Digital Transformation of Retail and COVID-19

Ana Milas, Head of Marketing

Business

26.08.2020.

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Few years ago things started to shift causing the not-so-traditional industry to expand their mindset due to disruptive trends and ennoble its presence with a new approach, whose concept includes digital presence.

Amid the brainstorming of whether “we’re fine as we are”, the AI craze and “we need to digitize, the market is hungry for it” thinking, there comes the uninvited guest- COVID-19 which drastically changed the way we were living and also affecting the face of retail that we once knew.

I personally hold a retail record of 10 years in FMCG, Consumer electronics and Fashion and a legit professional deformation when it comes to paying a visit to any of grocery stores in the city. Marketing activities, store layout, DPSM standards are just some of the things I like to monitor while making my path through to pasta category.  

There are sales outside brick and mortar

Empty shelves in store

People shop.

During crisis, they might shop less for certain items, whilst other’s sales bloom. During 2009 recession, nail polish sales went up by 14,1%. Nail polish sales soared! Was it due to not going to professional salons, or what, but one thing was sure- small indulgences kept the industry alive. And after the Great Depression, a famous sentence came out in Washington post: “When the depression struck America, the women’s finger-nails were the first things to go in the red.”

During the lockdown, many retailers expanded to e-commerce shops. Survey Advice, a reviews platform, surveyed 200 retailers and found that 25% of all surveyed business has added a ecommerce sales channel due to COVID-19 pandemic.

With a CLOSED sign on storefronts, those companies who did not think of ecommerce previously, were under pressure to create a new cash pipe. It became a matter of life or a lifetime lockdown. Even the small retail shops started creating online sales channels, and those who were smart enough, created an incremental market share- a new source of cash. Just think of the companies who lacked doing so.

Between March 23-30, ecommerce marketplaces saw a 14% increase in volume, according to data from the Forter Global Merchant Network.

Social Media - a main communications channel 

Survey done by Software Advice found that over the half of their respondents increased their SM investment due to COVID-19 while they did cuts on marketing activities of 13% on average.

In March 2020 alone, Facebook and Instagram saw a 40% increase in usage and Instagram users posted 6.1 stories per day which was a w-o-w 15% increase, according to influencer marketing platform Klear.

Graph - list of digital channels used for the first time due to COVID 19

Key retail strategy of all times is called “Customer is the king” translated to “Be where the customer is”. Retailers are reprioritizing their marketing investments and moving to social media being the fastest channel of communication to their consumers.

True digital transformation of retail business happens when we integrate brick and mortar, ecommerce and we ennoble it with social media. This is when the magic happens, and those retailers who don’t follow this equation are sure to be left behind.

The unchained melody of a weak supply chain 

Supply chain

Being fast and agile become the main message during the pandemic. The biggest threat to these is the system complexity. Consumers experienced this with their online orders, and in the long run this only means that the fastest, the most agile and up to date companies shall survive. Imagine placing an order at a sports store where you usually buy your equipment. Lockdown in out and about, and you want your equipment today so that you can work out and be your best. After three weeks and unanswered messages on their Facebook account and email, you are giving up. You cancel your online order and you will remember this event forever, as it affected your perception about the store and caused you to change your preference in decision making process.

What happened here is the failure of their main ordering system. But what really happened is the inability to adapt quickly, and a weak supply chain management. To avoid situations like this, companies will most certainly need to look for new solutions- which then again lead to digital transformation. Aside from that, retailers may need to warehouse relatively more inventory of key products and position that inventory closer to customers so that there is no delay or cost that would otherwise be associated with delivery of products- if you look at a retail giant Wall Mart- this is exactly one of their key supply chain practices. And they work.

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