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New retail customer imperatives in a pandemic era

  • Posted on July 21, 2020
  • Estimated reading time 4 minutes

Featured in this Q&A blog post: Sue McMahon, Industry Executive of Retail & Consumer Goods at Microsoft, Elizabeth Ebert, Executive, Global and NA American IT Advisory Lead at Avanade and Dave Weinand, Chief Customer Officer at Incisiv.

Dave: As we reopen the economy, how have customer priorities and expectations changed?

Elizabeth: The good news is that there appears to be considerable "pent-up" demand, with many of our clients reporting good opening bounces in traffic and sales. That said, with product availability often becoming the primary purchase decision driver during the pandemic, customer loyalty has taken on a new meaning. Retailers are working to strengthen customer relationships through loyalty program promotions as well as rolling out new engagement models such as "contactless pick-up".

Customers are also looking to trust as a dimension of the buying relationship. Trust that online orders will arrive more quickly after COVID supply chain delays, trust that stores will be clean and safe when they reopen, and trust that retailers will create safe spaces for the employees to work and create new In-person experiences.

Sue: As economies reopen across the globe and physical commerce resumes, as Liz pointed out, the perception of safety will determine where customers shop. Based on this, I believe that e-Commerce will continue to grow with an accelerated trajectory and that physical stores will have to earn the customer's trust that cleanliness and the ability to maintain social distance is optimized.

Dave: How will store layouts and other operational processes change coming out of the crisis?

Sue: Stores will be required to modify layouts by removing merchandise surfaces such as cash wraps or display shelves. In restaurants, we see design changes due to spacing requirements for dining tables as a medium term issue.

These new protocols are causing retailers to reconsider product quantity commitments and restaurants to reset reservation rates. The result will be a force-multiplier for both social distancing and revenue declines. In this climate, basket size in retail and table turnover in restaurants both need to be optimized.

Fundamental store processes must change as cost models are reset based on reduced customer traffic and resulting revenue declines. Because of this, there will be fewer store associates for the tasks required. In addition, we see many additional new tasks for associates that are designed to ensure the customer is comfortable in the store. These include store cleaning, greeters to meter traffic flow, handling product returns / try-ons, and other "new normal" activities that have emerged. Many traditional operational tasks will be eliminated, and for those deemed essential, there will be a rush to increase efficiency through automation.

Elizabeth: At this point, the majority of us have seen many of the changes that have been put into place. These include plexiglass protection at checkout, traffic flow designations through floor stickers, hand sanitizer for customer use, and mask requirements.

However, retailers who had been experimenting with experience-centered formats (vs. merchandise-centered formats) will likely experience enhanced benefits from that strategy. Catching up on seasonal merchandise (after having 1-2 cycles disrupted through various shut-downs) via resets can be done more efficiently, and working capital investments in inventory can be cycled more quickly because of centralized distribution. Stores who had not tested reduced merchandising levels may be reconsidering incorporating this strategy into their plans.

Finally, as Sue pointed out, I see the need for workforce models and payroll costs to be realigned. There are new roles for associates that include store capacity monitoring and additional merchandising control, either from fitting rooms, contactless commerce order picking / delivery, merchandise returns, etc. Also, stores' change in operating hours may become permanent due to new traffic patterns and cleanliness protocols.

Dave: How can retailers and restaurant chains win the trust of their customers?

Elizabeth: The first step in building customer trust is communication. Many retailers have been providing timetables showing how customers can complete their purchases or interact with customer service based on local reopening policies (dining room opening, curbside pick-up vs. in-store). Customers are reassured by hearing a plan and understand that there is an organized and thoughtful approach.

Second, having a visually prominent approach to store cleanliness is extremely important. The process and tools being used should be a part of the strategy but, more importantly, ensuring compliance in action through the visual act of cleaning by associates is critical.

Finally, as store reopen, customers will turn to the retailers / brands they trusted and were loyal to prior to the pandemic. It is absolutely incumbent on these retailers to show their customers that they have taken the right steps to earn that loyalty. That they have adapted to their new expectations.

Sue: To earn customer trust during the "new normal," seamless experiences across every customer touchpoint have become table stakes. BOPIS / takeout, curbside pick-up, and self-serve checkout capabilities are now required. The best scenario is that all of these capabilities are enabled via the customer’s mobile device in a contactless manner.

Dave: What are the top 2-3 technologies that will enable the new era of retail and dining?

Sue: Leveraging data across channels to gain a deeper understanding of customer engagement has been an elusive priority in the consumer industries for some time. This lack of clarity is not sustainable, and investments in analytics will be a necessity. The ability to deliver relevant, personalized engagement that increases conversion and loyalty will be the key differentiator for retailers that emerge successfully from this pandemic.

Also, increased visibility and agility across the supply chain, e.g., enabling near real-time status of goods-in-transit and the ability to pivot to locations of greatest need, has emerged as an essential priority that only IoT signals and cloud computing can deliver.

Last, the ability to optimize the performance and availability of frontline store and restaurant associates is more critical than ever as customer behavior rapidly evolves. Digital communication and productivity tools will become imperative to enable the required level of flexibility.

Elizabeth: Retailers are going to need to elevate their e-Commerce / omnichannel capabilities to a new level. Websites and mobile applications need to double down to truly extend the brand experience in more engaging ways, particularly to improve brand discovery (vs. being a transaction portal for existing customers).

In addition, VR / AR will be revisited to play a role in what the future of commerce will be. The challenge will be that while adding experience and functionality, retailers will need to find a way to improve e-Commerce margins to be more in line with stores.

Supply chain improvements will be required, mainly to reduce both delivery and reverse logistics costs. This will include efficiencies improving algorithms, which source multi-line shipments from multiple warehouse / store locations. 

In quick-serve restaurants (QSR), new contactless ordering technology adoption is likely to accelerate, including mobile, kiosk, or tableside. There was an immediate boost in the US as restaurants analyzed the role of physical menus in ordering and how they might present a health risk - quick solutions have included QR codes on tables, but longer-term solutions will be required to provide an improved experience.

Download our new guide to learn how to rethink how you do business and set your sights on the long term.
 

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