Retail Analytics

Reinventing Retail Post-Pandemic
Reinventing Retail Post-Pandemic 1440 428 ASG

The uncertainty of 2020 has resulted in two basic approaches to navigating the ambiguity of retail during the course of the pandemic: the “deer-in-the-headlight” approach – those retailers who panicked, froze in place, and have quietly filed for bankruptcy; and the “what if we try this” approach – those retailers who were able to nimbly adjust how and where they met their customers’ needs, even if those needs changed every week. What has been demonstrated over the past several months is that which we have always known to be true for retail – that agility is key. It’s just that now, instead of measuring business success in terms of profit and rate of growth, business survival becomes the means of determining success. Reinventing retail is the key to success – and survival.


Reinventing the Customer Experience

What happens when your livelihood and your very life are threatened, and you’re forced to live without the comforts to which you’ve become accustomed? First, you must begin to reevaluate what’s important. As time goes on, you become keenly aware of the things you miss most – and you start being willing to make the necessary accommodations (wearing masks, making appointments in advance, scheduling delivery and curbside pickups) to have the things you want. And the retailers who survive are those who are making customers feel safe and are providing them with alternatives for obtaining what they want or need. 


Reinventing the Shopping Experience

There is a significant shift from omnichannel to unified commerce – a seamless experience for your customers regardless of where or how they purchase from you. The flexibility of unified commerce allows retailers to stay as agile as possible, adjusting accordingly to our rapidly changing retail environment. What does this mean for retailers? Take a look at Chute Gerdeman’s excellent insights in the article, “Shopping Goes Automatic,” which explores how brands such as Starbucks, Nike, and even Amazon are making changes to make the shopping experience easier. 


Reinventing Brand Loyalty

Consumers may have been loyal to specific brands in the past, but the pandemic and social crises of 2020 have wiped the slate clean. Building brand loyalty comes down to two things: Do you make your customers feel safe enough that they still want your stuff, and is your brand aligned with their social and political ideologies in sufficient levels to make you worthy of their dollars? According to a study by EY, “Brands must stand for something, have a purpose, and share their expertise with consumers.”


Reinventing Engagement

Retailers are making adjustments to accommodate the ongoing pandemic, but with a vaccine on the horizon, there also needs to be preparation for the return of customers who are eager to be back in stores. Chute Gerdeman explores what that might look like in the months to come. 

The way forward begins with a strong retail strategy, in-depth analytics, and partners with their pulse on the retail industry. We’re here to help.

Post Pandemic Retail Strategies
Post Pandemic Retail Strategies 1440 428 ASG

We’ve been talking recently about department stores – specifically, the incline and change in retail that occurred as a result of department stores, as well as their original purpose. Department stores were the logical evolution of brick and mortar in the late 1800s. Before department stores, there were mom-and-pop shops. Those developed into the mercantile (think Little House on the Prairie). But as people moved out west and our economy shifted from agriculture to commodities, the department store became the mainstay – Macy’s formed in 1858, Bloomingdale’s in 1861, Sears in 1893.


What Made the Department Store more Successful?

Not only did department stores sell everything people needed to clothe themselves and furnish their homes, but they took advantage of the fact that, for the first time, consumers had disposable income. Department stores provided demos, offered lectures, and hosted entertainment events. Shopping was – get the irony here – an experience. By the 1920s, people were buying on credit, and by the 1950s, they weren’t just headed to a single department store, but instead to shopping malls that had under one roof their favorite department stores, along with a handful or more of specialty shops. Of course, the same thing that brought malls into favor – a fun way to shop at your favorite places while visiting with a few friends, dining in a restaurant, and enjoying a day out – became their downfall as malls across America and the department stores in them became homogenized duplicates. 


Can Department Stores Regain Relevancy Post-Pandemic?

