Experts: This is the future of retail after Corona
The Corona pandemic will accelerate the necessary restructuring and digitalization of retail, but not without pain.
– The strength of the financial muscles, the brand, and business concepts, and above all, knowledge of customers will determine who will be successful. The visitors’ interests, behaviors, and purchasing patterns have become more important than ever before, says Carl Johard, who on behalf of Indivd has conducted +30 in-depth interviews with leading experts within retail.
Prior to Corona, store visits and sales had an overall increase. The so-called “crisis” we have experienced in recent years has actually been about the first actual decline in annual growth, the first in a long time.
The growth of E-commerce has accelerated on a necessary restructuring of the retail industry, which has generally experienced growing costs and lower margins, resulting in increased segregation. Some parts of the industry have nevertheless performed well, while others are experiencing serious profitability problems.
The industry is lacking digitalization
The in-depth interviews show that the retail industry generally is very conservative to use digital technologies to improve their business models and provide new revenue and value-producing opportunities. They have a low maturity in the process of moving to a digital business.
– The industry has moved incredibly slowly even though e-commerce and society’s general digitalization is increasing. Physical retail would really need a long-term industry initiative for investments in a “Retail 2030”. However, no such thing exists, says Carl Johard, co-founder and chairman of startup company Indivd.
Parallel to the fact that physical retail has established its own e-commerce, several online-based retailers have chosen to open stores mainly for the purpose of building brands.
– At the same time, physical retail talks about the importance of creating seamless omni and multi-channel with intimately interconnected online and physical shopping. Regardless of strategy, everyone still agrees that the customer is in the center and controls the development and future of retail. That’s why visitor and customer knowledge is more important than ever before, says Carl Johard.
The industry agrees that organizations need to be restructured to be able to manage the growing competition from e-commerce. It no longer works with downpipe organizations, where information collaboration is limited between the various functions and where customer responsibility and customer contacts are fragmented.
– Tomorrow’s organizations must, according to those interviewed in the interviews, be shaped around and based on the customers. Information gathering about customers should be gathered in the central organization. The individual stores are fully engaged in meeting customers and improving their experiences in the physical locations, says Carl Johard.
New business models are required
To cope with the growing competition from e-commerce and new globally AI-oriented and super-efficient concepts, significant investments in new technology, more flexible product ranges, new organizations, new sustainable business models, and a strong focus on continued efficiency are required. Not only in the stores, but in all the entire ecosystem.
– Unfortunately, physical retail is generally poorly equipped for this change. Large investments require strong finances. Financial muscle is a must for continued survival, as long as you fight the volume markets and not a niche on the local markets, says Carl Johard.
At the same time, training and investment in the ecosystem suppliers are also required. These, too, must understand their roles and carry out the corresponding improvements. Several organizations are also demanding increased cooperation between competitive shopping centers, and instead focusing on the area as a destination.
– This means that the people who are working to develop tomorrow’s retail really need to keep track of people’s thoughts and needs. Something which is best done with the help of increased customer insights.
Increased customer knowledge is power
The in-depth interviews further show that the customer is in the center in a completely different way than before. The stores are demanding more and deeper insights into visitor behavior and purchasing patterns. Insights are needed to be able to establish sharper strategies, but also to make purchases, new establishments more efficient, and the experiences in the store more holistic and appreciated by the customers themselves.
– More reliable customer data is needed for sharper analyzes, as well as more transparent and user-friendly service, says Carl Johard.
Many stores and retail chains have some kind of technology to track visitors’ movements – but far from everyone. The stores that use the technology and insights do so on a limited scale in the form of visitor counters and cash receipts, where, among other things, day sales are measured as well as sales per square meter.
– The systems and technologies used are not always reliable. This is especially true of visitor counters, which are known to have performance issues. This has led to a lack of interest in follow-ups of the insights.
Digitalization is accelerated
The Corona pandemic will help speed up the necessary digitalization of retail, but not without pain. Those who choose to do as they have always done. Those who choose not to listen to their customers, or increase efficiency with the help of new technology will probably be knocked out.
– One thing these interviews have shown us that the knowledge of the visitors, the customers, their interests, behavior, and purchasing patterns are about to become more important than ever before. Retail stores will continue to attract visitors but it is the strength of the financial muscle, the brands, and business concepts that will determine which rate of success, concludes Carl Johard.