Covid-19 And Its Impact on The Retail And Ecommerce Sectors
Business as usual. Streets full. Christmas parties in full swing. Shops crowded. The economy looks good. Unemployment’s low. What could go wrong?
Everything, as it turns out.
As of December 2020, the world has been in (and out of) lockdown for 10 months. The global economy has crashed. A recession is likely. All industries have been affected. Especially retail. Shops remain closed. Some permanently. Consumer spending is down. And in 2021, things are unlikely to change anytime soon.
It has been a true annus horribilis.
Restaurants, cafes, cinemas. Public events. All are struggling. Even as lockdowns are eased, and retail spending briefly rises, new lockdowns are inevitably called. For every moment of respite, there’s another setback. Industry will take years to regain lost ground.
Some, however, have suffered less as consumers stay at home. Online transactions have risen (in the second quarter) by nearly 45% compared to the same period a year ago. But not all eCommerce businesses are Amazon.
And not everything is ideal. Today, over fifty million Americans are unemployed. Many others are furloughed or underemployed. Some twelve million (so far) have been sick from COVID-19. Throughout the European Union, unemployment is expected to rise to 8.6% in the new year. Youth unemployment is already over 17%. Spain and Italy are being hit the hardest.
People are, for obvious reasons, holding on to their money. As the holiday season kicks in, however, spending is likely to increase. Especially for online sellers. Though, in the US this may not be the case. According to the Boston Consulting Group, the typical holiday spending boost could be much lower this year.
This potential/temporary uptick in sales won’t help most traditional bricks & mortar retailers. Lockdowns and social distancing are keeping them closed and their employee’s home. But they should expect more ‘last minute’ in-store shopping nearer to Christmas. Guaranteed pre-Christmas-day deliveries are limited!
This isn’t to say that the situation is black and white. In many ways, retailers and online sellers are interconnected. Traditional retailers may have a strong online presence. Ecommerce sites use traditional supply chains. But is the coronavirus crisis turning this into a ‘what one hand gives, the other takes away’ scenario?
The Coronavirus is a game-changer
Retail has competed with eCommerce for years. But the COVID-19 pandemic has intensified the competition – even as they face multiple, and similar, threats. Work slowdowns and shutdowns. Delays in production and shipment. Increased costs and revenue delays. Delivery workers can’t deliver orders or stock shelves. Rising economic anxiety. You know the score.
It’s been a tough year. On average, online stores have certainly done better. Some (yes, we’re talking about Amazon) far more than others.
“Coronavirus ‘will be like adding jet fuel to an already exploding segment of retail. Amazon and a handful of others will be the beneficiaries of a windfall.’”
– Doug Stephens, author of “Reengineering Retail: The Future of Selling in a Post-Digital World”.
However, larger retail chains such as Target and Walmart, are performing strong (Walmart’s global revenues increased by 5.2% year on year).
But for the majority of businesses, 2021 will be an ongoing challenge.
Lockdowns and social distancing mandates will continue. This is unlikely to change, even once vaccines are deployed. Supply chains for stockpiled goods (so-called Pandemic Pantries) will remain strained. And bankruptcy and administration will continue to be a real threat. Competition with online retailers will intensify.
Supply chains will be under pressure. Especially as online shopping expands further. Specific areas – such as beauty products, groceries, and alcohol – will continue to boom. Yet those with a limited online presence (luxury brands, in particular) will struggle. And increased production will require a closer look at the health and safety of people all along the supply chain. Without them… well, it’s obvious what will happen.
Welcome to the new normal
“As entire countries come under quarantine orders and consumers around the world start to shun human contact, retailers are scrambling to adapt. They recognize the global response to the novel COVID-19 virus will have a significant impact on their business. They understand the situation is changing daily. And they know they have little time to respond.”
– René Vader, Global Sector Head, Consumer & Retail, KPMG International.
So, it’s clear to say there are more challenges ahead. But you know that.
How we’re living, socializing, working, and shopping is different to a year ago. It’s our new normal. This raises the question of how, in this new world, can you continue to survive… and thrive?
Diversify your supply chain.
Relying on one supplier can hit your business if they halt production. One warehouse? One big problem. If China mandates a 100% lockdown tomorrow that lasts months, how many businesses will survive? Supply chain disruption is a clear danger.
Give thought to who supplies your Tier 1 suppliers. Regardless of where your products are made, raw components come from somewhere. Could they be disrupted? If yes, make sure you have contingency plans.
And take a good look at your logistics routes. If your supply ship cannot dock at Point A, is there a Point B? The coronavirus crisis is resulting in movement restrictions. For people and goods. Ensuring there are more ways to receive, and distribute, your supplies is essential.
Prepare for continuing local, national, and international lockdowns.
You’re based in Hamburg but get everything from Bavaria. Normally fine. But Bavaria just went into full lockdown. So did California. And the Port of Rotterdam in the Netherlands. Now your stock, your employees… even your customers… can’t move.
