Photo: Saks Fifth Avenue
Has retail adaptation become more about survival than competitive edge?
The latest results from an ongoing survey by the IBM Institute for Business Value show that Americans were more concerned about COVID-19 in July than they were in June and those concerns affect their attitudes about a return to the old normal.
The survey of more than 7,000 adults found that 72 percent in July were more concerned about their own personal health and safety as well as that of their families, up from 68 percent in June. Nearly two-thirds remain concerned about a second wave of COVID-19 hitting later this year, even as the first wave appears far from over.
Health concerns are likely behind the reluctance by many to resume activities such as going out to restaurants. Twenty-seven percent reported that they visited a restaurant in July, up from 21 percent in June.
The percentage of people who expect the economy to return to its pre-pandemic health was only 13 percent last month, down from 16 percent in June.
“Consumers are preparing themselves for more permanent changes in behavior,” said Jesus Mantas, senior managing partner, IBM Services. “These new behaviors define the new preferences that business leaders need to be able to deliver to meet consumers where they are. This is no longer a question of competitive advantage, it’s a matter of business survival.”
The arguments surrounding how the nation should approach the COVID-19 pandemic broadly break down into two camps in today’s politically polarized environment.
The first argues that local, state and federal agencies need to throw everything they have into reducing the spread of the virus and then slowly reopen to avoid a relapse. Proponents acknowledge the associated economic cost of shutting down businesses and say that the government has to step up with financial assistance for those affected until the virus comes under control as a result of a cure or a vaccine.
The second argument offers varying logic as to the why, but the assertion is that the economy needs to reopen now because the cost of the cure cannot be worse than the disease. This approach may mean that things will get worse (people getting sick, being hospitalized and dying) before getting better, but that is a price worth paying.
- IBM Study: Most U.S. Consumers Remain Unsettled About the Economy, Visiting Public Spaces and Returning to the Workplace Amidst COVID-19 – IBM/PRNewswire
- Trump: ‘We can’t let the cure be worse than the problem itself’ – The Hill
- Trump says coronavirus will ‘get worse before it gets better’ – The Hill
Discussion Questions
DISCUSSION QUESTIONS: Has the ability for retailers to adapt to new changes in consumer behavior become more a question of business survival than competitive advantage in the here and now? What do you think it will take for life and retailing to go back to some semblance of the pre-pandemic normal?
Poll
BrainTrust
Richard Hernandez
Merchant Director
Mark Price
Adjunct Professor of AI and Analytics, University of St. Thomas
Yes, for many businesses it’s about business survival — period. When market demand is impacted to the extent that it has been, worrying about competitors is of least concern. Businesses should be focused on their customers and employees first and foremost. Ultimately, a vaccine and/or effective therapeutics will be required for the market to return to some semblance of normality but, even then, I’d expect it to take years to return to the consumer demand levels we enjoyed prior to the pandemic.
We won’t get back to anything approaching a normal life until a vaccine is available. Until then most businesses are focused on surviving the downturn – being here post-pandemic is the competitive advantage.
Both. Health and safety policy is about survival right now but those that take it seriously will GAIN a competitive edge over those that don’t.
Empathy is a powerful emotion to harness and highly engaging to shoppers when they feel taken care of.
Health and safety policies show whether or not a brand REALLY cares about its customers rather than it always just being about their money.
There once was a shoe chain called Joan and David. There actually were people with that name and Joan was the buyer.
Joan and David’s clients aged out. The company didn’t change, now we have no Joan and David.
There is no “back to normal” and none of us quite know what the end game will really look like. In the mean time, it’s all about continual adapting and shrinking expenses while things settle out. Perhaps there is retail business in a steady state in Europe and China. In the U.S., it’s all upside-down.
We don’t know what we don’t know. I believe that local, state and federal agencies are doing their best at keeping the virus in check. Unfortunately, this means a re-tracking of the business that had already opened in previous phases like bars and gyms and a reduction in customer capacity in restaurants. People do want to get back to work but how the virus will react and spread is still not fully understood. A vaccine will help quell fears, but that is still far away. I think it will be a tightrope still for some time.
COVID-19 has become an accelerant for transformation across all industries. The reality is that retail has been changing for the past 10-15 years and this is going to increase the speed of and, more importantly, the realization of the NEED for change. It will very much bring the need into focus. I am not sure anything will ever go back to how it was before. The nice thing is that in transforming, competitive advantage should well be a byproduct. Those who “grasp the nettle” and make the change will do well. Those that resist face the risk of demise.
