Q : What has been the impact of the crisis on practices of retailers ? What are the transformations that could influence the post-covid environment?
CB :This period had a considerable impact on the retail sector, with important divergences depending on the segments concerned. Regarding the business activity, for example, the crisis benefited the food sector, with a record revenues growth at the beginning of the containment period. By contrast, in apparel, the closure of non-food stores and the consumer’s reassessment of their needs led to a record drop in consumer spending in these segments.
In terms of practices, the first impact of this period is a substantial rise of e-commerce. In eight weeks, the digital maturity in retail and distribution has moved forward from five to ten years compared ! In the United States, the digital penetration in retail has achieved an increase of 11 points, rising from 16% to 27% over this period. Some of the players have been transforming themselves quickly, implementing new tools, re-evaluating their strategies and developing their omni-channel services to consumers, not without influencing consumers behaviours. The crisis is likely to widen the gap between the most mature companies and those suffering from ageing models. In the words of Warren Buffet, “only when the tide goes out do you discover who has been swimming naked”. Indeed, the crisis seems to prove that the degree of digital maturity of a company is a significant asset in terms of resilience and the rebound after the crisis could be more difficult for the ones which are further behind in their digital transformation. There is no more room for compromise but it is urgent that companies take action to renew their activity”.
What are the impacts of the crisis on consumer behaviour and what could be the new normal for post-Covid consumption?
C.B : “Containment had a significant impact on consumer habits. While it is too early to assess the real and medium-term impacts, the crisis seems to have been a catalyst for major mega trends and an accelerator for emerging trends.
Greater attention to health and environmental issues, as well as a quest for meaning linked to containment have reinforced the aspiration to responsible consumption, with the idea to consuming less but better. Moreover, the consumer’s moderation imposed by confinement could extend after the crisis, this time because of consumers self inflicted behaviours: the questioning of their habits and their concerns on their purchasing power could accentuate the trend of a chosen deconsumption. All these factors could reinforce the boom in the circular economy and the second-hand market, already observed before the crisis, as shown by the success of Vestiaire in fashion and luxury goods, or Back Market in electronic goods.
The crisis has reinforced the consumer demand for local consumption. Either for affinity or patriotism issues, with the awareness of the West’s dependence on Asia or calls to support farmers. Or out of concern for health security and the reinsurance provided by short and transparent channels. Players in the food sector have been working in this direction, as illustrated by the producers and wholesalers who have set up their websites to sell their products. According to an Odoxa survey conducted for Les Echos in April, 92% of French people consider that company reshoring has to be the priority for the post-crisis period, even if it leads to raising prices. The supply chain will be a core topic of corporate strategies in the post-crisis period.”
What are the implications of this new market environment on the business models of retail and distribution ?
C.B : “E-commerce means a transformation of the corporate business models. The key word in digital is to offer a “seamless” experience, i.e. to provide an accessible and synchronised offer across all channels – Internet, mobile and physical. Moreover, with digital, consumers are developing new habits and requirements.
Today, a customer wants to switch from virtual to physical at every stage of its purchasing process – product choice, purchase decision, payment and delivery – without encountering any obstacles. This is for instance the growth of Drive, Click & Collect or home delivery services. It is also for instance when, in a store, to avoid queuing at the cashier, you are offered to download an application to pay for your order and collect it at a dedicated checkout, as in Nespresso shops.
While it is still too early to know how fast e-commerce growth will evolve in the post-crisis period and whether a threshold has been reached, in any case consumers will keep the same of requirements. For companies, this means, for example, implementing agile logistics or implementing marketing strategies focusing on customer experience.
What could be the future model of physical stores in the post-crisis period? ?
The crisis could accelerate the transformation of commercial spaces. Whereas the store traditional function was to be a large warehouse and a sales advice centres, e-commerce transforms it. Sales advice can be provided across all channels, and goods do not have any longer to be all stored in the shop. The widespread adoption of e-commerce raises the question of the usefulness and benefit of owning a physical shop. In this environment, the virtual has an essential role without replacing shops and other “hard” spaces. The physical store becomes a lever for the omnichannel experience, brand image and customer relations.
Special events, pop-ups stores and ephemeral spaces are opportunities to create experiences and introduce new products. Combined with relevant digital content, these customizable venues contribute to make the shopping experience enjoyable again. For brands, a more experiential universe is an opportunity to showcase their creativity, rethink the atmosphere of their own spaces or temporary showrooms. Art galleries, for example, have largely integrated the importance of experience through their participation in international fairs or by using their exhibition spaces as places for conversation and entertainment through happenings, conferences with artists or other events. This evolution is also very present in fashion and luxury goods: the players in the sector are multiplying unusual places and ephemeral spaces to present and sell their products, as during special events organised in Fashion Weeks time.
To rebound after the crisis, the brands will have to use all the existing levers to optimise their commercial performance, rationalise their costs but also to attract customers once again. From this point of view, physical points of sale will have to surprise consumers even more than before the health crisis to encourage them to re engage in the shops. This is why pop up stores and ephemeral shops could multiply in the coming times.
: “As a brand, what should be the points of attention while interacting with customers in the post-crisis period?
C.B: “With digital, the customer journey encompasses more points of contact. This is an opportunity for brands to use the digital relationship and the data to know better their customers, strengthen customer relationships and design more personalised services.
The pandemic has lead to a need for increased reassurance from customers in their relationship with brands. They expect brands to be clear about their raison d’être, to make societal, environmental or even political commitments and to translate these into concrete actions. In a “Future consumer index” survey of 5000 consumers carried out in April, 25% of them said they would be prepared to pay more for trusted brands, and 23% for ethical brands. More than ever before, authenticity and consistency will be pivot of brands’ interactions with customers.