Can retailers find strategies that balance short-term recovery with long-term sustainability to lead them out of the COVID-19 crisis?

Posted: 2020-05-05

Author: Admin

Retail and fashion business leaders are currently focusing on business continuity (“keep the lights on”) and crisis management (“sell the right stuff”), but soon they must shift their focus to creating sustainable business value. Sustainability will depend on their ability to invest in scalable digital solutions (“shift to digital”) and to enhance customer engagement (“build creative engagement”). With the anticipated shift in customer buying behavior and lower consumer sentiment, retailers need to address “how can they can adapt to this new world, and re-align their business strategy.”

In the near term, retailers need to think outside the box, breaking away from their traditional constraints built into the operations over time while remaining true to their brand. As an example, can high-margin retailers afford deep discounting mass strategies to induce demand? I don’t think so; instead, they need to understand the core values of their loyal or aspirational customers and engage them at a price point they can afford.

So, who will win over customers in the near-term? I believe retailers who are building innovative solutions, engaging with their customers effectively, diversifying their business activities, and escalating their digital presence will be frontrunners in creating long-term value. Here are examples of innovative brands calibrating their business models to sprint ahead when others are struggling to keep up:

  • Adopting innovative models: Retailers need to re-think about their customers’ needs, challenges and aspirations. They need to be a solution provider by articulating a unique value proposition. When Hyundai assures its customers a six months payment coverage, it provides a sense of ease to a new buyer who might not be sure of future paychecks. Or, when Panera sells grocery and pantry items in their stores and online, it extends its promise to deliver healthy food options to its loyal customers. Or, when Kendra Scott turned its 108 stores into mini-fulfillment centers as a new way to reroute orders and inventory to a third-party distribution center (3PL) in order to keep up with customer orders. These are great examples of innovative models creating client value.

 

  • Building right partnerships: As businesses think about a rebound, things might be quite different. We are heading towards a new normal which needs a newer approach to partnerships focused on value multipliers from each player – like a symphony orchestra. And like H.E. Luccock said, no one can whistle a symphony; it takes a whole orchestra to play it. So along with delivering real solutions, retailers need to think about the gaps in their capabilities and forge strategic partnerships to fill them in. These partnerships can be at upstream (procurement, sourcing, manufacturing, packaging, distribution) or downstream (engagement, fulfillment, returns) levels.

 

  • Enhancing customer value: With increasingly frugal and digitally active customers, we believe retailers need to invest more in brand building, identifying a broader customer base, giving them optimal incentives to drive sales, and pushing effective bundles (up/cross-sell) to enhance customer value. As an example, CVS Pharmacy has an innovative CarePass program in which it gives back twice the monthly fee and offers 1-2 days home delivery at no extra charge to deepen its customer loyalty. Target is offering its parking lots to agencies for COVID-19 testing to drive additional store traffic. Most retailers have to go beyond their operations and engage with their communities and customer base more effectively.

 

  • Consolidating brand value: Post-COVID, retailers’ strategy needs to be closely woven around customer engagement and astute brand positioning. Brands may need to consolidate or realign their market position to build long term brand value through focused marketing spend, and optimized utilization of retailer’s strategic assets. Zara, for example, is shifting its focus to PPE suppliers to help communities fight COVID-19, creating differentiated brand value.

 

To summarize, retailers need to assess their unique strengths and play by them. As decision making will be critical (more than ever), they have to lean on their creativity to make it out of this situation. But creativity is not enough; their solutions also need to leverage data and insights in a holistic way. Decision processes will be complex and subjective, so it makes perfect sense to amalgamate data and human ingenuity. Are you ready?

 

About the Author:

Gaurav Johari is Director (Business Solutioning) for diwo, focused on articulating the right solutions to address key business problems, delivered through a decision intelligence platform. He has 15 years of experience working in management consulting, pre-sales and client services. He has extensive exposure in strategy consulting, business process management and business transformation across industry verticals like Retail, Telecommunications, Media and Hospitality. Also, he brings specialized expertise in the application of AI, advanced analytics and decision science in the Retail / CPG sector.