being mindful of the client’s goals and challenges in order to gain a deeper understanding of their business. In the end, the outcome may not be what the client originally had in mind, but this approach allows them to save time and money while still reaching their business objectives. 

 

Ensuring our client’s success is always our main priority at Tallwave. We achieve this by being mindful of the client’s goals and challenges in order to gain a deeper understanding of their business.

We Switch on a Dime When Circumstances Change

As a strategic partner, it’s our responsibility to adapt quickly as trends and shifts occur in the marketplace, whether it’s a new technology, regulation changes, or something much bigger like COVID-19. Not only do we have to understand the changes, we also have to be able to rethink priorities and help clients adapt so they can reach their bottom line.

 

While all of our clients were impacted by COVID-19, several were impacted more than others. A crisis like this could have been devastating for one of our food distribution clients, whose entire business revolves around providing food supplies, goods, and services to small restaurants. The pandemic forced all restaurants, regardless of size, to completely flip their business models – and when you’re in the business of servicing those restaurants, you really have to flip your business plan.

 

Our client had to quickly become a resource for their restaurants. Working with our client, we quickly created a multi-step action plan and resource center that detailed ways for restaurants to transition to a fully-digital presence. 

 

Our plan included instructions and guidelines for Google My Business (GMB) posts so restaurants could clearly advertise their availability for take-out or delivery, while also informing potential customers of their location and updated business hours. We provided recommendations to prepare restaurants for take-out only services, including prioritizing safety while working with third-party delivery apps, eliminating touch points between employees, remaining transparent with customers, and updating their online presence. We even provided a few strategic ways restaurants could get creative with their offerings. 

We Have a Continuous Focus on Outcomes

We’re always looking for new opportunities to drive growth for our clients.

 

As an example, we recently worked with a commercial printing client on a full-scale rebrand after they acquired several competitors. Through the process of diving into the business, we identified an opportunity to drive revenue by diversifying their customer base.

 

Even though it was not part of the original scope, we did an analysis into our client’s loyalty program and found that two-thirds of the company’s revenue came from only 10-percent of their customers. Going deeper, we found that their messaging, content, and marketing tactics were really only geared to one persona.

 

With this knowledge, we were able to recommend a strategy to build an experience and conversion path for other personas.

 

By helping every client we work with develop a better understanding of their business and the market landscape, we’re able to root out and address assumptions early to bring fresh perspectives and ideas that focus on the right challenges. It’s an approach that takes a partner who appreciates this type of pushback, but we’ve found that the clients who are open to alternative approaches and think outside the box can adapt their strategies to be more successful in their endeavors. Our relationships with clients are always more fruitful when we’re squarely focused on what matters most – making our clients wildly successful.

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Badass CX in the Time of COVID-19

To say that COVID-19 has changed the way we look at things would be a gross understatement. News cycles continue to churn out information, and we —as brands, consumers and humans in general— continue to respond.

 

We’re all human. We’re all being impacted by this. 

 

As marketers, we’re seeing the customer journey change quickly and often across industries and market segments alike – and many of these changes may well be permanent. 

 

The path forward isn’t clear by any means, but the brands that quickly and proactively adapt will survive and hopefully, come out of this stronger. Customers have begun demanding transparency, recognizing, and responding to authenticity and social responsibility now more than ever.

 

Last week, we polled our team to ask if they’ve had any personal experiences with a company navigating changes with them (as customers) really well in a COVID-19 world. Did any brand demonstrate an ability and  commitment to adapt their customer experience to meet the rapidly evolving moment? We wanted to know.

 

The answer was an overwhelming, “yes.”

 

In the responses, we saw four key themes emerge, illustrating just how companies are adapting their CX to meet the needs of their customers.

Theme 1: Adapt  with Empathy

This situation stinks for everyone. Now is NOT the time to nickel and dime. It may feel counterintuitive, but it’s not the time to make things difficult in order to protect your business.

 

Now is the time to break what are traditionally non-customer-friendly practices (ahem…airlines and travel).

 

By the way, this isn’t just a B2C issue. Business owners and business stakeholders are people too.

