shop owner sitting outside store
shop owner sitting outside store

When the going got tough, retailers got going

As we look back on retail in 2020, it's easy to think only of the struggles the sector faced: global uncertainties, forced closures, disrupted supply chains, and health and safety challenges. But we should take time to remember all the retailers that responded to these challenges with outstanding resilience, flexibility and agility. The local stores and national chains that continued to serve customers and provide employment—and in some cases even recruit new staff.

1. Continuing to serve

Significantly—and despite the fears of panic buyers—at no point were stores unable to provide the food and other essentials that we all rely on.

Despite the complexity of modern global supply chains, retailers were able to work with their suppliers, from farmers and processing plants to logistics and storage companies. Manufacturers hired extra staff and extended operating hours—flour mills in the UK, for example, working round the clock to meet home-baking demands.[1] Private aircraft were used to replace some of the cargo capacity lost on passenger routes and ‘green lanes’ were created at intra-EU border crossings. Road freight operators hired more drivers, took advantage of measures such as an EU suspension of bans on driving at night or on weekends, and focused on the transport of essential goods.[2]

Retailers themselves also hired more staff, adjusted opening hours, and responded to panic buying by rationing certain goods. By implementing simplification measures—like reducing the variety of pack sizes ordered—they were able to get more product on the shelves. And where these measures didn’t work, they found new suppliers at short notice—French supermarket Carrefour, for example, turned to suppliers in Pakistan when Indian rice exports became temporarily unavailable.2

In fact, most peoples’ experience of empty shelves was limited to photos in their feeds and temporary shortages of just a few goods. That’s a remarkable achievement in a global pandemic.

2. Taking digital acceleration in stride

In response to the pandemic online shopping grew rapidly across Europe. This was particularly true for grocery shopping, but most areas saw growth—overall, there was the equivalent of two-to-three years’ growth in just a few months.[3] Retailers were able to step up and accelerate their digital transformation initiatives. Swedish pharmacy chain Apoteket, for example, responded to a three-to-five times increase in its e-commerce volumes by bringing forward a plan to use local stores to fulfil online orders. This took pressure off its warehouse, helping to optimise stock allocation and cut delivery times.[4]

On the whole, the speed of response in the face of unprecedented pressure was extraordinary. Carrefour teamed up with Uber to expand its delivery capability; and the German group that owns Lidl acquired the online marketplace Real.de to extend its online offering of both general goods and grocery. Spanish group DIA partnered with on-demand shopping app Glovo and converted 11 of its stores in major cities into locations for preparing online orders, hiring an additional 1,000 people as pickers and delivery drivers.[5]

For retailers without a significant online presence, the challenge was even greater. In April, at the height of the crisis, 4,000 of H&M’s 5,000 stores were forced to close. Correspondingly, net sales fell by 50% between March and May–despite online revenue growing by around a third. But by developing its digital capabilities, by September, with most of its stores open again and digital growth continuing, it reported better-than-expected results.[6]

3. Reimagining their business

There’s also no shortage of examples of retailers pivoting to meet the needs of customers and keep their business going. In South Africa, a swimwear and beach accessories brand had a strong online presence, but few customers—its summer is around the end of the year and nobody was going on holiday. Seeing local farmers also struggling, it partnered with them, using its digital expertise and resources to help the farmers to get fresh produce to consumers.[7] In America, a boutique store that always depended on its in-store experience started offering private shopping appointments outside of regular business hours, curbside shopping, and a drive-through service.[8]

Ready for future challenges

Worldwide, the adaptability of the retail sector ultimately saw total sales volumes in October returning to—even slightly surpassing—February levels, though naturally with wide variability across countries and product groups.[9]

Challenges still remain, not least the effect of a global recession on overall spending capacity. Like all of us, retailers are still wondering which of the changes will outlast the pandemic. Will the shift to working from home, increased online shopping and transformed attitudes to safety and social issues continue to affect buying patterns long term?

Retailers’ ability to cope with this unprecedented situation has proven that the sector can be extremely adaptable. Their ingenuity and flexibility will be important as they face reassessing the role of physical stores, business models, and how they communicate and interact with customers in the months and years ahead.

 

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Sources

1. [1] BBC News, Coronavirus: Flour mills working 'round the clock' to meet demand, April 2020
https://www.bbc.co.uk/news/uk-52212760

2. [2] OECD, Food Supply Chains and COVID-19: Impacts and Policy Lessons, June 2020
http://www.oecd.org/coronavirus/policy-responses/food-supply-chains-and-covid-19-impacts-and-policy-lessons-71b57aea/

3. [3] At pre-pandemic growth rates, see McKinsey Digital, Europe’s digital migration during COVID-19: Getting past the broad trends and averages, July 2020
https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/europes-digital-migration-during-covid-19-getting-past-the-broad-trends-and-averages

4. [4] Forrester eTail Nordic Panel: Impact Of The Pandemic On Nordic Retailers, October 2020
https://go.forrester.com/blogs/etail-nordics-panel-impact-of-the-pandemic-on-nordic-retailers/

5. [5] Internet Retailing, Food for thought: Covid-19 and the lessons learned by the grocery industry, August 2020
https://internetretailing.net/covid-19/covid-19/food-for-thought-covid-19-and-the-lessons-learned-by-the-grocery-industry-21847

6. [6] (i) Evening Express, H&M shares leap on better than expected rebound from Covid-19 crisis, September 2020.
https://www.eveningexpress.co.uk/news/business/hm-shares-leap-on-better-than-expected-rebound-from-covid-19-crisis/

7. [6] (ii) Essential Retail, Covid-19: H&M unveils digitalisation plans after fall in sales during pandemic, June 2020.
https://www.essentialretail.com/news/hm-digitalisation-fall-sales/

8. [6] (iii) Insider Retail, H&M talks online growth, sustainability and recovering from the pandemic, June 2020
https://insideretail.asia/2020/06/04/hm-talks-online-growth-sustainability-and-recovering-from-the-pandemic/

9. [7] SME South Africa, 10 Impressive COVID-19 Business Model Pivots You Should Know About, November 2020
https://smesouthafrica.co.za/10-covid-19-business-model-pivots-you-should-know-about/

10. [8] CO, How 5 Small Businesses Are Channeling Creativity During COVID-19, November 2020
https://www.uschamber.com/co/good-company/growth-studio/creative-small-business-pandemic-pivots

11. [9] Eurostat Statistics Explained, Impact of Covid-19 crisis on retail trade, December 2020
https://ec.europa.eu/eurostat/statistics-explained/index.php/Impact_of_Covid-19_crisis_on_retail_trade

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