Shopper Centricity Key to Successfully Resetting Retail

In February, all was well in the world of retail. Sales during the 2019 holiday season were up 4.1% and equated to more than $730 billion in the United States. Spring fashions were arriving at stores industrywide. The Super Bowl was in the rearview mirror, and retailers were planning promotions tied to the NCAA basketball tournament and the summer season. There was no doubt that the outlook for 2020 looked rosy.

Then March came, and retailing changed overnight. The industry was quickly split into two camps: essential retail, which encompassed food, drug, c-store and mass channels; and nonessential, in which practically every other retail segment fell. Due to heightened customer demand experienced in essential channels, it has taken months for retail supply chains to catch up.

Fast-forward to now, and states are slowly starting to reopen, and retailers are ready to get back to business. As shelter-in-place orders are lifted, however, retailers will need to address two trends to successfully operate in the post-lockdown world: the rise of grocery e-commerce and assortment rationalization.

The Rise of Grocery E-Commerce: Pre-pandemic, growth across the online grocery shopping segment was slow, to say the least. The biggest reasons for low usage included questions around product quality, unreliable delivery services and challenging customer experiences, among other issues.

The pandemic and related social distancing practices helped remove these barriers, and volume spiked to unprecedented levels. Pre-pandemic, grocery e-commerce accounted for between 2% and 3% of volume, according to New York-based eMarketer’s report “Grocery E-Commerce 2019: Online Food and Beverage Sales Reach Inflection Point.” Grocery e-commerce in the U.S. was finally reaching a plateau in May 2020 after seeing double-digit growth for much of the first quarter, according to Nielsen.

However, the question still remains: How much of this segment’s new e-commerce growth will stick in the new normal?  While it remains to be seen—and volume levels may not sustain these levels—it’s fair to say volume is not going back down to 3%.

Food retailers have adapted to meeting the new in-store and online demand without having to worry about loyalty programs and offering far fewer (if any) promotions. Shopper-centric tactics such as these will return as the economy recovers and competition picks up.

Assortment Rationalization: The pandemic has changed in-store assortments dramatically. This experience has helped retailers better understand what items matter most to the shopper in times of crisis and perhaps more importantly, what products consumers won’t buy when facing out-of-stocks.

Post-pandemic, essential retailers will most likely not have consumers demanding large varieties of wipes, sanitizer and toilet paper, among other cleaning staples, as long as there is some product in stock. Conversely, retailers that have been temporarily closed will face a completely different level of customer demand. Customers will quickly expect the availability of merchandise needed for their new life—and this could be influenced by drastically altered financial circumstances.

Again, grocers, drugstores and mass merchants have been given a pass on out-of-stocks during the shelter-in-place orders. This will not be accepted when the economy recovers and there will be shopper expectations of complete pantry and fresh assortments curated for the demographics of the store’s traffic within months.

These trends will help shape retail’s new normal landscape, and retailers across both camps need to be ready. To remain a relevant player in this new marketplace, retailers will need a new level of operational agility, one that is supported by leveraging data and analytics. Right now there is an opportunity for retailers to collect more data—a move that will help them prepare for the emerging new normal.

For example, having real-time access to product substitution as a result of reduced assortment or stock-outs, brand replacement, base pricing and promotional information now will enable retailers to better analyze their business. And this will benefit the shopper directly, which is critically important.

Now is the time for retailers to develop an analytics dashboard that can quickly and accurately determine customer demand and shopping behavior. As the world is reopening in a staged manner, the opportunity is to glean insights from early opening markets and stores internationally and domestically, so they can make better decisions on what shopping looks like in the new normal and how to meet customers changing needs. This is an extraordinary time that calls on using artificial intelligence and machine learning to detect the changes in buying, selling and marketing processes, which will be paramount in revealing opportunities—and risks—across the retailing process.

Retailing is slowly returning from the brief but widely impactful break caused by the crisis—but it is certain that it will be a long and unpredictable road to recovery, and it will not be a return to the way it was before. There will be continuous change over the coming months, if not years. To successfully compete in this new environment, we all need to be agile and focus on the customer more than ever before.

Brian Ross is president of Precima, a Nielsen company. Precima is a global retail strategy and analytics company.