TextileFuture has presented to you several forecasts on the resilience of retail, but the one we do present to you is one of the most optimist proposal we read for you. It arrives at some interesting conclusions, and the TextileFuture Team is sharing these with you with pleasure. The feature is based upon a survey by Cotiviti, a leading provider of source-to-pay recovery audit services and the brand eTail, dedicated to support the growth of the retail industry. The third party involved is the custom research division of Worldwide Business Research (WBR).
Here starts the feature:
The Resilience of Retail – Navigating COVID-19 and renewed Optimism for an economic Rebound
Featuring five ways you can prepare for future disruptions.
About the Authors
Operating since 1979, Cotiviti is a leading provider of source-to-pay recovery audit services to large commercial enterprises, specializing in Retail and Healthcare. We leverage a flexible approach that combines best- in-class audit IP, audit tools, technology, and auditors with deep industry expertise to deliver superior results and performance for our clients.
We launched eTail in 1999, and have been dedicated to supporting the growth of the retail industry ever since. What started off as 100 people in a room discussing where this sector is headed, has led to 2000 senior-level eCommerce.
WBR Insights is the custom research division of Worldwide Business Research (WBR), the world leader in industry-driven thought-leadership conferences. Our mission is to help inform and educate key stakeholders with research-based whitepapers, the top grocers and retailers in North America, and we are the outsource or primary partner for 87 % of ourclients. Our accelerated recovery audit approach, pre-pay alerting solutions, and root cause insights are helping our clients move beyond traditional strategies to find more dollars faster.
A tumultuous 2020 recast retailers as essential service providers operating on the front lines in the face of a crisis. Strategic plans were either completely rewritten or thrown out altogether as the industry went into rapid response mode, innovating to meet the needs of consumers and communities. Suddenly thrust into the role of keeping the national population supplied during a crisis, the retail industry quickly shifted its focus from long-term growth to short-term stability. “All of our strategic goals were cleared to make way for improvised ones which we rarely expected to use,” responded a grocery/drugstore marketing director.
Efforts to contain the spread of the virus made a dramatic impact on how consumers purchased goods and how retailers reoriented supply chain and last-mile fulfilment operations to meet demand—all while adhering to enhanced health and safety protocols.
The challenges ushered in by COVID-19 provided the industry an opportunity to accelerate the development and rollout of new technologies, and to adapt to trends already taking shape. For example, 68 % of respondents said their customers now prefer an omnichannel experience that interconnects digital shopping with brick & mortar locations, compared to just 48 % before the pandemic.
Perhaps surprisingly, a nearly unanimous 97 % of retail leaders surveyed have a positive outlook in terms of overall economic growth over the next 3 years and expect their industry to quickly rebound.
This report explores how retailers continue to accelerate transformative change and remain resilient in response to trends exacerbated by one of the most challenging years in recent memory. A cross section of 100 leaders in the grocery/drugstore, mass merchant, specialty and department store sectors shared insights and predictions about the following:
• The pandemic’s prolonged impact on the retail industry
• How the pandemic will reshape strategic priorities in the coming years
• The role of suppliers in navigating the COVID-19 crisis
• Drivers of future success
Read the full report to learn how the future of retail appears even more resilient after the events of 2020.
Before the COVID-19 pandemic (circa January 2020), most retailers prioritised enterprise technology investments (63 %), supply chain transformation (53 %), and improvements to customer experience processes (52 %) as strategic objectives.
• Before the COVID-19 pandemic, most retailers were responding to multiple customer trends successfully, including shifting product demand patterns (64 %), product availability challenges (57 %), and disruptions to brand loyalty (57 %).
• Seventy percent (70 %) of retailers were either substantially or completely changing their organizational structure before the COVID-19 outbreak.
• Most retailers have embraced social distancing measures (64 %) and have enhanced their eCommerce platform and digital shopping channels (53 %) in direct response to conditions created by the pandemic.
• In each case, at least one-third of retailers claim they enhanced self- checkout (48%), enabled contactless payment technology (36 %), or modified store hours (33%)—not because of the pandemic specifically, but because of other market factors (e.g. consumer behavior trends).
- Most retailers are approaching change as a result of the pandemic in one or more capacities, including operational improvements (65 %), channel growth (64 %), customer experience (58 %), and margin improvement (52 %).
- Most retailers claim they are now responding successfully to emerging preferences for omnichannel customer experiences (68 %), disruptions to brand loyalty (61 %), and shifting product demand patterns (53 %).
