Survive Now, Thrive Later: Brick-and-Mortar Retail After Coronavirus | Coronavirus Series

Editor’s Note: This article is part of a series that explores the impact the coronavirus crisis is having on the world of ecommerce. Explore daily insights surrounding the coronavirus crisis or check out these additional resources to help you navigate your marketing strategy during this time.

This isn’t an obituary for brick-and-mortar retail; rather, it’s a potential survival guide.

There’s no question that the coronavirus is intensifying and accelerating disruption that had already been long underway in the retail sector. “The genre is toast,” said Mark A. Cohen, the director of retail studies at Columbia University’s Business School Department, of department stores like Macy’s and Nordstrom’s. 

Cohen is certainly not alone. The Atlantic noted this week that “department stores and clothing stores are facing an extinction-level event after having experienced years of decline.” There’s reason to believe this is true. 

Macy’s laid off more than 100,000 employees earlier this month. True Religion declared bankruptcy and venerable brand Neiman Marcus is reportedly on the verge of declaring bankruptcy. Just this week, Harry & David announced they won’t be reopening their brick-and-mortar locations, even after the coronavirus crisis abates.

It’s a grim picture—but make no mistake, there will be survivors.

For those stores that do hang on, how will they plan for reopenings when people may not come back because of the hassle of temperature checks at the door or fear of touching too many items in the store?

If the coronavirus presents a true extinction-level event, and mounting financial data suggests it may, what happens from here? Like the event that cleared the dinosaurs from the planet, retail “life” will continue after this cataclysm subsides, but it’s going to look quite different.

The rise of the dark store

Fulfillment and logistics challenges have been broad and deep since the onset of the coronavirus in the US in mid-March. In fact, some of these problems began months earlier in China with the shutdown of manufacturing facilities, ports, and other core elements of the supply chain.

Here in the US, warehouses and fulfillment centers have been hobbled—or even shuttered—by a combination of restrictive safety procedures, stay-at-home orders, and ill employees. Even Amazon, one of the bright spots from a sales growth perspective over the last six weeks, is facing its own set of challenges with surging demand and disgruntled staff

As a result of these disruptions, one trend is accelerating: the increasing number of retail locations transformed into fulfillment centers for brands’ ecommerce sales. The rise of “dark stores” began a few years ago, starting primarily with grocery stores, but has been expanding in recent months. 

Jewelry company Kendra Scott closed all 108 of its retail locations in mid-March. In a span of nine days since then, the company transformed each of those 108 locations into “mini-fulfillment centers” and launched an ambitious ship-from-store program.

“We had plans to become truly omnichannel and offer shipping from stores, but that was almost a year out. We’ve had to accelerate that over the last couple of weeks. The landscape has changed for retail forever, and the companies that will be successful are the ones that put customers’ needs first,” said Tom Nolan, president at Kendra Scott

Evolving a business model in near real-time seems to be essential for some retailers to survive. 

Bed Bath & Beyond closed all of its retail locations at the start of the crisis but announced at the end of last week that after seeing ecommerce sales grow 85 percent in April they were rehiring some employees and reopening 25 percent of their stores—as regional fulfillment centers. The extraordinary spike in ecommerce sales had also helped create “hundreds more new positions” needed to meet the company’s digital fulfillment needs.

Reimagining the in-store experience

The online and offline shopping experience will continue to blend together on the other side of the coronavirus. “If you asked me where retail is headed, I would encourage you to look at China,” said Daniel O’Connor, a veteran retail adviser and visiting executive at the Harvard Business School. “If we’re going through 18 months of social distancing, which makes crowded stores impossible, then we need to significantly repurpose our retailers for increased delivery.” 

O’Connor points to the Chinese supermarket Hema (owned by Alibaba), which serves as the offline “showroom” and logistics center for purchases that shoppers make on an app as they walk through the store. Customer data (item preferences, shopping history, payment information) flows directly into the app, allowing for a more personalized shopping experience on future visits.