As retailers head into the holiday season (i.e., right now), they will both serve as models, as well as guinea pigs, to determine whether department stores are still relevant. The New York Times predicts a pretty slim likelihood of survival for most department stores. Retail Dive is keeping a running list of those who have already filed for bankruptcy. Several other retailers were already in peril when COVID-19 hit. But when department stores reopen, they need to be ready to offer something different. 


What Are You Doing Now to Be Prepared?

What data are you collecting about your customers so that you can understand how their habits have changed? Are you noticing the shift in population centers that is happening because more people will be permanently working from home so they can live in one city and work for a company in in another city 800 miles away? How are you responding?

Just as the world experienced a sense of exhilaration when emerging from the Spanish Flu, people are going to be starving for places to go, things to do, stuff to buy, and most of all, for the experience of it all. The retail landscape and the overall economy could very well bear a resemblance to the Roaring Twenties next year or the year after. 

The question is: Will your brand be there to take part in it?

The Future of Retail Is Not Pureplay
The Future of Retail Is Not Pureplay 1440 428 ASG

Most of the people predicting pureplay and ecomm as the future of retail could not have foreseen what would really happen to the infrastructure when challenged the way it has been during the pandemic. We now realize that the future of retail is not Amazon (or Target or Walmart), and that Amazon was not the golden child everyone thought it was. They have the largest ecommerce infrastructure in the country, yet when retail closed, they had to curtail Prime shipping because they didn’t have the capacity to keep up with the demand. They were not prepared. No one was. There was no infrastructure in place to handle 100% online consumer demand. From manufacturing to the seamless delivery to consumers, every single point along the way highlighted the problem areas. There is no way everything can move to online only.  Daphne Howland deep dives into the challenges of pureplay – with or without a pandemic. 


Brick and Mortar Is the Future of Retail

If it wasn’t already clear, which it should have been, brick and mortar is the future of retail. But it cannot be the brick and mortar of the past. We need to leverage local, regional, and niche brands. We need to make malls interesting again. We need to focus on the experience. And we’re going to need to get to know customers all over again. Who are they? What do they want? Given our “new normal,” what are their new expectations and how do we help fulfill them?


Changes You’ll See Across Retail

The biggest changes are designed for health and safety compliance. The number of people allowed inside a store will be limited; there will be hand sanitizing stations and plexiglass shields at check-out counters. Many stores are completely closing fitting rooms; those who are leaving them open will quarantine unpurchased clothing that has been worn or modeled. Improved cleaning and screening standards will be essential. All department stores will remove sample makeup counters or move to a single disposable sample standard. 

Leveraging Technology

From thermal scanners to monitoring technology that manages capacity to AI that helps deliver improved customer service, the future of retail will rely more than ever on technology. A recent survey revealed that 87% of consumers “prefer to shop in stores with touchless or robust [items are identified when put in the cart, no scanning required] self-checkout.”


Consumers Have Changed

For retailers, it will be important to remember that the customer whom you knew two months ago and the customer who walks into your store when you reopen are vastly different individuals. Priorities have shifted almost overnight. What you do now – how you adjust both your in-store approach and your omnichannel experience – will be critical. You should already be working on and implementing your post-pandemic strategy. Not sure where to begin? CBUS Retail hosted a virtual roundtable in May featuring Amy McCormick, Corporate Affairs Manager for The Kroger Company. Kroger has made their entire retail blueprint available for download here.


Moving Forward

For everyone in retail – from grocers who struggled in the beginning but have adapted remarkably well, to the fashion industry, which experienced perhaps the biggest decline – the future is anything but certain. What we know:

  • From Zoom calls for work to ordering groceries online, consumers adapted very well to digital. There will continue to be a shift. This means your retail locations and your ecommerce solutions need to work together to present a seamless brand experience (yes, we’ve been telling you this for a long time; now it’s not an option).
  • This may only be the first of many coronavirus pandemic waves, especially since social distancing protocols were largely ignored for the sake of the protests. Retailers need to anticipate at least a second wave. This means better data, less reliance on just-in-time inventory, more cash reserves, and better planning.
  • You’ll need to plan how you’ll maintain social distancing, what your cleaning protocols will be, and who will be responsible for monitoring and enforcing those protocols. Customers will not frequent your business if they are not convinced that you – and they – are safe. Your locations must be meeting and exceeding minimum CDC standards. This means installing handwashing and sanitizing stations, reducing the number of occupants in your store, providing clear signage, and establishing policies to deal with everything from sick employees to what you’ll do after someone tries on clothes but doesn’t buy them.