 

  • Shopify  has shown that it is dedicated to helping small businesses. Amongst other things, the brand made physical and digital gift cards available on all new and existing Shopify plans, and committed to making $200 million in small business funding available to lend some much needed support to the community.

  • OpenTable is recognizing the massive impact the restaurant industry is experiencing. They activated their customer base and sent an email to users encouraging support for the community with examples on how we can help restaurants during these times. It came across as altruistic while providing actionable information.

  • Chicago Cubs/MLB: When the remainder of Spring Training was cancelled, an email went out from the Cubs organization proactively detailing that refunds would be issued for all purchased tickets, exactly how they would be received, and the timeframe refunds could be expected in. There was no action needed from the customer. 

“It was nice to receive everything in one email and not have to worry about contacting anyone to get a refund.”

 

Westin helped tackle cancelling non-refundable reservations with no hassle, in a matter of minutes.

 

After the announcement was made that Broadway would be going dark, Telecharge proactively got cancellation emails out by the end of the day, making clear its plan to issue full refunds with no action needed from the customer.

 

American Airlines flights to New York (that were booked with points, no less) needed to be cancelled quickly, in the eleventh hour.

 

“I had a really long wait time, but once I was on they were nice, quick, and frictionless to get the points returned.”

Theme 2: Adapt Proactively 

Consumer behavior has been changed, for sure in the short-term. Better to be there first, anticipate the changes and make proactive adjustments if you can.
 

  • Blue Apron: With news of COVID-19 beginning to take off, Blue Apron’s business spiked and the brand was quick in communicating with its customers weeks in advance about the changes needed in order for everyone to be served within their dietary restrictions.
    [Blue Apron’s] customer service has also been helpful since I wanted to change the serving sizes on my orders.

  • Costco: “Staffed up for the rush and changed their business workflow to appease the customers and maintain sanity.”

Sanity may be a relative term, but we applaud the company for doing its best in these strange times.

  • Booty’s Burgers and Wings
    “It’s our favorite local wing place and we wanted to help them out. They have a system set up for pickup that limits any contact. Very fast, easy, and tasty!”

     

  • Texas Roadhouse quickly deployed a very efficient system for pickup where you didn’t even have to get out of your car – and had a good takeout deal too.

  • Pat Tillman Foundation: Instead of cancelling their charitable run in April, the nonprofit is transforming it to be a virtual run. 

“It's pretty cool. They're encouraging users to share as they run. Great way to keep the momentum virtually!”

Theme 3: Adapt Altruistically 

Quickly developing an altruistic model, or leveraging one that already exists. 

“Opportunistic” doesn’t have to have a negative connotation if it’s true to your brand, has an authentic voice, and strives to be helpful to the situation.

  • Allbirds quickly spun up a donation model in which they implemented a buy one, donate one model for getting shoes to frontline healthcare workers.

Their statement read: “Beginning March 24th and running while supplies last, you can bundle any shoe purchase with a donation to immediately supply a pair of Wool Runners to a healthcare professional who’s already reached out to us. Don’t need a new pair yourself, but still want to help? That’s an option, too.”

 

  • TOMS has a good campaign running right now centered around how “we can all use some extra comfort” and that we’re in this together. The shoe brand has a sale on sale for its slippers. 

“The messaging was tactful and helped with some normalizing, [giving] a break from seeing only COVID in my news feed.”

Theme 4: Adapt Radically 

The badassiest of all. There are many, many companies who are pitching in to help, but two specific ones came up in our office poll. One, in particular, is a local company that is no doubt further solidifying its already strong brand, but winning new customers and brand advocates.

 

The “doing good is good for business” mantra has never been more true than right now. 

 

O.H.S.O. and Fruit Brands, et al will reap the benefits of doing the right thing today.

 

No doubt, the impact of this virus will continue to grow. And the changes we’re all faced with making today will live on. Since we’re all in this together, let’s continue to make those changes for good.

How has your customer journey been impacted by COVID-19? 

What has your company been doing to adapt  during these times?