Success lies in being bold

As the winter brought a new wave of COVID-19 infections and renewed lockdowns, it was tempting for companies to think in terms of more of the same: operational triage, emergency cost cutting and the leanest of future investment strategies. I believe that retailers will need to be much bolder than that.

While 2020 has had a significant impact on the retail sector, it has also been the year when many retailers demonstrated they were able to be resilient, flexible and creative. 2020 has been a time of rapid responses and adaptations, where companies were forced to adopt short-term survival strategies, as well as making some hard decisions. At the same time many were surprised by the extent to which their staff embraced change, and even driven it.

Having worked closely throughout this crisis with retail businesses in the UK, I am convinced that a ‘cost control first and last’ strategy is not the best road to survival. With the effects of the pandemic likely to be felt well into this year, businesses need a longer-term strategy.

Cost management is still critical, but traditional cost reduction approaches are running out of steam. Many companies think about cost on a functional basis, looking for interventions department by department. While such cost reductions may release some pressure, they are usually about little more than buying short-term survival time.

Time for change
It is time to think about cost more radically. It is time to stop taking out one slice of cost here and another one there within the existing business model, because unfortunately they will just creep back into the business in short order. It is time to develop a new model with an entirely different cost base.

This new model would be one that responds to underlying changes in customer behaviour, or in technology, and in what makes retail profitable. It would be a model that understands that increasing online sales is not enough: a retail business has to be digitally enhanced from end-to-end.

Going fully digital
2020 accelerated the revolution towards an online model. According to our Deloitte Consumer Tracker, 12 out of 13 retail segments have seen significant shifts to online shopping during, and even after the initial lockdown restrictions were eased. At least half of UK consumers reported a continuing reluctance to enter a physical store.

Retailers need to embed digital right through their operations, and not just add an online channel or service to their existing model. It is only when everything and everyone from suppliers to designers, to frontline staff are digitally integrated that retailers will be able to leverage the benefits offered by a data-rich and AI-driven ecosystem.

What to do with the retail real estate?
The move to digital has a knock-on effect, in particular in relation to real estate. Management teams will be thinking about how much of their physical footprint they really need, but also whether what they do have can be repurposed for the new world of distanced retail.

For some time, the sector has been exploring more financial flexibility in the way rents are set and more planning flexibility in how retail space can be repurposed for housing or new local services. The meaning of ‘prime location’ has changed, probably permanently, so this is the time to press for that flexibility.

Making omnichannel a reality
With the ongoing changes with lockdowns and many stores having to close, retailers should be thinking about the kind of retail experiences that will bring customers back. Experiences that are thoughtful, linked to your brand values and create value for both the retailer and the customer.

If seamlessness is the key feature of a successful online retail proposition, then that experience is what might make a bricks and mortar business flourish – and it is important to remember that even after the disruptions of 2020, over two thirds of retail is still offline.

The exciting part now is creating a seamless shopping experience for your customers, no matter which channel or channels they prefer to use.

There are bold steps to take, but ones I believe will determine survival for the long term. It is a unique time for retail. Companies that get it right, will ensure a sector that is leaner, more profitable, and radically better.