The coronavirus has turned retail on its head. Once we get through the pandemic restrictions, these five trends will drive retail over the coming years.

1. Shift from physical retail to online

Consumers are embracing online retail like never before. Australian retailers have seen online sales double in recent months as Covid-19 restrictions have impeded bricks-and-mortar store traffic. Supermarket giants Coles and Woolworths were so overwhelmed by online sales demand in April that they had to temporarily disable their websites.

Online sales now comprise around 12% of total retail sales in Australia, up from 7% last year. In the United States, online sales were 15% of total sales before the pandemic, and are now well above 20%. We can expect similar growth in Australia, as retailers who have embraced online are rewarded with strong results and sticky customers.

2. Reduction in store selling space

With customers shifting their purchasing behaviour from shopping centres to smartphones, many retailers are finding that they have too much physical selling space and not enough foot traffic. Wesfarmers and Woolworths have announced closures of Target and Big W stores, with department stores Myer and David Jones facing similar pressures.

But it’s not simply a matter of closing stores. Rather, it is rebalancing the selling portfolio. We should expect to see more smaller-format stores, with curated offerings. Product ranges will be tailored to local customer communities, and personalised to individual customers through enhanced loyalty schemes.

3. Forensic focus on inventory

In retail categories such as fashion apparel and footwear, product ranges are planned many months in advance – even years – resulting in excess stock holdings for retailers after Covid-19 lockdowns. Here in Victoria stores are still closed. With orders placed in 2019 still arriving at the back door, and no customers coming in the front door, stock holdings are at peak levels. Customers will be enjoying Boxing Day-like sales from now until Christmas!

The coronavirus shock will drive a forensic focus on better forecasting of inventory levels. Retailers are already investing in artificial intelligence and machine-learning algorithms to help drive orders specific to customer demand, even forecasting sales to individual online customers. Where smart retailers once hired MBAs they are now employing data scientists.

4. Automation of online fulfilment

Most retailers are using their stores as mini-warehouses to help fulfil exploding online order demand. We’ve all seen supermarket team members wielding large online picking trolleys down aisles as they pick online orders. This manual process produces pick rates of up to 70 products per hour.

Savvy retailers are investing in automated fulfilment technology which can enable pick rates of up to 400 products per hour, with robots doing the picking and packaging. The efficiency gains compared to manual operations are unambiguous, and these automated solutions will underpin profitable online growth for years.   

5. Digital workforce

It’s not only customers who are embracing digital. Employees too, are using digital networks to maintain contact, share ideas and support. New digital applications are revolutionising the workplace, and all using employees’ own smartphones.

Training and compliance can be streamlined through the use of videos shared directly from head office to the shop floor. Communications are streamed directly from the CEO to employees’ phones. And rostering can now be “uberised”, with employees nominating which stores and shifts they wish to perform, and trading with other team members to drive a truly engaged workforce. 

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