It is business survival for the next 12-18 months. We need a vaccine to bring us back to some sense of normal. Even in this pandemic, savvy retailers are making moves to give them competitive advantage. One of my pro-bono clients made a shift to BOPAC, changed their menu to a simplified bundled approach with only five items on the menu and is now doing more business today than before the pandemic. It can be done with a strategy that considers our current reality and capabilities and leverages them to complement the newly altered customer journey.
I do not think that the two need to be mutually exclusive, nor all that different from what the climate was pre-COVID-19. Companies are still fighting for the attention and loyalty of shoppers – it remains about competitive advantage in the fight for retail survival.
Undoubtedly the pandemic has greatly impacted the speed with which retailers need to act on the items planned or discussed over the last few years. Any company that was not already working hard on the types of adjustments needed to address the shift in consumer trends was likely already backing toward the ropes.
I feel like there was already a sizable line between the leaders who “got it” and those who “didn’t get it” – and the pandemic just put a spotlight on their brands. The competitive advantage is already there due to that distinction, but it was already about survival.
As far as what it will take for life and retailing to go back to “normal”?
The cat is out of that bag, the horse has left the barn, the ship has already sailed — pick whichever colloquialism you prefer. We are not going to be able to go back — the advancement rate on the technology and exposure to many shoppers previously in the “tech averse” category end up meaning that the store experience, as we knew it, is forever altered. (By and large.)
Retail adaptability has always been about survival. Retail has been in place for centuries and those that can adapt, survive. Competitive advantage is a also about survival – longer term. It’s like going on a treasure hunt but the treasure is moving continuously, providing new clues on where to find it (and making old clues obsolete). To use an overused cliche, but one apt for the situation: “skate to where the puck is going to be.”
Companies which can identify, understand and predict where consumer behavior will be in the next three months can take advantage of the here and now. These are the companies that will both survive and have a competitive advantage. Certainly no walk in the park for retail — but a definite market advantage until a vaccine or regular treatment comes out AND becomes accepted by the general public.
In my opinion, the pace of innovation in retail has been pretty dramatic in the past 20 years compared to any other similar periods before.
The barriers to entry have vanished. What this means is the upstarts have been setting the customer expectations with innovative business models and delivery models. The biggest players then can easily catch up or acquire these upstarts. The middle of the pack ones can neither innovate nor follow fast enough because of investments needed. Of course there are many who have money to invest but can’t get their act together.
This dynamic then forces the middle of the pack to be the late majority and join when the capability becomes a must-have. That situation becomes a survival question, and this is the situation that a lot of retailers find themselves in.
While some of my clients in retail are focused on survival, expecting that 2021 will return to a semblance of normal, other clients have focused on improving their customer engagement through digital channels and optimizing their e-commerce experience. From a financial perspective, in retail, this is clearly a time for survival yet at the same time e-commerce is expanding dramatically, with customers changing their behavior in a way that may become permanent in the long run.
I do not believe that life and retailing will go back to the pre-pandemic normal again; consumers have learned to optimize their shopping experiences without having to walk into a store or with highly limited store engagement. The best retailers will succeed by building a strong base of customer relationships digitally and then finding through test and learn the best ways to engage on an individual customer level.
I doubt we will see anything approaching “normal” until either the novel coronavirus mutates to cause a less deadly disease, we get an effective vaccine, or it runs its course (the worst of the three).
No retailer should put itself in survivor mode during this time, though. Retail success continues to depend on delivering to customers goods they need while introducing them to interesting new goods they weren’t aware of.
The difference during the pandemic is what consumers need and the things that interest them are of a very different focus than normal.
The new normal will be anything but normal. Many organizations are chanting the mantra of “survive then thrive.” The longer this pandemic lasts (Wave 1, Wave 2, spikes, etc.), the longer we remain in survival mode. However eventually we will emerge on the other side of COVID-19 and those organizations who proactively adapted their shopping models will enjoy a competitive advantage.
I agree with Dave Nixon on this one: Companies that show the greatest ability to adapt to unexpected change will help themselves ring the register in the short term, but they will also strengthen their reputation for good execution. Even “essential retailers” like Amazon and grocery chains got caught early in the pandemic because they didn’t react to demand shifts quickly enough — but they seem to have regained their footing to some degree. (With the mystifying exception of sanitizing products.) Survival mode doesn’t just mean getting through 2020, but emerging from the other side of the pandemic with more brand equity built on trust.
Yes. Even before COVID-19, many retail companies struggled to keep up with basic investments in innovation. Early in the pandemic, even retail giants Walmart and Amazon stumbled. Mid-market players were already drowning in debt. While smaller companies are nimble, they need sufficient funds to stay solvent and survive.