Small Changes Won’t Be Enough to Retain Customers

For the retail industry, emerging from this pandemic may be comparable to the post-9/11 era in terms of how consumers responded to the uncharacteristic environment. When consumers finally started to recover from the shock and fear of 9/11, they sought out ways to be inspired, to forget, and to help. Post-pandemic, consumers are going to be seeking out those retailers that are committed to health, safety, and wellness – the ones that authentically commit to a higher standard and demonstrate that they are concerned more about protecting consumers and employees than making a profit. Consumers will also expect you to meet them where they are – both emotionally and physically. This means being able to provide online shopping with curbside delivery, even if you never have before. It means understanding that no matter when you reopen, people will be more sensitive about personal space and they’ll be looking for experiences that help them escape. And no matter what your brand, consumers better see you cleaning – often and efficiently.

Reinventing Retail: The Post Pandemic Strategy
Reinventing Retail: The Post Pandemic Strategy 1440 428 ASG

Has there ever been a more challenging time for retail? Without the business disruption insurance that we lobbied for, we’re seeing more and more retailers forced into bankruptcy. And even as states are in the midst of phased reopenings, the ongoing civil unrest, however justifiable, has made it impossible for some retailers to open as planned. There are more unknowns than knowns – and there’s a lot to unpack. What has become clear, however, is that whatever role you play in retail, the one word you need to remember is flexibility. 


Flexibility is our Mantra for 2020-2021

Retailers, landlords, lenders, and consumers – and all the organizations involved in keeping them up and running – must all embrace flexibility. But what does that really mean?


Retailer Flexibility

Retailers who survive need to throw their old models out the window. Consumers have changed. The economy has changed. We are not going to be able to predict everything that is going to happen (did you ever once think in January that this is where we’d be in June?). 


Location

For a retailer, this means flexibility in your location strategy: pop-ups, regionalization, localization, adapted design, modular design, movable walls to adjust to consumer and operational needs. 


Leases and Lending

This also means flexible negotiations with landlords and lenders, because traditional, long-term, fixed deals are not and cannot be the future. While terms have been adapting over the last two years, even more change is going to be required for new retail players. Flexibility tied to performance and structure will be a mandate from those retailers expanding and moving forward.  


Customer Service and Customer Experience

Flexibility in service to the customer, whether this means curbside delivery OR curbside return – yes, you read it here: curbside return – will be necessary.  Providing delivery options is only one of the simple changes that retailers have to make. The long pole in the tent is a complete overhaul of old processes and procedures as well as systems and devices that both associates and customers use.  Retailers have to pivot their strategies in order to address these new customer expectations.  Rachel Williamson provides the best guidance here:

  • Retailers must start with WHY. It has to be clear to your customers. Many businesses are focused on the WHAT and HOW. WHY is more important and draws customers to your brand.
  • Create WOW experiences. While safety is top of mind (and should be for the time being), it cannot replace genuine customer engagement. Sanitizing, masks, and long lines to enter the store must be met with engaging associates who are making the customer feel glad they chose to shop in-store.  The experience has to be tantalizing and connect the customer to the brand.  The only way this happens is through really thorough training of the store teams.  Shortcuts to training means shortcuts in delivery.  The customers will feel it and may not come back to shop.
  • Communicate to your customers regularly, reminding them about the safety protocols, but more importantly, about the different ways they can connect with your brand.  Now more than ever, the online and offline experiences have to be seamless.
  • Create a compelling reason for customers to come shopping and then continue to create reasons to return. Covid-19 created a supply chain disruption bigger than we have ever seen.  Stores have few fixtures on the selling floor and even fewer products.  Get creative on how to make the stores look and feel full.