Risk management strategies must consider this. Can your employees work remotely? How long can you close your doors? Can you secure alternate sources and locations for your goods? Are there newer, innovative ways to sell your products? Is your employee pool able to expand when lockdowns ease and demand peaks? Is your inventory management 100% accurate?
Having the right plans in place, and being highly agile, will ensure your business can cope.
Staying safe as you deal with customers.
Things happen. Good and bad.
Inventory doesn’t arrive. Gets lost. Damaged. Can’t be delivered. You have to close your doors. Or limit how many can enter. Ensure masks are worn. Even hire security.
Some of these challenges have always existed. But the coronavirus crisis is amplifying them. And creating new ones. Lockdowns impact everyone. Some customers are taking it worse than others. This doesn’t mean all lockdowns are 100% restrictive (in Melbourne, Australia you can travel, but only five kilometers from your primary residence). This means your business must adapt. Often day-to-day.
One critical point is the continual effort to keep everyone safe. Even nearly a year into the pandemic, this hasn’t changed.
When customers are in your store, is there adequate space for social distancing? Are hygiene products at hand? Do you have a ‘no mask, no entry’ policy? Are shelves, products, communal areas routinely cleaned?
It’s also essential that safety measures exist for your employees – and that they’re enforced. Whether they deliver goods, are at the register, in the office, or at the warehouse.
In the end, clear communication is key. Especially when you run out of stock and/or cannot deliver it.
Thinking outside of the box
Bricks and mortar retailers are closing doors. Limiting hours. Experiencing empty shops. And needing alternative ways to reach customers. To be where your customers are (mostly in their home).
Having a digital presence is now a must-do, not a ‘nice to have’. This doesn’t just mean being online. It might be an app that lets you quickly find products in-store. A virtual ‘fitting store’. In-store tracking sensors that track customer behavior. You’re only limited by your imagination. And your budget.
There’s one technological advance that is increasingly being used. Artificial intelligence.
It can collect, store, and analyze customer details. Enabling you to learn about customer preferences and ‘reward’ them (send a coupon knowing that’s what they’re interested in). Improve customer service. Automatically scan and restock shelves (seeing what’s in demand and ordering it). Analyzing product layout and customer buying habits to help you best-place your products. Helping to develop customer-focused (unique) experiences. Click here for an interesting overview.
You could also develop loyalty programs. Provide contactless delivery. A range of in-store guidance services. Remote shopping where the customer turns up just to pick up their goods. Experiment. Challenging times call for innovative thinking!
And if you’re involved in eCommerce, here’s a few quick tips that could help:
- Continually evaluate that your online service is running optimally and able to manage the extra load from so many ‘at home’ shoppers. Our Load and Performance Testing solution can help.
- Consider how to make your deliveries more flexible and customer-centric. You can also contact Testbirds today to evaluate your delivery chains from an end-user perspective.
- Be change ready.
- Stress-test your solutions and supply chains.
For ‘brick and mortar’ retailers:
- Get your online solutions up and running – in-line with your offline store – and tested with our End-to-End Testing solution.
- Phase any reopening… and put in place appropriate health strategies.
- Consider contactless delivery – are underused staff ready to deliver?
- Spend time developing new revenue-generating strategies (for example, contact local restaurants to prepare ready-made meals that you can sell).
New year, new hope, new opportunities
“For now, the picture may appear bleak. But retailers who grasp the challenge and join the gathering trends could well emerge stronger and provide a brighter future for employees, customers, and stakeholders alike.”
The 2020 pandemic was unexpected. And for modern times, unprecedented.
Nobody knows exactly how the industry will look after the pandemic. But there is cause for hope. Vaccines are on the way. Consumers are becoming used to the ‘new normal’. And you’ll be ready.
Innovative, and diverse, supply chain solutions. Creative marketing strategies. ‘Customer-first’ experiences. By building them now, and strengthening your business today, 2021 may just be your annus mirabilis.
If you’re thinking of launching a digital solution, or wanting to strengthen your online business and ensure it’s ready for any challenge, contact us now.
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About the author
Harry is our expert for the retail and e-commerce industry.
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Testbirds specialises in the testing of software such as apps, websites and Internet of Things applications by using innovative technologies and solutions. Under the slogan, “Testing Reality”, the company offers various testing methods to its clients looking to optimise the user-friendliness and functionality of their digital products. With over 250,000 registered testers located in 193 countries, Testbirds is one of the world’s leading crowdtesting providers. In addition, the IT service provider utilises cloud based technologies to support customers in the optimisation of their digital products. The combination of the two testing methods delivers a unique and extensive portfolio that takes the quality of software to the next level. Testbirds was founded in 2011 by Philipp Benkler, Georg Hansbauer and Markus Steinhauser. Today, the company has over 100 employees. Other than its headquarters in Munich, there are now offices in Amsterdam, London and Stockholm, franchises in Hungary and Russia and sales partners in Italy.
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