How Retailers Can Succeed in a COVID-19 World – And Beyond

October 14, 2020

The retail apocalypse has been slogging along since 2017, a slow-motion event that set a record for store closings that year at roughly 8,000. Fast-forward to 2020, and the coronavirus pandemic has accelerated the demise with such speed that imperiled companies find themselves scrambling to save themselves.

“COVID-19 makes 2017 look like nothing,” said Barbara Kahn, executive director of the Marketing Science Institute and a marketing professor at The Wharton School of the University of Pennsylvania. “During the first three months of COVID-19, 250,000 stores were closed. Now they are slowly reopening and closing, and it’s hard to keep track. We predict that by the end of the year, 15,000 stores will be closed.”

The pandemic catapulted changes in consumer behavior that were already trending up, particularly the shift to online shopping. Stores that did not establish a solid omni-channel experience — the seamless integration of in-store, online and mobile shopping — before spring lockdowns began are continuing to struggle as the holiday season quickly approaches.

But there is still time to get it right, Kahn said. In the premiere episode of “MSI Conversation: Winning Customers in an Era of Endless Disruption,” she drew on research and lessons from her book, “The Shopping Revolution,” for a master class in crafting a retail strategy to carry stores through the pandemic and beyond. Two experts from Teradata, a California-based provider of database and analytics-related software, products and services, joined her in the session (Watch the full presentation using the player at the top of this page). David King is a senior industry consultant who specializes in retail, consumer packaged goods, and communications, media and entertainment. He holds an MBA from Stanford University and is a McKinsey consultant. Bonnie Holub is a data scientist with a Ph.D. in artificial intelligence from the University of Minnesota.

In the hourlong virtual session, Kahn laid out her framework for retail success. It is visualized as a matrix consisting of four quadrants: brand, customer experience, frictionless and low price/value. According to Kahn, retailers need to lead in at least one quadrant, be the best in a second quadrant, and be good enough in the remaining two.

“If you are not good enough on all four, you will be part of the retail apocalypse,” she said. “All the retailers that were closing down were not good enough on all four of these quadrants. But to win, you have to be the best at two.”

Focus on Customer Experience

Even as the pandemic keeps many shoppers out of physical stores, it is important for retailers to provide the best possible experience for their customers. Kahn cited the difference between Macy’s and Sephora as an example. Macy’s traditional approach to selling cosmetics isn’t working because it is focused on the products, which are out of reach behind the counter, and the salespeople, who work on commission. By contrast, Sephora stores are an immersive experience for customers, who can wander the aisles, sample everything, fill their own shopping baskets and ask for help if they want make-up tips.

“They created a fantastic customer experience,” Kahn said. “They created a beauty playground, and people swarmed to the store and they did buy.”

A second example is legacy razor brand Gillette, which lost market share to startups Harry’s and Dollar Shave Club. That is because the startups zeroed in on something that Gillette wasn’t doing: They are digitally native and sell directly to the consumer online; they offer subscriptions to capture long-term loyalty, and they are competitive on price.

No conversation on customer experience is complete without mentioning Amazon, which has flourished during the pandemic because of its product assortment, logistical prowess and ease of use.

“When everybody else is closed, and you’re open, that gives you an incredible advantage,” Kahn said. “But [Amazon] obviously leveraged that advantage, and they’re doing better than ever.”

Focus on Frictionless

Reducing pain points is closely tied to the customer experience. Retailers must make shopping as frictionless as possible in order to keep shoppers coming back. That is a key strategy as they build their online presence and offer BOPAs, or “buy online pick up at store.”

There’s nothing more frustrating to customers than filling their digital carts only to find that the items they want aren’t in stock, or the order isn’t assembled when they arrive to collect it. In the case of online grocery delivery, which has boomed during the pandemic, shoppers are exasperated when they cannot find convenient time slots for delivery.

“An abandoned cart online may seem trivial,” Holub said. “But if you spend time filling a grocery cart with a number of arcane ingredients for a specific recipe that you want to produce tomorrow night, and then you are told at the last minute that it won’t be delivered for a week and a half, that’s a very negative customer experience. That leads you to not return to this retailer in the future.”

Developing a frictionless BOPAs experience should be a top omni-channel priority for retailers, but it is tough because it requires technical agility, the experts noted. “Winning in the Kahn retail matrix looks deceptively simple, but delivering it is really hard,” King said, laying out 35 complex steps to the digital shopping process. He added that it is important for retailers to offer more options for online shoppers, such as a “customers also bought” feature, alternative product suggestions for out-of-stock items, suggestions for related or accessory products, and a “bestsellers” scroll. And they need to be sure that items are available in real time.

“The challenge is to link the store and digital inventory. That may not sound very glamorous, but it makes a huge difference in the buy-online-pick-up-at-store experience,” King said.

Building a painless experience that strengthens customer loyalty requires smart data analytics, so companies must invest in their digital infrastructure. It is no longer a nice-to-have, according to Holub. It is a need-to-have. “This concept of a connected ecosystem is a widely recognized industry standard of what needs to be done,” she said. Companies should create an environment in which people can generate their analytics in real time, scale them up, and work at speed and at scale on extremely large datasets, she noted.

Reinventing Retail

Although much of the conversation focused on smoothing out the online shopping experience, Kahn emphasized that physical stores are hardly dead. However, it is imperative that they create value for customers by reinventing the shopping experience. Stores must stop focusing only on product and price, she said, and put their efforts into creating a satisfying, sensory experience for shoppers.

For those who don’t know where to start, Kahn suggested plucking some “low-hanging fruit.” Find a change that is easy to implement but has a big impact. “If you’re going to do something, and you’re only going to prioritize one metric, go for the low-hanging fruit,” she said.

The experts also warned against getting too comfortable. In an era of endless disruption, staying ahead takes constant vigilance and a willingness to pivot. “If there is anything that COVID-19 has taught us, it is not to take anything for granted,” Kahn said. “I think we have learned now to do that better than ever.”

By using you agree to our use of cookies as identifiers and for other features of the site as described in our Privacy Policy.