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Introduction
Abstract
This chapter provides an overview of the retail landscape during the pandemic, by showing facts and figures of consumers and Governments' containing measures in Europe. It further provides some guidelines and support for retailers to be more ready to react to the environmental changes, along five main areas: (1) rethinking the in-person experience, (2) enhancing digital channels for shopping, (3) investing in digital capabilities, (4) embracing agile and flexible approaches and (5) developing new retail business models. It finally concludes with a brief summary of the remaining chapters of the book.
Keywords: COVID-19 pandemic; lockdown; shopping experience; digital channels; retail business models; agile approach
1.1 Retail Landscape during the Pandemic
Countries in Europe and all over the world adopted different timing and severe measures to contain the virus. Although the World Health Organization (WHO) declared the COVID-19 outbreak a public health emergency of international concern on the 30th of January 2020 (ECDC, 2020), the speed of response of countries for very different. For instance, Italy was the first country in Europe to adopt very restrictive containment measures (i.e. lockdowns and subsequent stops of all non-essential activities such as the closure of non-grocery stores, ban of social gatherings inside and outside, imposed social distance of 1mt or 2mt, etc.) immediately at the beginning of emergency in Europe (26th of March 2020), while other countries like Spain adopted the same strategy on the 29th of March and UK later (EU, 2020). Similarly, Spain closed the land borders on the 16th of March, while the United Kingdom and Italy did not; and the non-essential movement was banned (lockdown) on the 10th of March in Italy, 16th of March for Spain and 24th of March for UK (EU, 2020). However, differently from other European countries, UK put in place two further lockdowns (from the fifth of November to the second of December 2020, and from the fifth of January to the 15th of April 2021). These measures had dramatic consequences in several industries, including retailing. The impact on footfall clearly reflects these restrictions in high streets, retail parks and shopping centres. For instance, in the United Kingdom the footfall reduced by 80% since the beginning of lockdown, to not fully recover when the measures have been lifted in the countries (ONS, 2021). Although the performance of the retail sector differs in the different countries as reflection of the level of restrictions policies, the restrictions introduced are associated with lower levels of retail sales (ONS, 2021). However, consumers appreciated retailers' adoption of protective measures against the virus, showing favourable attitudes towards them and increased satisfaction during the (in-person) shopping experience (Untaru & Han, 2021).
COVID-19 largely changed retail landscape, from both retail management and consumer behaviour perspectives, by creating new challenges and opportunities (KPMG, 2020; Pantano, Pizzi, & Rogers, 2021; Pantano, Pizzi, Scarpi, & Dennis, 2020; Roggeveen & Sethuraman, 2020). A research from Statista (2020a) evaluated the cumulative impact of lost retail sales caused by the pandemic as 3,264 million British pounds (728 in Germany, 445 in France and 253 in the UK).
Some changes that had to be put in place in the short term, for instance new health and safety measures (including in-store on-way systems, hand sanitizing areas, cap to the number of accesses, etc.) reduced the demand for certain products dramatically. For instance, research in the United States, United Kingdom and Germany in 2020 showed that consumers spent less than usual on clothing due to the pandemic: 41% less, 60% less and 49% less respectively (Statista, 2020b); in opposite they spent more than usual on health and hygiene (i.e. hand sanitizer and medicine): 33% more, 36% more and 43% more respectively (Statista, 2020c). In the long-term scenario, retailers have been required to push towards online/mobile channels to compensate the forced closures due to lockdowns, and to invest in contactless technologies (including contactless payment systems) that would last also after the pandemic. However, recent studies showed that not all retailers, with emphasis on traditional small/local retailers, were able to achieve the new opportunities offered by digital channel expansions, due to the required web infrastructure and logistics (including distribution and delivery) costs, and economies of scale in place for large established online players (i.e. Amazon) (Beckers, Weekx, Beutels, & Verhetsel, 2021).
Simultaneously, the shortage of some products (including imported products) and difficulties in distribution pushed to revisit the supply chain management. As a consequence, retailers needed to design/redesign retail supply chain networks to increase the resilience, by considering different resilience strategies, such as safety stocks, inventory sharing and reserved capacity (Alikhani, Torabi, & Altay, 2021).