Now that crowds provoke anxiety, tech has emerged as this year’s hero, safely connecting us to our loved ones, work and the virtual shopping mall. To survive, companies of all sizes need digital processes for efficiencies and safety across the supply chain. That’s why we’re seeing a step change for e-commerce adoption, especially e-grocery.
“Normal” is gone. For life and retailing to return to a more sociable state, we need a vaccine. Until then, low and declining COVID-19 case counts, and higher employment rates and disposable income are worthy goals.
I put myself in the role of a shopper and don’t like what I feel. As a shopper I am not going to spend any time “looking for that elusive value.” Yes, as a buyer, I will go to a store of my choice, get what I need and leave. I don’t think I am alone in my thinking. It will be some time before we find the next iteration of normal. A vaccine will be important. The vaccine has to prove effective before we will see mall parking lots with many cars.
Any retailer who is selling Lysol right now is thinking about survival. Quite frankly, any retailer who can sell Lysol both in-store and online, at the same time, has the competitive advantage. It’s funny how priorities shift in the blink-of-an-eye when every day is about survival.
For retailers and brands, survival is always about being relevant. Right now, most consumers are concerned about the health and safety of their families. Products and services that keep families safe are in high demand. Retail adaption to meet consumers needs as they navigate through a global pandemic is not a competitive advantage. It is slowly becoming table stakes.
In the supermarket space, it is going to be imperative that supermarkets “put their eggs in both baskets” as online shopping has grown by leaps and bounds with the magnitude of “stickiness” still to be determined longer-term, and at the same time, many other shoppers want to get back in the store more often but want stores to have clear safety protocols in place before doing so (and some shoppers simply won’t feel safe until there is a vaccine). It’s largely about business survival at the moment but simultaneously trying to innovate in ways that supports that survival.
Of course! But I’d argue that business was lagging consumer change way pre-COVID. All the pandemic did was lengthen the gap. I don’t believe we will ever go fully back to the Old Normal, or at least I hope we don’t. We live in transformational times. It would be a pity to opt for business as (was) usual.
Right now it is about survival unless you are the few well capitalized retailers who can operate on sales of necessities. I am sure the few of them are planning market share gains and tracking competitors activities looking for new opportunities to protect and grow their customer base. I think we are facing a “new normal” for retailing for at least till end of calendar 2021 in terms of consumer preferences, then the rest is driven by income and employment.
As always, the best companies will do both: obviously you have to survive now to have an advantage later, but for them the former won’t become so overwhelming that they stop thinking about/planning for the latter.
Of course the sad reality is many businesses probably won’t make it: no matter how creative, limited escape options will hamper their chances.
The simple answer is yes … both to survive and give you a competitive edge. We have to adapt and adopt a new way to do business. This is constant, even beyond COVID-19. Those that don’t will find themselves playing catch up, or worse, going out of business. So, survive and compete. The answer is YES.
I believe that retailers are in survival mode currently and reacting in a knee-jerk way to the seismic shift in consumer behavior. I don’t believe that understanding consumer behavior has been a strategic initiative by many retailers pre-COVID, so the “in the moment” reactions to try and keep up with the changing consumer has been awkward and messy.
Going forward, executives must begin thinking more proactively about what their customer’s beliefs are and how those beliefs affect their shopping behaviors. Companies that develop a nuanced understanding of their target customer’s beliefs, habits and shopping behaviors – and adjust their product offerings, customer experiences, and marketing communications accordingly – will be best positioned to thrive in the future. These are the companies that will have the competitive advantage by truly understanding what motivates their target customer.
You cannot fix the economy without first fixing COVID-19. Retail adaptation depends on this to even exist. It is adapt or perish. We have already proved that pushing people to do things without social distancing, using masks and staying clean, will only result in horrific disease acceleration. Should we continue to do this, the lessons will only get more horrific and the dead bodies will continue to mount. This will start with pushing children to go to school before we have a vaccine in place. These children will become carriers of the virus on a tremendous scale the likes of which we have never seen. They will spread the disease to their friends, families, neighbors, and classmates. We will not be able to respond to this accelerated spreading of the disease fast enough.
It depends on the retail business, of course, but digital adaptation (going online is the only way to adapt post-COVID) is both a question of survival and competitive advantage. If a retailer is able to undergo digital transformation and take this two steps further with personalisation, for example, then this will mark their competitive advantage.
In short, retailers should be investing in a strong online presence in response to the shifting consumer mindset. But they should also take this as an opportunity to go the extra mile. It will take a while before retail goes back to a pre-pandemic “normal,” but if retailers can find the opportunities in this new space, they will succeed.