In retail, as in politics, strong leadership is critical at this time of global crisis. Here, Simon Forster, former Managing Director of Selfridges and retail adviser to Benoy, considers how retailers can respond and prepare for the future.Return to Design Thinking
What does effective retail leadership look like during the coronavirus crisis?
On Tuesday April 14, UK retailer Next reopened its website for the first time in almost three weeks following concerns about warehouse staff safety during the coronavirus crisis. But less than two hours later, the website shut once more after meeting its daily order limit, in line with new company strictures around warehouse operations.
Pre-COVID-19, such measures would be deemed commercially illogical and unsound. But in retail, as in most other industries and areas of life, everything has changed. It’s not just about doing the commercial thing anymore, it’s about doing the right thing. Any retailer who thinks they can just carry on, business as usual, is going to struggle. Because our retailers will be judged tomorrow on the decisions and actions they take today.
In this respect, the present situation provides an opportunity to rethink what’s important, to reassess what people value. The way the NHS, the supermarkets and the service industries have responded has been incredible. In the midst of this crisis, we need our leaders to be visible, empathic and confident – and that goes for our retail leaders as well.
Revolution not evolution
Those brands, such as Next, that are visibly addressing health and safety issues, have set a great example. As of course have the food retailers, working 24?7 to support their customers and reach the vulnerable. But such efforts will need to continue post-pandemic.
Indeed, it’s clear that retailers are going to have to think carefully, not only about how they engage people in the future, but how they protect them, how they keep their staff and customers safe. They will need to reset business models and reconfigure retail environments in a way that promotes wellbeing and preparedness. Retail can’t just evolve into this new reality, it needs a revolution, a total reboot.
In particular, a rethinking of physical retail space will be critical, with social distancing likely to influence interior store design for some time to come. To ensure transaction doesn’t facilitate transmission, we need to drive enhancements in store layout, placemaking and wayfinding to reduce customer bottlenecks and contact. And we need continued innovation in technology and automation to improve the flow of people and limit surface touchpoints.
In the midst of this crisis, we need our leaders to be visible, empathic and confident – and that goes for our retail leaders as well.
Invention, not inventory
Retail space also needs to be fundamentally reimagined. Historically, our high streets have focused on filling space with stock, which has led to inefficiency, waste, and unnecessary cost.
We simply don’t need all that space to sell stuff. Retail space, particularly on the high street, needs to be reimagined as social space, as cultural space – more experience-oriented, more people-focused, to drive customer engagement in the post-COVID landscape. Digital retail will satisfy the desire to purchase, but in-store it’s invention, not inventory, that we’ll need to see from retailers.
Furthermore, inventory is always the highest cash requirement for any retail business. So reducing inventory could also help to improve cash management, which, with the threat of recession looming, is another vital consideration for retail leaders. By operating with less, in a narrower, more streamlined way, retail businesses can begin to revitalise and monetise surplus space in-store, and begin to mitigate the long-term economic impact of the crisis. Similarly, by moving away from the traditional model of Christmas peaks and fourth-quarter returns, a more focused and flexible approach could help retailers manage cash flow more sustainably.
Pre and post-pandemic retail
For many years, retail has struggled to embrace sustainable business models. The biggest challenge has always been to imagine the world as we know it undergoing catastrophic change. And now it has happened. Retail leaders therefore need to ensure their operations become truly sustainable, or else their brands will lose relevance to consumers whose perspectives have changed forever.
As we emerge from lockdown and ?‘normal’ life resumes, customers will want to see retail brands demonstrate genuine commitment to looking after the planet. Greater levels of engagement with sustainability goals, efficiency measures, environmental targets and community initiatives will be essential.
Because the general mood is clear. We’ve seen major brands being met with public censure over unfair furloughing of staff, or being chastised for self-interest. Brands will need to show that they’ve learned from this, and retail leaders will need to show sustained vision and commitment. Those that don’t and those that do will soon be divided into ?‘pre- and post-pandemic’ retail, and it’s very clear which will satisfy the new consumer outlook and appetite.
From global to local
Retailers will also need to rethink the scale and focus of their business. In recent years, those retail brands that have flourished have been able to take advantage of globalisation – whether through cross-border exports or by leveraging a rapidly growing and high-spending tourism boom.
In particular, the growth of China as a consumer has shaped and driven this growth – especially in the luxury sector. In 2018, Chinese tourists overseas spent $277 billion (up from $10 billion in 2000), which is almost double the amount spent by US tourists in the same year. And in the UK, the number of Chinese visitors quadrupled between 2010 and 2019.
But in the post-COVID world, the tourism boom is likely to implode. Tourist spend is likely to be focused in-country, rather than abroad, and this will require retailers to rethink and recalibrate. Yes, globalisation has driven growth, but it has also created problems, so perhaps more localised and locally relevant brands and services will be required. By thinking local and sustainable, by reimagining space, relationships and environments, businesses can begin to prepare themselves for the future retail landscape.