Operations

Flexibility also means streamlining your company’s operations. Before COVID, removing ‘friction points’ was the focus. Now, the new processes designed to keep customers safe have created a new set of friction points for both store teams and customers. Every process that can be automated should be.  Examples include labor scheduling, merchandise flow, and performance management, as well as sensor product in the DC or at the manufacturer. Take it off the list of things the stores have to do. The focus in-store must be on delivering customer experiences and exceeding their expectations if brick-and-mortar is to survive.  

To be as nimble as possible, retailers should outsource everything that’s not part of the core business so that they can adjust more readily to changes. The future of retail belongs to the brands and companies willing to adapt to this constant state of flexibility – and there is a lot of market share up for grabs.


Landlord Flexibility

One of the core lessons learned during the pandemic is that force majeure did not save anyone but the landlords. Landlords – and the lenders behind them that often tie their hands – who refuse to renegotiate or provide any kind of flexibility will end up with empty buildings. The landlords who remain under-standing and flexible will be the landlords who win going forward. Retailers must be able to adjust lease terms to their needs. This can no longer be a negotiation to meet landlord demands. Retailers just can’t afford to do it anymore. Gone are the days of a 10-year, fixed-rate lease. Right now, retailers need leases that offer variable rents with more options; flexible terms are the new norm.   

The biggest outgoing is often rent. A number of landlords and tenants have already agreed short-term arrangements, such as rent concessions and deferments to cover the lockdown period. But what happens after lockdown? In a retail landscape where some trading is possible, but not enough to sustain rents at their pre-Covid levels, landlords and tenants will need to collaborate in order for both to survive. 


Store Construction and Design Flexibility

Retailers are going to need to be able to adjust locally and build in more regionalization and differentiation; so, there can be no more one-lease-to-fit-them-all or one size stores. National footprints won’t be normalized. Adding flexibility inside the spaces themselves will require flexibility with the landlord for things like movable walls to adjust backroom sizes and selling floor sizes as the stores or consumers demand, with multiple-size footprints and more showrooming for consumers.  

“This is a retail renaissance not a retail apocalypse,” said Whitney Livingston, COO, Centennial Real Estate. “For anyone to succeed, all parties need to move out of their comfort zones, and compromise and partner. Companies that are willing to innovate and think outside of the box will help the industry reset and thrive post-pandemic.”


Lender Flexibility

We’re spending all day every day in conversations with landlords. Landlords’ hands are sometimes tied as well. But without more flexibility from commercial lenders, we’re headed for a collapse that will make the housing crash of 2008 look like small beans. We’re already in a worse situation than we were then. It’s going to be ugly. 


Final Thoughts on Post-Pandemic Retail Strategies

Consumers may spend less. But even if they spend more, their spending is likely to be different. It will take time to collect data and develop trends, and until then, you’ll need to be able to quickly pivot.

The way forward in 2020 and 2021 is going to require innovation, technology, and data.

Data will be crucial. To get some real perspective on how little retailers know and how crucial data will be for future decisions, read this deep dive, from Retail Dive, on the uncertainty retailers face. From managing cash flow to determining a reopening strategy to making the tough decisions about locations in the coming 6-18 months, you will need analytics more than ever. 

“Retailers need to understand that their response to dynamic customer behavior starts and ends with data. We already have an endless supply of data but using it intelligently to make decisions on where and how to invest, and what the customer needs and values, is where we’ve seen traditional retailers struggle.” – Andy Halliwell, Senior director, retail, Publicis Sapient

The future is unknown. But we can begin to build new models now.

