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Retail must weigh up high street versus online investments after coronavirus lockdown
Larger retailers that have a significant online presence will need to decide whether to innovate on the web or on the high street
In the opening keynote at the Retail Expo virtual conference, Mark Price, former managing director of Waitrose and deputy chairman of John Lewis Partnership, warned that the high street will need to adapt radically post-coronavirus.
He said almost a quarter of UK customers are unlikely to return to the high street, either because of their financial situation being worse than before the lockdown or the risk of catching the virus in stores.
Looking at China’s experience, Price said that after it lifted its lockdown, the volume of retail footfall returned to half of what it was before.
Among the issues retailers with physical stores will need to consider is how to maintain social distancing, both for their staff and customers. Price said: “Can you run a retail business at scale, adapt business models or hope that there is more government support?”
For Price, the challenge that retailers will face as the UK eventually comes out of the lockdown is how to scale the business back to its pre-lockdown state, given that retailers tend to operate on margins of between 3% and 5%.
Price painted a picture of tough times ahead for the UK economy, with government borrowing set to hit record levels and the prospect of austerity measures and increased taxes to reduce national debt. He said: “In times past, when cost were under pressure, you’d increase prices. But the discount retailers now have a strong hold on consumers.”
As such, reducing the cost of goods sold in retail is unlikely to have much impact on major retailers trying to remain viable after the coronavirus. For Price, this means that those legacy retailers that have a substantial online presence will need to think harder about whether to continue to invest as heavily in their retail chains as they did in the past.
And if lower shop prices are unlikely to lure customers away from discount retailers, Price urged retailers to look after their existing customers and focus on making the shopping experience unique. “It’s very easy to focus on winning new customers. The most important ones are the ones who love your products,” he said.
“I would spare no expense in owning your intellectual property. This will become more important. The internet has shown that if you sell the same goods, it is not much of a differentiator.”
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If customers have less money to spend, but the retailer is unable to differentiate purely on price, Price suggested that consumers may be prepared to pay more for better service. “I see an opportunity for a whole new beginning, creating a new era of retail,” he said.
For Price, retailers should aim to train in-store staff to provide the best customer experience and use technology, where appropriate, to engage with their customers, who are now working from home. For instance, in his presentation, he discussed how Carphone Warehouse was using Zoom videoconferencing to help customers at home make purchases.
He urged retailers to invest in staff training to enable in-store staff to provide the best customer experience as and when the lockdown is lifted. “To interact with customers in retail, you will need to be highly skilled,” he said. “I’m really struck by how Richer Sounds closes its shops in the mornings to ensure its staff understand its products. There is a real role to develop people.”
Asked whether robots could replace in-store staff, Price said: “I’ve seen robots in Japan – I think it’s horribly artificial. There is something about trusting a human rather than a machine, which is working to sell your products to clear stock.”