On the same day that the US Commerce Department announced the largest ever slump in our country’s GDP at 34%, Amazon reported that their Q2 revenues jumped by 40% to $59B while profits doubled. These strange times have all Americans and retailers living in two alternate universes. Some, like department stores and specialty stores, have suffered, while grocery, online retail, pharmacies, big box retailers, and discount stores have thrived to unprecedented degrees.
Regardless, this pandemic is a wake up call for many industries, and retail is no exception. If I were leading a retailer – let’s call it SidMart – I would look closely at the core elements of my business and use technology to revitalize each part. Three things I would try to transform in particular:
In-store experience: Customers are no longer willing to shop for merchandise alone – they want an experience which includes social and community aspects. That lower prices are driving us as customers online is a myth – even today, we are willing to pay $5 or more for coffee! SidMart’s operations in brick and mortar locations need to get an experiential edge by changing store formats and seamlessly merging with other channels. I can promise you: online commerce does not have a chance against that.
Supply Chain: That large country in Asia which had taken over the world’s manufacturing has transformed in the past few years from irrelevant player to political hot potato and now a national security threat. All businesses, retailers in particular, have to re-evaluate their supply chains and build redundancies, bringing as much as possible of the manufacturing into the country in a cost effective manner via automation. The costs of last mile logistics also need to be addressed through smart decisions (AI anyone?) on store locations, part of which can become dark to reduce the cost of fulfillment.
Innovation: Retailers have grossly underinvested in innovation, and the time is ripe to embrace the groundswell of private equity and venture that will build the next generation of retail without enormous capital commitments.
If retailers do it right, the pandemic of 2020 could be a transformational moment for the industry.