Consumer Packaged Goods Need a New Plan
Consumer Packaged Goods Need a New Plan 1440 428 ASG

When it comes to surviving the evolution of retail, it’s not just retail brands who are having to reinvent themselves and find new, customer-centric avenues to survive. The future of wholesale is in the same boat and so are consumer packaged goods (CPG). According to McKinsey, CPG losses over the last decade ranged from 7% (food) to 18% (household products and beverages), and disruption in the CPG market is coming from everywhere:

  • Ecommerce has leveled the playing field to a degree, allowing unknown startups to compete effectively against well-known brands.
  • Younger consumers are not as brand loyal.
  • A consumer shift toward healthier products has left some brands lagging far behind the trends.
  • Amazon.
  • Increase in local competitors.
  • Private label brands are taking a significant share of the market.

Costco introduced the Kirkland brand in 1992, 27 years ago, and that brand did $39 billion last year, whereas all the Kraft and Heinz brands did $26 or $27 billion. So here they are, a hundred years plus, tons of advertising, built into people’s habits and everything else, and now Kirkland, a private label brand, comes along and with only 750 or so outlets does 50% more business than all of Kraft-Heinz brands.
– Warren Buffet, Forbes


How Do Traditional CPG Brands Compete? D2C Is the Answer

Just as wholesalers have been discovering, many CPG brands have sensed a change in the market and are likewise making the move to direct-to-consumer models – and if they’re not, they should. Startups are agile enough that this shift is easy for them; traditional CPG brands, however, struggle to adjust to the shift. Unfortunately, those that don’t adjust will struggle more so. There are benefits to D2C for CPG brands:

  • Direct communication with their customers.
  • More control over their brand presence, instead of being at the whim of the retailer’s shelf space and competing brands.
  • More control over the price, making the brands better able to compete. 
  • Total control over brand image.
  • Deeper understanding of data about, and engagement with, their consumers.
  • New opportunities for strategic growth.


Overcoming the Challenges to D2C

It’s crucial to understand the difference in strategy and execution for digital brands, wholesale brands, and CPG brands versus traditional retailers. The strategy and approach are different for the execution of a DTC model for those not traditionally involved in retail. The biggest challenge CPG brands have to overcome is much the same as wholesale: Well-established brands often get stuck doing the same thing because that’s what they’ve always done – but they have different stakeholders to please, too. 

Most large CPG companies still have a 1980s view of private label. They are not aware of how much the industry has changed or how much it is driving and impacting retailer activity. A lot of marketers overestimate the importance of their own brands and underestimate the importance of the retailer’s brands to the retailer. Others don’t understand the private label threat well enough to take it as seriously as they should.
– Jim Wisner, former Jewel-Osco executive who runs a marketing consultancy in Libertyville, Illinois. (PPIQ)

Will private-label CPGs put big brands like Kraft Heinz and Proctor & Gamble out of business? Unlikely. But these legacy brands are having to justify slower growth, lower profits, and in some cases, product line losses to their shareholders. At the end of the day, CPG brands that don’t consider D2C may not survive.


D2C: A Roadmap to Success and Survival for Wholesale and CPG

Before a wholesale or CPG brand can shift to D2C , they must first shift their mindset. These brands have been insulated from direct contact with – and in many cases data from – the consumers who enjoy their brands. To succeed in a D2C world, that has to change. Marketing, branding, market position, and location decisions must be based on a deep understanding of the consumer and their relationship to the CPG brand. The talent shortage in the CPG industry is a big hurdle to accomplishing this.

Challenger brands and private label brands have a lot of the same appeal. Private brands provide value and a lower price with the perception of similar quality. Challenger brands may be priced higher, but they offer a tangible benefit to justify the premium. Big brands are stuck in the unenviable middle. They’re not telling their story in a compelling enough way about why shoppers should be willing to choose them.
– Timothy Campbell, senior analyst at Kantar Consulting (PPIQ)

Then, CPGs must create a relationship with the consumer. How? It starts with data. Where are your customers? Who is loyal to your brand? Why? Do you have the insight you need to open flagship stores?

