Retail was challenged by rapid economic, technological and social change before Covid-19. Multiply that by 10 now.
The virus has had a profound impact on the sector. From frenzied stockpiling stretching supply chains to breaking point, to the lockdown of physical space strangling demand and leading to the largest fall in retail sales in recorded history. From the emergence of online queuing to the recognition of the food retail workforce as essential workers.
As consumers emerge from catastrophe, history tells us that habits change. Many will reflect that online has been a lifeline.
Numerous dimensions of uncertainty will be playing into the thoughts of retail leaders as they try to narrow choices to navigate this ‘Perfect Storm’.
1. The Virus. Will a vaccine emerge? Will there be a periodic tightening of restrictions? Will it mutate to something like a dangerous seasonal flu?
2. Economic. What upward pressure on wage costs will negotiators expect in recognition? What depth of recession? What duration? Impacts on disposable income?
3. International. We have seen more competition than co-operation between nations. Even between our islands. To what extent will global supply chains shrink back to national? We could see massive changes in the value chain from where a product comes from to the process through which it is ultimately delivered.
4. Consumers. How safe will people feel in resuming their previous behaviour? To what extent will learned behaviour become permanent? Will the inconvenience of physical convenience retail in a socially distanced world drive more business online? Many will make changes to their lifestyles, and their workstyles.
5. Competition. What about the exponential growth of takeaway providers? Are they intruding into traditional grocery? They both serve the same ultimate end.
6. Payment. With cashless/contactless payment becoming obligatory in many locations, what will the impact on the less well-off be? How do we protect those most vulnerable?
7. Place. To what extent will offices scale back on space and displace workforce? Will premium city centre retail locations lose their allure? How will landlords respond?
8. New Operating Models. Many of us in the sector wondered precisely what problem the ‘Amazon Go’ store concept store was trying to solve. Now it has one. Will subsidiary Wholefoods now follow? Who is in fast follower position?
Leaders will need to do their best to narrow these fields of uncertainty and put new stakes in the ground. And quickly. Always remembering that uncertainty is far more dangerous than risk. Investment in new routes to market whilst digesting the high one-off costs of checkout screens, floor markings, queuing systems etc at a time that price point will be critical will mean trade-offs. Difficult ones.
Whilst I believe community and locality will remain important, providing that stores respond accurately to those local needs, it will be fascinating to see how and where retailers place their bets.
This is no storm in a teacup.