The 3 Waves: Rebuilding Retail After the Pandemic
Retailers are no strangers to transformation. They are constantly reacting to consumers’ shifting desires and expectations. Yet, nothing has forced such a sudden and dramatic overhaul as COVID-19.
Retailers don’t have the luxury of focusing solely on the short-term impact of COVID-19. Unfortunately, the impact of this pandemic won’t be cyclical, and we won’t simply return to business-as-usual once there are treatments and a vaccine. Rather, the impact of COVID-19 will be structural, and the familiar retail experience that we’ve come to know will evolve.
Many of the changes the retail industry is implementing to counter the effects of the pandemic will become permanent, resulting in a new normal.
We’ve started to refer to these types of pandemic-related industry changes as “The 3 Waves,” spanning from the immediate changes that ensured stability in the earliest days to more long-term, strategic changes that will become institutionalized.
Wave 1: Maintaining Business Stability
Wave 1 started when global economies started to shut down in early March 2020. This had an obvious impact on all retailers—both essential and non-essential. Stability and continuity became the primary focal points.
Retailers were forced to throw as many resources as possible into maintaining operations. This meant optimizing labor hours in ways that minimized costs as much as possible, ensured customer demands could reasonably be met and maintained employee and customer health and safety.
While declining performance was the expectation, successful retailers found ways to stay afloat in the earliest days of the pandemic – such as offering curbside delivery and selling meal prep kits, and they shifted toward the next phase, where new ways of working and engaging customers started to become the norm.
When “panic buying” started to strain supply chains, it became apparent that traditional demand planning models were not going to be sufficient to keep store or warehouse shelves stocked. Retailers and grocers immediately started investing in technologies that could give them a crystal-clear picture of what was happening within their four walls and within their supply chains. They quickly embraced prescriptive analytics to detect new inventory demand patterns and thwart fraud, theft and waste. Those with intelligent automation solutions leveraged the “smart robots” to better gauge shelf inventory turnover and locate inventory that was misplaced amidst the rush of customers and hurried restocking efforts. And nearly every retailer increased its utilization of mobile computing and scanning solutions. It was the only way to maintain a steady line of voice and/or data communications between supply chain partners, store associates and even customers – all of which significantly increased as retailers sought to increase the size of replenishment orders, speed up end-to-end fulfillment and accommodate customers’ basic needs and wants both in store and online.
Based on collective feedback from retail leaders and store associates, the biggest lessons during Wave 1 were the importance of:
1. Real-time operational visibility.
Guessing about whether or not you have certain inventory on hand doesn’t help anyone, including customers. Many associates found themselves scouring stockrooms and loading docks for in-demand items that were showing in stock in customers’ mobile apps and even inventory management systems but were nowhere to be found on the floor. Many times, the items were never located and customers left empty-handed and let down. In reality, the items were probably there somewhere. Or, in the haste of e-commerce fulfillment, maybe they weren’t. It’s quite possible that items just weren’t properly scanned by curbside, delivery and buy online, pickup in store (BOPIS) pickers before being put into boxes and bags.
Plus, if you can’t see the state of your store, the status of your supplier orders or trends in customers’ orders, then it becomes easy to over or under-order inventory or experience prolonged out-of-stocks due to delayed replenishment orders and deliveries.
2. Distributing actionable intelligence to store associates and supply chain partners.
Your employees and partners are heads down most of the day, running from one place to the next unloading pallets, putting away items, stocking shelves, picking and packing online orders, manning point of sale stations, managing entry points, delivering orders to customers and just doing everything they can to assist customers and one another in a very stressful and tense climate. They don’t always know what more they can do – or what they can do differently – to improve the customer experience and your business outcomes. You have to tell them very directly what best next steps they should take to mitigate issues or maximize opportunities. This is where prescriptive analytics, intelligent automation (if available), wearables and handheld mobile computers come in exceptionally handy.
3. Overcommunicating with customers, especially when you aren’t going to be able to deliver what they want on time or at all.
When stay-at-home orders were issued, many customers stopped going to stores all together and shopped for groceries and other essentials solely online. Since they couldn’t see the empty shelves in that moment when they were shopping, they relied on the “in stock” inventory information presented on the website or mobile app they used to build their online carts. In many cases, items (if even truly in stock at that moment) weren’t actually available on the shelf or in the stockroom when the store associate went to retrieve them. In many cases, this was due to the long delay between the time the order was placed and the time it was scheduled to be delivered. Some grocers’ first available windows for curbside and home delivery services were two or three weeks out. Though consumers were well aware of retailers’ inventory availability issues, they were still upset when they didn’t get what they ordered. What ultimately caused some customers to abandon certain brands wasn’t the frequent out-of-stocks, though. It was the lack of communication about those out-of-stocks and the inability to work with a store associate to find a suitable substitution. Some people didn’t know what they were actually getting until their groceries were loaded into their trunks or dropped at their front doors.
4. Prioritizing worker and customer safety above all else – and compensating associates for the risks they’re taking on the front lines.
Retailers who gave employees hazard pay or bonuses were celebrated by workers and customers alike. Of course, store associates were more inclined to come to work and give 100% when they felt physically protected as well. Beyond distributing personal protective equipment (PPE) such as gloves and masks, employees expected and appreciated efforts by retailers to maintain strict social distancing and sanitization measures. This included frequent disinfection of shared scanning and mobile devices and the investment in “personal” wearables, when possible.
Wave 2: A New Retail Normal
When operations stabilized, essential retailers were able to focus on institutionalizing new ways to engage customers with online and in-store experiences.