- A majority of retailers are already using predictive analytics (64%) and artificial intelligence or machine learning (55 %) as means to improve general efficiencies and productivity.
- Most retailers are already using blockchain (62 %) as means to improve accounting, auditing, and financial analysis.
- A majority of retailers (53 %) believe many of the consumer behaviors embraced during the pandemic represent permanent changes. Half believe there will be greater consolidation within retail markets as well.
- Nearly all retailers (97 %) have a positive outlook in terms of macroeconomic conditions and growth over the next three years.
64 % of retailers say they were successfully responding to consumers’ shifting product demand patterns before January 2020.
Structural Changes Were Already Prevalent Among Retailers Before COVID-19
Before the COVID-19 pandemic struck, retailers were already contending with another disruption to the historical paradigm of in-store shopping: the continuous rise of eCommerce. To adapt, retailers had set plans in motion to dramatically change the in-store experience, adopting omnichannel capabilities that could bridge the divide between their brick-and-mortar operations and the online shopping experience.
Many retailers had already made significant progress in this adaptation. And many of their strategies—some of which were years in the making—were already reaching a significant level of maturity.
Still, other retailers were in earlier phases of working to address changing consumer preferences at the start of 2020 and were exploring new opportunities through technology and innovative service models.
Prior to the COVID-19 pandemic (circa January 2020), to what extent were the following challenges a priority for your organization?
This was a priority strategic objective
This was an active objective, but not a priority strategic objective This was not an active objective.
In January 2020, just before the public became wholly aware of the COVID-19 pandemic, most retailers had prioritised enterprise technology investments (63%), supply chain transformation (53%), and improvements to customer experience processes (52%) as strategic objectives.
Meanwhile, exactly half of the retailers were either prioritising or focusing on operational improvements, such as improvements to inventory management and physical store effectiveness.
Enterprise technology, such as artificial intelligence (AI), provided perhaps the best opportunity to bridge the gap between digital and physical sales channels. By connecting physical retail locations to online customerexperiences, retail stores could provide a level of personalization in the store that customers have grown accustomed to while shopping online. Transformations in the supply chain and emerging customer experience strategies were also set to meet increasingly demanding consumer expectations and revolutionize the shopping experience.
Prior to the COVID-19 pandemic, to what extent were your customers’ preferences evolving based on the following trends?
This was a noticeable trend at the time, and we were responding successfully This was a noticeable trend at the time, but we were struggling to respond This was not a noticeable trend at the time.
At the time, most retailers believed they were responding successfully to consumers’ shifting product demand patterns (64%) as well as challenges to
product availability (57%) and disruptions to brand loyalty (57%). About half of retailers (48%) recognized consumers’ preference for omnichannel customer experiences and were responding successfully.
These types of changes require more than the deployment of cursory technologies and impromptu customer interactions.
Retailers seem to acknowledge this, where every respondent to the survey states their organisation was in the process of changing their organizational structure before COVID-19, with 70 % of respondents reporting they were either ‘substantially’ or ‘completely’ changing their organisational structure. (See Exhibit A)
But due to disruptions related to the pandemic, most retail organizations were forced to fast forward their timelines for deploying these changes—even those organizations that were only beginning their initial explorations of omnichannel customer experiences.
Among the 30 % of respondents who say their organizations were only ‘slightly’ changing their organizational structure, 94 % say the pandemic accelerated those changes despite this fact. (See Exhibit B) To gain a better understanding of the pandemic’s impact, researchers asked the respondents to explain how it altered their strategic goals at the beginning of 2020.
Many of the respondents acknowledge that demand fell sharply due to the pandemic, which had an immediate impact on their priorities.
According to one vice president of marketing at a department store, “The pandemic didn’t allow us to function the way we planned, nor did it support the traditional method of shopping. All our customer experience strategies had to be put on hold or transformed to support online shopping.”
Similarly, a vice president at a grocery store brand says, “The pandemic forced us to make big changes to the operational structure. There was more focus on online strategies and a different level of focus on in-store operations.”
One respondent says the pandemic forced them to rely on their “disaster management strategies,” while another claims their plans “had to be changed to make way for new ones that were based on the rules of the pandemic.”
As such, it’s clear that safety, continuity, and profitability became the most important strategic priorities in the interim, while other priorities had to be put on hold.
But, as we will see, the disruption has also spurred innovation. Some of the structural changes retail organizations made due to the pandemic will likely change when the pandemic finally subsides, but some innovations are likely to become staples of the post-COVID-19 retail economy.
66 % of retailers say their suppliers are providing them with improved communication, transparency, and collaboration to stay resilient.