The BOPIS or buy online and pick up in-store model of commerce had already been gaining momentum before the coronavirus. It is likely now mainstream, according to Aaron Cheris, head of Bain & Co.’s retail practice. He’s seeing pickups make up 40 to 50 percent of ecommerce orders at some stores and predicts that will continue post-pandemic. “It’s super-convenient and feels super-fast,” he said. Adobe Analytics reported that from February 24, 2020 to March 21, 2020, BOPIS orders increased 62 percent, compared with the same period a year earlier. 

Inside brick-and-and mortar locations, the rise of ecommerce was already forcing significant innovation by brands looking to bring people offline and into their store. Some, like Burrow Inc., were building more experiences into their retail locations, appealing to shoppers with guest speakers, live podcast recordings, book readings, and other experiences that helped to build a sense of community in the store. Although Burrow’s shopping experiences have had to move online for now, it’s reasonable to assume brands will continue to experiment with appropriately socially-distant experiential retail when doors open again. 

Social-distance regulations, combined with cost, may drive retail activity in the United Kingdom to the suburbs where large malls provide more room for brands to implement proper spacing measures to meet health guidelines and to assuage shopper concerns. UK clothing chain Next will “be better able to manage and monitor safety measures in a small number of large stores, than a large number of small stores,” Chief Executive Simon Wolfson said.

New technologies and new commercial models

Even when the doors open at the local mall, many shoppers will continue to hesitate to walk through them for fear of crowds and lingering risk of coronavirus infection. Retailers will increasingly supplement the in-store experience by leveraging technology tools like virtual showrooms, virtual tours, and even virtual fittings. 

Mohamed Haouache, CEO of Storefront, says his company’s “[v]irtual retail stores and showrooms provide brands that rely on relationships with their customers the ability to deliver genuine shopping experiences. We hope these virtual reality stores will help people feel a semblance of normality.”

Some brands have turned to virtual fitting tools like Easysize.me whose mission is to “deliver a personal shopping experience with the world’s leading AI-powered size and fit recommendation platform for apparel and shoes.” 

Retailers will also personalize the experience for trepidatious shoppers through remote consultation sessions, which connect shoppers to in-store experts directly through video chat and provide the help they need. Although this can create a stronger consumer experience and relationship, it’s very resource-intensive and expensive. This tactic alone is unlikely to sustain a brand, but as one of several tactics operating together, it can help.

Retail commercial models will also innovate. Brands will be more likely to experiment with new approaches like the try-at-home model popularized by companies like Stitch Fix and Adore Me. In this model, customers regularly receive an order with items they selected for themselves or that were curated for them by an algorithm or a stylist working at the retailer. Customers can try on the products in the comfort of their own homes and keep (and pay for) the items they like while sending back the ones they don’t.

Adore Me has seen a significant increase in the number of new customers using the product in the past few weeks, according to their head of content, Ranjan Roy. Speaking to Glossy, he said, “Typically, 30 percent of new customers use the feature, but in the last four weeks, that has jumped to 50 percent on some days.

Another likely retail commercial model to see growth post-crisis? Subscription services. Renting apparel was already increasingly popular with companies like Rent the Runway and CaaStle offering customers the opportunity to keep their fashion fresh. The appeal of these services may be even greater during a time when shoppers see in-store shopping as risky.

Everyone loves a comeback

Like with Mark Twain, the rumor of retail’s death may be greatly exaggerated. It’s inarguable that the coronavirus presents an existential threat to offline retail and brick-and-mortar stores in particular, but there will be survivors. American consumers will want to come out of their homes when it is safer to do so. They will want to engage and connect in person—at restaurants, museums, and stores. 

When consumers return, they will want to have flexibility in how they engage. New approaches to fulfilling customer needs, new technologies for your customers to engage with your brand, and new commercial models to convert and retain customers may help meet the demands of the post-coronavirus shopper.

There’s no question this is a difficult moment for retailers, but there are early signs that some are already evolving in order to survive now and, possibly, thrive later. 

Looking for more information? These resources may be helpful to you as you adjust your marketing strategies to navigate the coronavirus crisis.

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