Getting ready for the new post-lockdown retail reality

Hello and welcome back to This Week in Retail. With light finally beginning to appear at the end of the lockdown tunnel, many retailers are ramping up preparations for a welcome return to action in the not too distant future. Any new sense of optimism is tempered however, with a strong dose of caution and uncertainty. Even as restrictions on businesses and individuals begin to ease, as they eventually will, it is unlikely that we will see a return to pre-Covid consumer behaviour patterns anytime soon. Amid such extraordinary circumstances, what measures should retailers be taking in the coming weeks and months? And how will the new retail reality impact the shopping experience?

Targeted store re-openings.

We will likely see a slow and phased reopening of bricks-and-mortar stores. If the UK government follows the lead of its European neighbours, restrictions will be lifted gradually depending on retailer type and store size. And while many high-street retailers – particularly independents – will be eagerly anticipating the moment they can roll up the shutters and fling open their doors to the public once more at the earliest opportunity, retailers with large store estates should think tactically about which stores to reopen first. The likes of Next, John Lewis and Dixons Carphone have said they will prioritise high square footage, out-of-town stores, where social distancing can be more easily implemented. Yes, sales will slowly increase again, but so will operating costs. And with measures limiting the number of people in store likely to stay in place for some time, retailers with high-volume/low-cost models, such as Primark or Sport Direct, will have to consider if the economics of low footfall add up at all. In addition to store closures, retailers may want to consider repurposing space for online operations.

Unpredictable demand and forecasting issues.

Just when COVID 19 was beginning to impact the market and consumer behaviour, panic buying triggered the equivalent of peak-Christmas trading for five days in a row. The totally unplanned spike in demand sent shockwaves through the supply chain, but supermarkets and suppliers rallied admirably, and availability is now more or less back to normal for most products. Apart from toilet roll of course. It must be all those keepy uppy videos on YouTube. But for other “non-essential” retailers getting ready to reopen for the first time in weeks, demand will be extremely difficult to predict for the foreseeable future, we could see availability become an issue once again, or conversely, overstocking. The current market situation is completely unprecedented and retailers will either need to radically alter their forecasting models or bypass them altogether.

Sales and discounts.

The timing of the COVID 19 crisis has forced fashion retailers to sit out almost the entire Spring-Summer season. Despite drastic order cancellations, we are seeing warehouses backed up with inventory, especially those with limited online operations, such as Primark. Expect to see prices tumble on t-shirts, as fashion retailers look to clear stock and make way for winter coats.

Floor markings, signage and PPE.

The British Retail Consortium has issued detailed guidance for retailers that outlines certain measures that will allow them to reopen stores and warehouses in compliance with government social distancing and hygiene guidelines. Shoppers have already become accustomed to following one-way systems in Tesco and other supermarkets. Floor markings spaced 2 metres apart at tills and outside shops have also become a regular feature. Expect to see a proliferation of new customer signage outlining the latest shopping restrictions, such as “maximum 4 people allowed in at any one time” or “no entry without a face mask.” Masks, gloves and hand sanitiser stations will likely become the norm for shoppers and staff, and perhaps even Perspex screens or contactless thermometers.

Continued strong online sales.

Online grocery was already set for strong growth this year, but lockdown has undoubtedly given it a further boost, with sales set to surge by more than a quarter this year, now accounting for over 10% of the total grocery market. Tesco in particular has managed an adept and successful pivot to sharply increase online capacity, taking early and decisive action to increase its workforce (12,000 new pickers and 4,000 extra drivers) and reducing store opening hours to allow increased overnight picking for internet orders. Manual picking operations remain easier to scale than automated fulfilment solutions, meaning the likes of Ocado have struggled to meet demand. Looking ahead to life without Ocado, Waitrose is opening a new fulfilment centre in London with the aim of doubling its online grocery orders in the capital. Meanwhile, Ocado’s new partner M&S is perhaps hedging its bets by rolling out a home delivery partnership with Deliveroo, with 130 essential items available for delivery within 30 mins.

We are living through an unprecedented and unpredictable times. Retailers will be looking forward to the end of lockdown, but they will have to remain responsive, agile and innovative in order to navigate the rocky and uncertain road ahead.

Author

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Edward Jobson

Senior  Consultant, Retail Supply Chain (Operations Transformation)

Ed has a proven track record of helping multiple major international retailers through large scale business transformation programmes, with a strong interest and recognised expertise in Business Process Design, across Grocery and GM.