Life after COVID-19: New trends in retail
The UK will finish its tenth week of lockdown before the Government considers the next stage of easing the nation back outside. Countries such as Italy and Spain have already begun to reopen non-essential stores with other European countries expected to follow suit soon. German football has even restarted, but retailers have reported low footfall in Berlin’s shops.
With high-streets closed, it’s no surprise that retail is one of the hardest hit industries of 2020’s COVID-19 pandemic as two-fifths of UK retailers closed completely. Big brands have faced widespread disruption as: Primark reportedly took a £248m hit on unsold stock at the end of April as £650 million a month sales dropped to zero; Oasis and Warehouse went bust; Next closed warehouses for over a month and struggled online with demand; Debenhams confirmed that seven stores will not reopen after lockdown, and others are still at risk.
Paul Martin, UK Head of Retail confirmed, “Total sales fell a staggering 19.1% compared to last year – eclipsing any previous fall since records began – but that pain hasn’t been felt equally.” Whilst the vast majority of retailers with physical stores have struggled, furloughing staff and scrambling to move their resources to fulfilling eCommerce orders, those with a strong online presence and business processes already set up to sell online may have recouped a large percentage of sales online. Dixons Carphone claimed recently that online sales had recovered two thirds of lost sales expected from physical stores.
It’s not all doom and gloom for the retail industry. Pure play etailers, such as Boohoo have reported incredibly strong revenues. A combination of lower overheads, strong consumer reputation and robustly tested capacity to process high volumes of orders have allowed them to capitalise on the boom of consumers forced to shop online. Many experts were predicting eCommerce sales to outstrip those made in physical stores within the next few years, but what seemed more like a bold prediction at first, now looks like a foregone conclusion. Here are some of the trends ZigZag expects to arise from retail’s time in lockdown.
Retailers will increase their capacity and resources to deal with eCommerce
The coronavirus pandemic has emphasised that eCommerce does not have the capacity to deal with the current accelerated levels of demand. Ocado, the pure etailer, only has operational capacity to deliver to 250,000 customers per week despite nearly all of its 800,000 customers now putting in weekly orders. Amazon has recruited 100,000 extra staff and is still looking to add another 75,000. Fast deliveries dates promoted through Prime are often delayed and third-party sellers have been pushed aside for essential goods.
COVID-19 has forced online-sceptics to try eCommerce, create new favourite brands, and potentially scare them off entering physical stores unless absolutely necessary in the future. Ultimately, retailers need to be able to deal with a higher level of eCommerce demand, including the ‘silver surfer’ generation who are buying online more now. We are likely to see greater investment in warehouses, logistics and operations, employees and automation to speed up the process and reduce the reliance on having a healthy workforce.
Say goodbye to changing rooms
A searchlight is currently scanning every industry, looking for old ways of doing business that unnecessarily put people’s health at risk. Whether shops stick to social distancing measures into the future remains to be seen, but it is likely that shoppers themselves will do what they can to limit contact with strangers. Changing rooms are an obvious first casualty.
We expect innovation in this space to accelerate. ZigZag Global currently offers an exchanges solution for its retailers that allows customers to swap an item they are returning for an alternative in-stock item in the store’s catalogue. This will allow customers to swap their item easily for a different size, colour or style easily, and will ultimately save sales and reduce the need to purchase multiple sizes on the first purchase.
The likes of Amazon and H&M are getting closer to developing augmented reality and smart-mirror designs that seamlessly allow customers to see what clothes look like on them. This could be the safe replacement for changing rooms in stores in the future, but we are probably far off the world in which every retail consumer has one of these mirrors in their bedroom, or even an app version of it.
This time it’s personal.
With retail returns higher than 50% for some fashion brands, and the most popular return reason being size related, eCommerce retailers will look at improving this process. Indeed 35% of consumers admit to deliberately over purchasing. Getting more accurate, personalised recommendations for size and clothing fits based on previous purchases, previous returns, or perhaps even from measurements provided by the consumer could start to become more standard.
With eCommerce looking to be the new way of doing business for fashion, retailers will need to look at how they can stand out from their competitors. A more personalised approach to customer experience could help build brand reputation and customer loyalty in addition to cutting the costs related to returns.
A new way of delivering
It’s expected that many people will continue to work from home way into the future. Google and Facebook will continue to work from home until the end of the year, whilst Twitter have announced they will permanently. Not only does this suggest a natural increase in eCommerce orders and reduced sales for high-street brands (especially those in city centres) but it also welcomes changes to deliveries.
Home deliveries and home collections are likely to become the new standout favourite for consumers. In the case of home deliveries, this will mean that some retailers may look at using their stores to deliver directly to consumers. Dark stores have been tested as a result of the pandemic, using stores as a pseudo-warehouse that can deliver to local customers. Another option for retailers would be to increase the number of smaller warehouses, stocked with the most popular items, to directly distribute to customers at home quickly (specially in gridlocked cities).
As customers look to avoid social contact when possible, returning to stores or post offices may become less desirable. Home collections will be the most convenient option for many customers and will require a larger and more streamlined logistics network to deal with the demand. Drop off lockers also offer a safer way of returning items, services such as InPost are already gaining popularity across Europe.
The returns experience
ZigZag Global is reporting a spike in both eCommerce orders and returns throughout April and May. Increased returns are an obvious by-product of increased eCommerce orders, and with 89% of consumers checking returns policies before purchasing, it is time for retailers to take another look at their policies.
The pandemic has resulted in many retailers increasing their returns policy to allow the added difficulty caused in processing, shipping, and grading returns. We have not seen a significant lift in the number of returns being made when a retailer increases their returns policy. Consequently the increased customer satisfaction and a reduction in customer service enquiries pays off. We may even see flexible return periods that reward trusted VIP customers and also allows for shorter return periods on fast fashion items and longer periods on all other items.
Localisation
Demand for grading services in local markets is definitely up. With goods marooned in different countries, higher airfreight costs and delays in transport arising from the pandemic, sellers need help to dispose of goods in local markets to get goods back in the supply chain more quickly.
Brexit still looms on the horizon, so it will become increasingly important to have a consistent and accurate grading process that can be easily deployed in multiple warehouses globally to keep customers happy with fast or instant refunds.