What retail banks can learn from retailers during COVID-19
In this new, three-part blog series we sit down with Deborah Weinswig, CEO and Founder of research and advisory firm Coresight Research, to discuss global retail and the coronavirus crisis, and learnings that can cross over to retail banking. In this first Q&A, we ask Deborah what retail banking can learn from how retailers have reopened after—or stayed open during—the coronavirus lockdowns.
How can retail banking learn from retail to encourage socially distanced or contact-free financial-services interactions?
Deborah: Retailers have successfully pulled several levers to maintain physical retail operations during the lockdown and to prepare for a “mask economy” during initial store-reopening periods.
Curbside pickup: We saw a number of retailers switch to contact-free curbside-pickup services, and rollout has continued even as stores have begun to reopen, reflecting that retailers are preparing to equip their businesses for sustained changes in shopping behaviors. Among those to pivot most successfully to curbside pickup was electronics retailer Best Buy: The company reported that over six weeks, it retained an astonishing 81 percent of sales from the year prior, despite all of its stores being closed. The extent of this sales retention is likely to add impetus to retailers’ adoption of such services and could ultimately make the prospect of slimmer store fleets more attractive.
Appointments and virtual consultations: Mattress brand Casper is launching virtual consultations from its stores and will subsequently introduce one-to-one in-store appointments. More big names are moving to an appointment-based operating model, with Best Buy and Neiman Marcus among those offering pre-booked consultations in-store.
Regulating traffic: In grocery, especially, we have seen retailers innovate to regulate in-store traffic. In Ireland, Lidl launched a chatbot that allows consumers to check the quietest times to shop in their local store. In the UK, Aldi is introducing traffic lights at store doorways to regulate shopper numbers.
For retail banking, we see several takeaways:
- Financial-services firms must make mobile the centerpiece of post-crisis brick-and-mortar services. Smartphone apps should evolve to become bidirectional points of contact rather than monodirectional information sources: They must be places to make appointments and check-in for in-person appointments; initiate or complete transactions; access financial-planning advice; get more engaging financial information, including through data visualization; and be sources of real-time information on traffic flow or customer numbers in a branch.
- Similarly, companies must continue to erode divisions between digital and in-person banking. Just as retailers have switched to pickup and ship-from-store services, banks must ensure branches and digital join up in a seamless offering.
- Finally, we are likely to see demand for lower-contact banking models, including through no-contact digital channels, with services provided through video calls and apps. Financial-services firms must stand ready to offer virtual services rather than assume a return to pre-crisis practices, and legacy firms must accelerate their digitalization to fend off threats from digital-first rivals. Longer-term, we could see accelerated brick-and-mortar streamlining in retail banking, as we have seen in physical retail.
What can retail banking learn from retailers as they begin to reopen stores?
Deborah: While we do not yet know the full picture of post-lockdown consumer activity—in terms of visits to brick-and-mortar locations, transaction levels, or channel shifts—we are seeing early indications of a confident return to physical retail among consumers. That return is being supported by retailers adapting brick-and-mortar formats and services and enhancing integration with digital channels.
For even the biggest retailers, it can be a case of “test and learn.” Coresight Research’s conversations with retailers have confirmed that phased approaches, with a gradual reopening of stores, prove useful in trialing new operating procedures, including implementing new protocols related to social distancing; and that limited launches of newer services such as curbside pickup are enabling them to test their implementation. In a still-uncertain context, staggered reopenings or phased rollouts of new services are allowing retailers to test and learn and so iterate more nimbly.
One expectation in retail and retail banking is the greater adoption of digital channels over the longer term. In Coresight Research’s weekly US surveys, a sizeable proportion consistently says that they will shop more online and less in store after the crisis ends: On May 27, for example, 28 percent of US consumers told us that they planned to do so. Reflecting this, we continue to see retailers roll out multichannel services such as pickup even as they reopen stores.
We see the following learnings for retail banking:
- Use a market-by-market approach to test new branch-level practices and newer services: Small-scale implementation facilitates test and learn, and thus more rapid adjustment.
- Prepare for a sustained level of digital usage for banking interactions.
- Aim to maintain and capture share among consumers who are now doing their shopping online by providing banking add-ons that resonate with them—for example, with promotions, co-branded partnerships, or loyalty programs that are more explicitly tied to e-commerce-related rewards.
How can retail banking learn from retail to enhance digital offerings and offer in-person-equivalent services?
Deborah: Faster-moving, more digitally adept retailers reallocated associate expertise from stores to digital channels—for example, launching consultations, advice services, and product demos via video, using the expertise of their store associates.
Many retailers placed a greater emphasis on social media as a more direct and faster-response communication channel in rapidly changing circumstances, and some have been bringing physical experiences to consumers through social platforms, too—from Q&As to entertainment to fashion shows.
The average consumer is likely to come out of this crisis more digitally focused, not simply because of retail elements such as e-commerce but also because of the adoption of digital tools more broadly. In particular, we expect an accelerated migration toward online video for advice and appointments among consumers.
While financial-services brands should be present in the channels or media consumers are opting to use, firms can gently nudge consumers toward touchpoints that are more favorable for them, including those that are lower cost or logistically easier to service, such as digital channels. Focusing on apps can support these efforts while responding to consumers’ heightened use of digital channels.
Resources from Microsoft
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