The Pandemic Put Store Operations, Supplier Relationships, and Strategy under the Microscope
Two of the areas retailers reassessed were the habits of their customers and the support they could expect from their suppliers. As we’ve seen, many retailers were already in the process of transforming their strategic approach to these parts of the business, including 53% who were already in the process of supply chain transformation.
But the quick change in the marketplace caught many retailers by surprise.
Analysts have already noted shifts in consumer shopping preferences due to the pandemic. A more important question to ask is how have retailers responded to this shift, and were they successful?
How have your customers been affected by the COVID-19 pandemic, and to what extent have each of these changes occurred?
This has been a noticeable trend, and we are responding successfully This has been a noticeable trend, but we are struggling to respond This has not been a noticeable trend.
Most retailers claim they are now responding successfully to emerging preferences for omnichannel customer experiences (68 %), disruptions to brand loyalty (61 %), and shifting product demand patterns (53 %). Still, in each case, about one-third or more of the respondents have noticed these trends but are struggling to respond to them. This includes product availability challenges, which 46 % of retailers recognize but are struggling to respond.
As a result, most retailers have made immediate changes at the store level to encourage customers to continue shopping. This has led to a rapid boost
in safety protocols like social distancing, which most of respondents embraced in direct response to the pandemic. A majority of respondents also embraced enhanced digital shopping channels (53 %) in direct response to the pandemic, while half of the respondents embraced modified store hours or low-touch fulfillment due to the pandemic.
The only adjustment a plurality of respondents has embraced due to trends other than the pandemic is enhanced self-checkout, at 48%. This capability has become especially popular in grocery stores and some other retail environments, as it enables customers to skip the line or check out at their own pace.
Which of the following changes have you embraced as a result of the COVID-19 pandemic, and what was your primary reason for doing so?
We did make this change in direct response to the pandemic We did make this change, but not in response to the pandemic.
We did not make this change, but it has become a new priority for change due to the pandemic We did not make this change, and it has not become a priority
Of course, many organisations have turned to their suppliers for help during this time, or they have prioritized supply chain innovations that foster sustainability and resilience. Suppliers can play an outsized role in responding to crises, and successful supplier relationships are central to meeting shifts in consumers’ demand for products.
Most respondents say their suppliers are supporting their shifting needs through improved communications (66 %) and accelerated order fulfillment (62 %).
However, most respondents say their suppliers could do more to support their needs in other areas. For example, most respondents’ suppliers are not supporting them by agreeing to improved contract terms, increased promotional activity, and greater flexibility. Just 40 % of respondents say their suppliers have reallocated resources to meet shifting priorities.
Indeed, most of the changes that retailers are making because of the pandemic are driven internally. And most of those changes have been accelerated due to the unprecedented nature of the current marketplace.
In each case, a majority of respondents are taking an even more accelerated approach to transformative change when it comes to operational improvements, channel growth, customer experience strategies, supply chain transformation, and margin improvement. The only aspect of the business that a majority of retailers aren’t accelerating due to the pandemic is enterprise technology investment.
However, 13 % plan to step back and reconsider this strategy.
As we will see, this does not necessarily mean retailers are putting a complete hold on their digital transformations.
Enterprise technologies will play an essential role in building the shopping experiences of the future, and consumers’ demand for enhanced convenience and personalization is only bound to accelerate.
We’ve noted that most retailers were already making structural changes before the pandemic started. Many of those changes involved the deployment of new and emerging retail technologies to improve business competencies. More specifically, many of these technologies are being rolled out to improve the back office, the supply chain, and inventory and logistics.
Retailers are already using technologies like robotic process automation (RPA), artificial intelligence (AI), blockchain, and predictive analytics to improve the business, albeit for different reasons depending on the company.
For example, a majority of respondents (62 %) are using blockchain for accounting, auditing, and financial analysis, but almost half are using it to enhance the customer experience. Meanwhile, 64 % of respondents are using predictive analytics and 55 % are using AI and machine learning (ML) to enhance general efficiency and productivity.
Blockchain has the potential to add unprecedented levels of security and visibility to both the back office and the supply chain. It can also be used to improve customer loyalty and better secure some types of customer data.
Predictive analytics and AI/ML have the potential to dramatically change how retailers understand their customers and provide recommendations. In some applications, they can help retailers predict shifts in the market andprepare accordingly.
97% of retailers have a positive outlook in terms of macroeconomic conditions and growth over the next three years.
Retailers Have a Positive Growth Outlook and Expect Some Changes to Be Permanent
The pandemic sent shockwaves through the retail industry.