D2C data is a gold mine for any business and this is even truer for the CPG industry. If you think about it, there are no other data sources within the four walls of a CPG or FMCG organization that afford the richness and ‘always on’ feedback loop to demand and supply metrics. This is a dream come true for those tasked with advanced analytics and measurement as it is the cleanest way you can stimulate and measure consumer loyalty and then develop robust data-based decision behaviors around demand sensing and forecasting.” – Vidyotham Reddi, Global Director of Advanced Analytics & Measurement at Mars Inc. (LeadsRX)

Finally, you need to use the data to make strategic decisions about your brand. Do you build out your own retail shops across the country or test pop-ups in certain high-traffic areas? Do you sever ties altogether with the retailers who carry your brands or focus on some kind of hybrid that allows your brand to remain on retail shelves even as you build your own branded stores? How do you keep your brand-loyal consumers engaged?


The Way Forward for CPG Brands

So many CPG brands have no visibility beyond the retail space they occupy. That space is quickly shrinking, especially as retailers compete with their own labels. The CPG industry needs to embrace communication, branding, and risk taking. To have the ability to understand consumers, CPG brands must learn to take calculated, educated risks to discover what works and what doesn’t, incrementally expanding into direct-to-consumer markets as they refine their testing. Pick a market. Do a test. Refine and do a bigger test. But DO something.

Outsourcing Retail Strategy and Lease Administration
Outsourcing Retail Strategy and Lease Administration 1440 428 ASG

There are 10,000 Boomers retiring every day, and they are taking an enormous amount of institutional knowledge with them. This has been most noticeable in the healthcare and insurance industries, but in the next decade, we’re going to feel it in every industry. 


The Generational Divide

Because Boomers have worked longer and are retiring later, Gen X and Millennial employees, in many cases, have not had the opportunity to rise through the ranks as quickly. As Boomers now begin to disappear at an alarming rate, they are leaving behind very inexperienced replacements who have had much less time and opportunity to enter leadership positions.  Consequently, these replacements have limited high-level work experience, creating a giant skills gap. And as these succeeding generations aren’t having kids quickly enough to create future replacements, the gap and skills shortage will continue to widen.


What does this have to do with retail?

Retailers often benefit from younger generations working in their stores. Digitally native brands inherently understand what traditional brick -and-mortar brands often fail to realize: The brand is the brand, regardless of how or where the shopper engages with the brand.  While operations and other aspects are feeling the pinch on the front end of the talent pool – on the corporate side of retail – I’m seeing this painful loss of institutional knowledge on a regular basis in lease administration – and it is a costly and painful deficit. 


Lease Administration Is a Negotiation Game that Requires Expertise and Finesse

As experienced lease administrators retire and take with them their considerable understanding of leases, settlement negotiations, and relationship building, their younger replacements simply are not armed with the information and knowledge needed to properly defend contracts and protect their companies. For example, in one instance affecting a national retail brand, the lease administrator retired. When the new administrator started, he immediately invested in a new system that included a lot of promised bells and whistles. They spent a ton of money on it – and promptly missed a kickout, costing them over $300,000. When we audited the system after taking over, 82% of their expiration dates were wrong.


The Case for Outsourcing Lease Administration

It’s not just the constant back and forth with ASC 842 updates or even lease negotiation; at the end of the day, outsourcing lease administration ensures that you have the best experts handling the second-largest expense item for many retailers. Relying on experts can help transform a game-changing expense item into a hidden profit center. ASG saved its clients $5 million last year.

ASG manages leases effectively, ultimately serving as a profit center for many of our clients. An investment made with us results in measurable savings – without the headache of arguing over every dollar saved, because we don’t charge an additional contingency fee on the recoveries we generate.  You keep every dollar. For one client last year, that amounted to $1.1 million.  We will do the heavy lifting for your implementation of ASC 842 reporting capability on our lease management platform, many times at no additional cost over the base service fee, saving you thousands in accounting consulting fees and headaches. Your experienced lease administration executives are going to retire. Now is the time to outsource that function to a highly skilled and effective organization who lives and breathes leases.

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