Moving towards a new Retail Sector as we embrace the ‘new normal’
04 Jun 2020 Moving towards a new Retail Sector as we embrace the ‘new normal’
The Pandemic amidst an economic slowdown has impacted Indian retail brands, especially those who are selling non-essential items. With India going through a lockdown phase for the past two months, several retail stores are either entirely closed or only operating essential items if they have that option.
Over time, we expect retail brands in India to navigate through different phases:
Now (Immediate Response)
Characterized by widespread transmission of virus and strict lockdown imposed by government, Retailers respond to immediate challenges. The situation expected to last for about 3 months starting end of March 2020 (when lockdown was imposed).
Next (Reboot and React)
Retailers respond to medium-term challenges and opportunities largely from disruption in the sector. Retailers are on the path to recovery, timeline varying by category. This situation is expected to last for about 9 months starting end of June 2020.
Beyond (Adapt with the new World)
Worst of crisis being over, consumers gain confidence and spending improves. Retailers responds to transformative, long-term challenges and opportunities. Retailers move to pre-crisis levels.
We are currently in the “now” stage wherein retailers are grappling with multitude of challenges around employees and consumer health and safety, supply chain, cash flow and fluctuating consumer demand.
Probable Consumer behavioural shift
The lockdown and the Pandemic have brought in several changes in behavioural trait of consumers. One of the critical changes that have come is how there has been a decline in spending for discretionary items. The economic stagnancy brought in by the crisis has also made consumers more conservative in terms of spending. The Post Lockdown period will see consumers being habituated towards increase in personal hygiene and continuous focus on social distancing. There will be relocation of spending from travel and vacations to retail and dining; eat out occasionally at trusted restaurants. A spike in purchases will be witnessed during the festive season but spending will be more judicious. This will also lead to lowering of brand stickiness as consumers will be more inclined towards buying the products that do the job.
Action Points for Retailers and Brands
To mitigate the disruption caused due to the COVID – 19 crisis, Indian Retailers needs to devise a strategy for the “now”, “next” and “beyond”. As the brands react to the fluidity of “now” they also need to build the resilience for the “next”. Speed and agility will be key levers of success and retailers will need to adopt a FASTER approach both to navigate the crisis “now” and to plan for the “next” and “beyond”.
Given the uncertainty around the crisis, it becomes imperative for retailers to have a cross-functional swift response team to handle any event that may follow. They must be flexible and adaptable to alter operational models and product assortments to meet the requirements that is most critical at the given point of time.
Repurposing of Supply Chain
Retailers will need to repurpose their supply chain to meet the demand fluctuations within their categories amidst supply constraints. They must develop the capability to plan inventory and logistics across stores in a highly dynamic way till business returns to normalcy. Digitization will help in reimaging company operations and meeting consumer demand for rapid fulfilment as the market moves to more omnichannel and delivery-based models.
Effectiveness in Customer Retention
Retailers need to ensure that they continue their communication with the customers throughout the crisis period. They need to build trust in consumers mind that adequate steps will be taken to ensure health and safety of customers visiting the stores. In this regard introduction of Contactless Shopping journey could play a critical role.
With the COVID-19 outbreak, which is continuously evolving, nobody can predict with certainty the material impact of this crisis on the sector. The actual impact and rebound will depend on the period of the crisis and the resulting extent of behaviour change. But what is certain is that it will test all retailers and the ones who will be financially strong, agile in response, and effective collaborators will emerge as winners.
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