Retail rethink

The Fragrance Foundation France previews an extract of an article from BW Confidential’s September magazine on how brick-and-mortar retailers will revamp their business and stores post COVID-19

BW Confidential partenaire et adhérents de la Fragrance Foundation France

COVID-19 has dealt a major blow to physical retail. It pushed indebted retailers that had already been suffering for years into bankruptcy and has thrown into doubt the future of smaller, independent players that have been starved of sales for months. And the acceleration of e-commerce has meant that all retailers now need to rethink the size of their store networks and the purpose of each point of sale and do so very quickly.

Social distancing and coronavirus covid-19 prevention: maintain a safe distance from others when shopping in stores

Consultancy WSL Strategic Retail ceo and chief shopper Wendy Liebmann says that given the current financial and strategic pressure, retailers will need to reassess every facet of the physical retail experience, from staff training, why the consumer comes to the store, how far they go into the store and where they spend time in the store, to the way they engage in the product and the role of packaging. “It requires a very tough, urgent assessment of how many stores are needed,” comments Liebmann. “We built these models and structures to support 2,000 or even 15,000 stores, and now you have to step back and say: ‘what do we need and how fast can we change? And also, what can we anticipate? What are the scenarios in six months, 12 months and the six months after that?’ That requires a very different model.”

Retail realignment

As the lockdown lifted, several retail chains announced that they were looking at restructuring their business. Germany-based beauty retailer Douglas, for example, said it was looking to realign its store network and ramp up e-commerce due to the changed retail market and the shifts in shopping habits ushered in by the COVID-19 pandemic. It brought in a chief restructuring officer, Michael Keppel to lead the effort. 

In addition to possible store closures, Douglas will push ahead with growing e-commerce with the aim of reaching €1bn in online sales in the near future. In its financial year ending September 2019, e-commerce sales accounted for 16.9% of sales or €585m. “The coronavirus pandemic has changed consumption behavior radically. Some of this change will be permanent – leading to a lasting loss of frequency and sales for stationary retail business,” commented, Henning Kreke, chairman of the Douglas supervisory board.

Other retailers have also said they are re-assessing their store networks. US-based Ulta Beauty for example said it was rethinking its store footprint, while working on accelerating e-commerce. While in fashion, retail group Inditex announced it would close 1,200 stores and invest $1bn in expanding e-commerce. It sees e-commerce sales representing 25% of its business by 2022, up from 14% today.

What is likely then post-pandemic is that there will be fewer stores. The role of the stores that are left is also likely to change. For example, at some of the major chains, there could be a focus on larger flagships whose purpose is to convey the retailer’s brand identity through the atmosphere in-store and the service and events they offer. While at the same time, their smaller, local stores will disappear, with their clients encouraged to buy online. Or these less-productive stores could become fulfilment centers, pick-up points for online deliveries, help centers or even product advice centers. In a bid to deliver the ‘real-life experience’ or in-person high-touch service, retailers may also prefer to regularly launch pop-ups and create a buzz around them, rather than pay all the overheads for permanent stores that may not offer anything better than what can be had online. 

Profits first

What is clear is that there will be no room for poor levels of profitability nor unproductive stores. “The fact is that when the cash balance isn’t as good as it should be, retailers will be forced to change their business, be more efficient and more profitable in order to survive,” says  OneStock ceo Romulus Grigoras.

Anna Vitchacholchai, retail engagement team lead at RetailNext says that this stronger focus on profitability will impact how retailers manage inventory: “The pandemic has driven retailers to look into their operational efficiencies and reassess their supply and distribution chains. Investments in automated fulfillment and on-demand manufacturing are being made. One of the many lessons we have learned throughout this pandemic is that everything can change quickly, so retailers need to be prepared to adjust their inventory to meet in-store demands.” 

Grigoras adds: “Every retailer has to find the right balance of customer facing and back office functions or fulfillment functionalities for a store, and those structures are more and more interlinked.” 

But what will stores look like?…

Read the rest of this article in BW Confidential’s September magazine. For your complimentary copy contact:

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