Everything from directional flow lines to special store hours for immunocompromised customers, plexiglass dividers to prevent contact, new cleaning regiments and increased support for curbside pickup helped create a new retail normal. In an effort to provide a safe environment for shoppers and store associates, retail leaders have made efforts to get people in and out of stores as quickly as possible while also limiting the number of people allowed in the store at any given time.
Even when the pandemic quiets down, retailers will still take precautions to maximize the health and safety of both customers and employees in stores, in corporate offices and on warehouse floors. The efforts being made to address new trends in consumer behavior will become mainstays of the adjusted customer experience. Things like BOPIS with curbside pickup options, contactless purchases and increased integration between digital and physical experiences will become standard means of engaging with customers.
Wave 3: Long-Term Transformation
At some level, the long-term transformation in Wave 3 should occur simultaneously with Wave 2. While there’s no one-size-fits-all way to adapt, there are certain technologies and strategies that will become essential to building viable retail businesses moving forward.
The initiatives that may have been on a three-to-five-year horizon should be moving up on the priority list because, as previously mentioned, there has been a rapid and sustained uptick in online shopping. The business case has been validated for technology investments, workforce expansion and process re-engineering. Retailers have no choice but to accelerate planned efforts to increase product sourcing diversity, leverage intelligent automation and scale e-commerce fulfillment capabilities. Focusing on these priorities is imperative to achieving greater resiliency and backend efficiency:
1. Increasing Product Sourcing Diversity
When demand for certain nondiscretionary products spiked as news around COVID-19 broke, it became clear that supply chains weren’t agile enough to adjust quickly to keep up with customer demand. Part of the problem is that many retailers have not yet diversified their product sources to a point where backend shortages remain “invisible.”
While manufacturing in China has always been seen as a primary means of increasing retail profits, overdependency is just as problematic as limiting financial returns. Retailers need to find ways to balance profitability with product sourcing diversification by identifying the regions that will help them limit travel costs, inspection costs and lead times.
Product sourcing diversification won’t happen overnight. However, making data-driven decisions about where to source products will unlock long-term value for retailers—even in the wake of devastating external forces.
2. Leveraging Intelligent Automation
Retailers will implement more automation solutions to help maximize shopper and employee safety, keep up with ever-changing consumer demands and manage both fulfillment and in-store operations. Food, drug and mass-merchandise (FD&M) retailers in particular are expected to capitalize on automation technology investments for both the front and back of stores to help meet post-crisis needs.
One thing that the pandemic has made clear is that the majority of supply chains and operational procedures weren’t designed to maximize flexibility. Consumer behavior changed so rapidly that many retailers weren’t able to adapt without service suffering at least to some extent. Going beyond prescriptive automation to embrace true intelligent automation that can capture, analyze and prescribe specific actions using real-world data in real time will make it easier to streamline end-to-end processes and achieve desired outcomes.
Ask the Expert: What’s the Difference Between Intelligent Automation (IA) and Artificial Intelligence (AI)?
The combination of artificial intelligence (AI) and robotics can bring data-driven approaches to supplier quality, merchandising, distribution, logistics and fulfillment, giving retail leaders the insights necessary to maximize value capture. Instead of reacting to external forces and rapid changes in consumer behavior, intelligent automation creates opportunities to operate more proactively.
3. Optimizing Last Mile Delivery
Retailers have been under pressure to improve e-commerce and logistics capabilities for years now. However, the current pandemic has magnified even small issues in e-commerce operations as retailers have seen a massive spike in home delivery requests. As stores reopen, enabling and optimizing last-mile delivery will be critical to satisfying customer expectations, reducing marginal costs and improving overall efficiencies.
There are a few tactics that can help retailers optimize last-mile delivery, including:
- Providing flexible delivery options based on delivery method and location as well as consumer need
- Creating a collaborative network with suppliers to maximize visibility on the backend
- Leveraging brick-and-mortar stores as fulfillment centers to minimize shipping costs and delivery times by locating products as close to the end customer as possible
- Using technology to maximize the value of delivery routes by serving more customers in the same amount of time
Last-mile delivery has always been a significant challenge for retailers, and the pandemic has only increased customer expectations. By implementing automated solutions, retailers can alleviate this pressure while positioning themselves for future success.
The ability to scale up digital capabilities to support these initiatives and meet evolving customer demands will be critical to business success both now and in the aftermath of the pandemic. In fact, any effort made to introduce greater shopping flexibility will likely pay off significantly. Many consumers were slow to warm up to the idea of online grocery and clothes shopping prior to COVID-19. There were trust issues: will the produce quality meet my standards? Will the expiration date for perishable be far enough out? Will the dress actually fit or will I have to go into a store to return it anyway?
Yet COVID-19 gave them no choice but to trust that a personal shopper, warehouse picker or online “find my fit” tool would fulfill their desires. That turned out to be a huge win for retailers. Once consumers saw that stores could meet their expectations – and resolve issues quickly if they did occur – then online shopping started becoming the norm. Many people now shop only online or via mobile apps, no matter what it is they’re buying. Retailers who continue to expand their online presence and improve the shopping and fulfilment experience will benefit greatly long term.
At the same time, retailers who focus on improving the safety, speed and convenience of the in-store shopping experience will find it easier to generate foot traffic as stay-at-home orders expire. Those who introduce contactless payment options to make it easier for shoppers to get in and out will increase customers’ comfort in returning to brick-and-mortar locations. (The days of browsing and lingering are gone, at least for now.)
In other words: rebuilding retail after the pandemic won’t just be about working back to the pre-2020 status quo. Rather, the future of the industry depends largely on retailers’ ability to prioritize operational transformation – to take advantage of new solutions and technologies to balance employee health and safety, improve the customer experience and maintain profitability.
To learn more about innovative automation solutions that are helping retailers rebuild after the pandemic, please click here.
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