Top learnings for retail banking from retailers navigating a COVID-19 world
In the third and final part of our three-part blog series, we ask Deborah Weinswig, CEO and founder of research and advisory firm Coresight Research, to discuss retail’s reaction to the coronavirus crisis worldwide and the top learnings for retail banking. Take a look at the first part of our series which surrounded what retail banks can learn from retailers during COVID-19, and the second part of our series discussed how retail success stories inform retail banking strategy.
What can retail banking learn from the pace of change in retail?
Deborah: We saw retailers move impressively fast to work around the challenges of lockdowns—subsequently social distancing, while meeting rapidly changing consumer behaviors and demands—including large retailers that would otherwise be resistant to rapid change.
- Several retailers rapidly launched or scaled up curbside pickup and at-store collection, often positioned as “contact-free” to assuage consumer concerns. Retailers reallocated store staff to become fulfillment operators for curbside and other pickup models.
- For sectors such as discount and warehouse clubs where e-commerce itself was a nascent channel heading into lockdown, online capabilities overall were scaled at speed—the crisis accelerated digitalization and therefore condensed the learning process.
- Firms partnered with third-party service providers to begin offering online grocery services and to fulfill online grocery orders. Increased shopper demand for essentials prompted grocery retailers to partner with scalable, asset-light, last-mile firms such as Instacart and Uber.
- Retailers took nascent technologies and rolled them out—on the basis that, in a crisis, any capacity and service enhancements are better than none, even if the product has not yet been perfected. Self-scan apps were a prominent theme in grocery retail as stores tried to square accelerated demand with limiting in-store contact.
We see the following learnings from retail in rapidly evolving business models or operations:
- Re-purpose or extend what you already have, including amplifying nascent services and asking staff to reallocate their expertise.
- Partner with scalable businesses to launch new services faster than what would be possible in-house.
- Work with technology vendors that can provide rapid-rollout, “oven-ready” solutions.
Will models that were adapted quickly remain post crisis?
Deborah: Retailers have not found themselves at unexpected destinations; instead, they are at destinations where they expected to be in a few years’ time. We have heard from retailers that they have moved forward “10 years in 10 weeks” and that things that “might have taken three or four years to get to … happened in the space of less than six weeks.”
The implication is that many of these changes are here to stay.
We see drivers of retained offerings and ways of working as:
- Sustained changes in consumer behavior as shoppers’ routines have been shaken up for a sustained period: The retention of changed behaviors by shoppers—such as migration to digital channels and use of cross-channel services—will underpin the retention of services by retailers.
- Heightened expectations of convenience, as retail came to locked-down consumers: Shoppers may be reluctant to let go of handy options such as pickup services that deliver direct to the trunk of their cars.
- Greater productivity in store operations, including through consumers undertaking self-checkout: Retailers will appreciate opportunities to offset the added costs associated with e-commerce and recoup losses resulting from lockdown closures.
- The risk of a need to return to lockdown conditions, with associated need to serve customers in different ways: The future remains uncertain, and companies may need to spring back to crisis mode.
How is retail adapting—and likely to adapt—to permanent changes in consumer behavior?
Deborah: We see three prominent themes in retail’s ongoing and likely permanent adaptations.
- Cross-channel: Digital adoption will spur an even greater blurring of the store and e-commerce divide. Many retailers have talked about “seamless” omnichannel retailing for years. The crisis will accelerate the laggards (such as discount formats) toward this target. For some of the others, lockdown learnings will prompt a rebalancing of online versus offline—we are already seeing retailers such as Zara owner Inditex switching expenditures and culling stores as they move their emphasis to digital. Retail banking is likely to follow a roughly similar path to retail, and firms must stand prepared for a future that is even more digitally focused.
- Cross-border: One less-documented effect of lockdowns was a surge in cross-border shopping, as consumers turned to international retailers for brands and products that they could not access through usual channels. Post crisis, and facing short-term losses, more retailers will look outward to seize the increased opportunities to grow sales globally. The learning for retail banking is indirect but potentially profound. The crisis has shaken up consumers’ routines including in channel preferences—some may have a new openness toward trialing different companies and alternative channels, possibly fueling fintech upstarts.
- Contact-light: Physical retail will become contact-light across all touchpoints, from experiences to collection to checkout and payment. Furthermore, contact-light will be a hallmark of adjacent sectors such as restaurants and coffee shops, where digital menus and pre-order via apps will become the norm. After years of shifting toward experiential brick-and-mortar retail, we could be about to see retail pivot back to a functional, streamlined process focused on shoppers getting a product as easily as possible—the real “experience” will be the ease of completing the purchase. Like retailers, retail banking must be prepared to offer contact-light experiences across all potential interactions.
Other big changes are likely still to come in retail—for example, diversification in sourcing to limit risk and to react to increasing political tensions and changing consumer sentiments—a reassessment of inventory management in the wake of overstocked supply chains. A wave of mass store closures, sparked by retailers reacting to channel shifts as much as by lockdown-driven retail failures—a consequent consolidation in the US shopping mall base. Retail will change further, and new learnings will emerge.
Do retailers show a model for sharing information and best practices?
Deborah: The crisis saw much positivity emerge in retail which was manifested in collaboration and information-sharing to support retailers, driven by retailers in the grocery sector.
- In the United States, Kroger published “A Blueprint for Business,” a detailed, 59-page guide to keeping the retail supply chain operating and stores open amid a pandemic—from demand management, to store sanitation, and employee wellness.
- In France, grocery retailers Auchan Retail and Carrefour and the UNI trade union undertook to work together to share best practices in minimizing risk across areas such as safety in stores, home delivery, and logistics, as well as providing support for employees.
- In the United Kingdom, major supermarket groups successfully lobbied for a temporary relaxation of competition law to enable them to cooperate and share resources during the crisis.
Retail trade bodies, such as the National Retail Federation, the International Council of Shopping Centers in the United States, and the British Retail Consortium in the United Kingdom, shared best practices and made guidance documents for operating stores freely available.
Essential retailers rose to the challenge of heightened consumer demand and the need to serve consumers isolating at home. Such deep collaboration may prove short lived, but it presents an optimistic model for potential cooperation and sharing of best practices across industries.
Resources from Microsoft
Here are some of our resources to help address the topics covered above:
- Get the latest information, updates, and resources from Microsoft: Responding to COVID-19 together.
- For additional resources, solutions, and best practices for the financial services industry, visit our banking, capital markets, and insurance pages.
- Learn more about the Microsoft Dynamics 365 financial services accelerator.