Thankfully, retailers appear to be bouncing back, as 97 % of retailers have a positive outlook in terms of macroeconomic conditions and growth over the next three years. (See Exhibit C)
Researchers asked retailers to explain how they expect these larger macroeconomic trends to impact the retail industry long term. The few respondents who have a negative outlook note that volatility and the continuing dominance of Amazon will make the market more challenging.
Those that have a positive outlook cite numerous reasons for their attitude, but “more jobs,” “more income generated,” and “better spending power” among consumers as the pandemic fades are some of the key reasons for their sunny disposition.
As one C-suite executive puts it, “Employment and the markets healing will uplift the purchasing abilities of customers and eventually help retailers.”
Several respondents also noted a very specific development that they believe will have a positive impact on retail markets: the COVID-19 vaccine. Other retailers also anticipate a more stable market now that the United States presidential election has concluded.
Retailers also have predictions about how the landscape will change in the
coming years, especially when it comes to consumer behavior. Many of the changes to their strategies reflect these predictions.
For example, 53 % of retailers believe many of the consumer behaviors embraced during the pandemic represent permanent changes, while half of the respondents believe there will be greater consolidation within retail markets. Retailers are pursuing digital transformation to address this shift in consumer behavior as well as consumers’ new penchant for omnichannel experiences.
However, most retailers don’t believe brick-and-mortar retail will be less important to consumers as they shift to eCommerce. This is a reasonable assumption in the near-term as well.
Consumers who have been stuck inside for a year are likely to embrace in- person shopping with passion when it finally becomes safe to do so.
53 % of retailers believe many of the consumer behaviors embraced during the pandemic represent permanent changes.
Researchers asked respondents to provide their top recommendation to business leaders at similar companies in terms of preparing for future success. If there is an overarching theme in their responses, it is that retail professionals suggest other businesses like theirs take a measured approach and launch initiatives with a steady hand. Several respondents say retailers should focus on “stability” and “customer relationships,” and that retailers should “take fewer risks,” take “smaller steps,” and not be “overly aggressive.”
For example, a supply chain professional at a specialty retailer says, “Inconsistency and volatility will continue beyond 2020 and retailers need to be patient in their approach to achieve success.”
Similarly, a vice president at a specialty retailer advises other organizations not to “rush into decisions of expansion at the drop of news of a vaccine. Customer response and movement will have to be analyzed before this happens.”
Another vice president has a similar piece of advice: “Calculated risks are the better bet in the near future.”
• “Every organisation needs to work together with the community to build a sustainable future.”
• “Involve the community in the majority of your activities because that is what will enhance the value of the brand for a longer time.”
• “Focus on community sustainability more than any other feature right now.”
• “We now have greater focus on developing the community along with us.”
• “The most important strategy is to focus on some sort of environmental sustainability for better success in the future.”
- “Align business goals to sustainability and using renewable energy.”
• “Focus on environmental sustainability in the long-term. This is more than a requirement.”
- spot macroeconomic trends that point to signs of a recovery. If
- deploy technologies that can help you enhance communication and transparency with your suppliers. Supply chain automation and real-time supply network insights can also help you adapt to market changes quickly and more effectively.
- the seamless integration of both digital and physical shopping environments. Before in-store shopping begins to pick up, focus onyour strategy for satisfying omnichannel customer experiences.
- likely outlive the COVID-19 pandemic.
- Every decision you make should be informed by data and macroeconomic trends, and every risk must be a calculated one.
Appendix A: About the Respondents
Cotiviti and the WBR Insights team received 100 total survey responses from retail professionals to generate the data featured in this report.
At 41 %, a plurality of those respondents has a role in marketing. The remaining respondents have roles in category management or procurement (21 %), supply chain or logistics (21 %), and finance (17 %).
At 65 %, most of the respondents are directors, while almost one-third of the respondents (31 %) are vice presidents. Four percent of the respondents are C-level executives.
At 35 %, over one-third of the respondents are from an organisation that sells specialty retail products, such as home improvement, electronics, or sporting goods. Meanwhile, 31 % represent a grocery or drug store, 21 % represent a department store, and 13 % represent a mass merchant retailer.
Appendix B: Other Data Cited in This Report
[Exhibit A] Prior to the COVID-19 outbreak, to what degree were you changing your organizational structure?
[Exhibit B] Has the pandemic accelerated changes to your organizational structure, even though you were not making substantial changes at the time?
[Exhibit C] Do you have a positive or negative outlook in terms of macroeconomic conditions and growth over the next three years?
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