INSIGHT

Beyond coronavirus: a retail existential crisis

Luke Ritchie Luke Ritchie

Any retailer which simply turns the lights back on and reverts to its traditional model post coronavirus is doomed.

Traditional retail – from quaint shopping villages through to arcades and big centres – are facing challenges like never before. After years of declining foot traffic in shopping centres as more customers move online, retailers must now contend with a coronavirus catastrophe which has emptied shops altogether. In order to survive in the future, retailers must innovate and embrace new ways of interacting with their customers at a pace they may not have anticipated. This is unambiguously an existential crisis.

Prior to coronavirus, technology had already made its indelible mark on retail behaviour.

But as online shopping has exploded, so has traditional shopping declined. Fewer customers are entering department stores and shopping malls, with retail outlets closing by the thousands. Forbes Magazine reported more than 9,300 closures during 2019 in the USA alone, with similar numbers predicted for 2020. Australia has some of the highest numbers of retail shop space per person in the world, is likely to follow suit. I’m sure no one has missed the growing numbers of “For Lease” signs visible across the country. And this is all before coronavirus struck.

In response to COVID-19, governments around the world have enforced varying levels of social and commercial lockdown, with the vast majority of people remaining in their homes. Working from home, learning from home, and largely shopping from home. Non-essential retailers have voluntarily closed their doors, standing down hundreds of thousands of staff. But whilst stores are virtually empty, online shopping levels are through the roof.

However, whilst online retail is flourishing in this unprecedented environment, it can never replace the human interaction and experiential side of shopping.

Customers can never feel the fabric of a dress, or try on a pair of shoes through an online medium. There are virtual apps which allow you to “see” what you would look like in those pair of pants, or “place” that dream rug on your floor, but it’s only indicative.

Humans will always yearn for the physical interaction that shopping provides. I anticipate many will flock to stores once social distancing rules are relaxed. However, given surging online sales, that flock won’t be as big as it was before coronavirus. The competition for returning physical customers will be fierce, so innovative ways of attaining – and retaining – those customers will be vital. Any retailer which simply turns the lights back on and reverts to its traditional model is doomed.

We should expect to see a renaissance in shopping as an experience.

It is something that has been discussed for a decade or more but now is crunch time. All retailers, big and small, must drive customer stickiness like never before, ensuring their brands speak directly to their customers’ needs. An example I love is Nike’s Adventure Club – a subscription service where Nike ships new sneakers to children multiple times per year as they grow. It takes the pain out of buying children’s shoes and ensures customer loyalty. This will become more prevalent.

Stores will become less about simply displaying product and more about experiencing products. Samsung recently opened a cavernous experiential store in New York where customers are handed a Samsung digital device upon entry which guides them through the space, linking with several virtual reality installations along the way. Department store Nordstrom provides shoppers an interactive app where customers click on the clothes they would like to try on, with the team then preparing a personalised changing room with all nominated items, all while the customer sips on coffee. Seamless integration of digital and physical mediums will become commonplace, with digital apps assisting customers with store navigation, sizing, individualisation and paying for a product in store.

Lower customer traffic will drive some retailers to reduce their store numbers and selling space, whilst at the same time increasing their online fulfilment capability. It’s a common complaint that every shopping centre looks the same – expect this to change. You will still be able to experience your favourite brands in meaningful ways but there won’t be a storefront in each of the 1630 major shopping centres around Australia. Your products will be shipped faster and returns will become increasingly less onerous for the shopper.

To succeed in this new environment, smart retailers must use their remaining time in isolation to prepare for the resurgence in customers desperate to satisfy their shopping urge – dormant for so long.

They must innovate with new ways to attract customers. They must be creative in their interactions with customers. And they must embrace experiential retail and the human need for social interaction. There is not a moment to lose.

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