From a consumers' perspective, customers discovered different places for shopping (for instance, in the United States, about 17% of consumers shifted away from what was their primary store before the pandemic; Briedis, Kronschnabl, Rodriguez, & Ungerman, 2020). Consumers also displayed panic buying and stockpiling, driven by fear of contagion and anxiety. Consequently, retailers introduced some new practices to reduce consumers' irresponsible behaviours, such as reserved opening (usually in early morning) only to vulnerable people, or limiting the quantity of certain products to be bought by each consumer (i.e., toilet papers, flours, pasta, etc.). Buying online become more familiar also for those consumers previously rooted offline, and for those kinds of products traditionally bought in person before the pandemic (for instance, grocery delivery went up by 57%) (Briedis et al., 2020). For instance, in China, the number of (in-person) transactions in grocery stores declined by 30% during the pandemic, and buy online and pick up in the store grew 28% (Briedis et al., 2020). Indeed, consumers increased their purchases online, while Amazon's share price has risen from $1,900 to $3,160 (McGinn, 2020). Also, there was a surge in subscription to online platform-based services (i.e. Disney+, Netflix, Amazon prime), and an increasing familiarity with subscription plans. Consumers' increased engagement with online shopping was a consequence of the possibility to overcome geographic/physical boundaries and a welcome channel to gain access to limited resources (i.e. shortage of certain products), achieve convenience. Consumers became increasingly dependent on technology to fulfil individual needs and wants, and benefited from more time to spend at home and to use to search/find/compare products (Jiang & Stylos, 2021).
Moreover, practitioners pointed out that also consumers' expectations changed (e.g. reaching products with more quality, more convenience, more speed (of delivery), more choice, and more value), but it is unrealistic of any retailer to be able to fulfil of them (McGinn, 2020).
1.2 Competing in the “New Normal”
In 2021, some signals of recovery appeared. For instance, the online traffic of Travel industry in May 2021 increased by 11.4% compared to the same period of January 2021, while the food suppliers online decreased by the 20%, showing consumers' tendency to find a “new normal” in their consumption habits (Statista, 2020d). However, in December 2020, clothing and fuel consumption was still below the pre-pandemic level (ONS, 2021). Nevertheless, the long-term social, economic and health impact of COVID-19 is still unknown, as well as what the “new normal” will eventually be, when the pandemic is over.
In this book, we try to provide a comprehensive overview of the actual retail landscape, with some guidelines and support for retailers to become more flexible and equipped to react in a more agile manner. We suggest five main recommendations that would help retailers to thrive in the new competitive scenario:
(1)Rethinking the in-person experience.
The online shopping offers the possibility to buy directly from home, and choose among different delivery possibilities (i.e. buy online and pick up in the store, home delivery on name day or same day delivery, etc.), while providing an experience without exposing consumers to the risk of contagion (no physical interactions with others). Retailers should rethink their offer to offer a remarkable experience able to catch consumers back in the stores, and to maintain them. To this end, they should focus more on the hedonism aspects of the experience that the store can provide against the utilitarian online experience, by engaging, entertaining and stimulating customers (Scarpi, 2021). For instance, multisensory environments enriched with new technology would increase consumers' purchase decisions (Mishra, Shukla, Rana, & Dwivedi, 2021) 1 .
(2)Enhancing digital channels for shopping.
At the beginning of the pandemic, many retailers had to close the store as results of Governments' containing measures. However, not all retailers were ready to move online/mobile. For instance, the fast fashion retailer Primark only in 2021 added e-commerce functionalities to the website, and announced that in early 2022 consumers will be able to check the availability of certain products on the closest Primark store directly from the website. Mark and Spenser Food (M&S Food) launched at the end of 2020 the new app to allow consumers in buying food from mobile. In early 2021, Sainsbury launched a brand new app to support consumers for in-person purchases (namely “Scan & bag as you go”): the app allows consumers to scan the barcode of each product to buy directly from the app, and complete the payment from the app before leaving the store through a dedicated SmartShop checkout. Thus, retailers from any sector need to invest on digital channels (including mobile and online ones) to complement the in-person service (and to replace it if needed due to health and safety regulations). Extending towards digital channels would allow retailers to gain competitive advantages from the integration of different sales channels and communication channels (i.e. social media), improving the offer and the shopping convenience (e.g. in terms of location and availability of products), and bridging new supply and demand side opportunities (Balaji & Roy, 2016; Haas, 2019).
(3)Investing in digital capabilities.
There is a huge deal of research on how new technologies might improve retailing from both the managerial and the consumer's perspective, with emphasis on Artificial Intelligence and machine learning algorithms, retail time inventory management, predictive analytics, personalization and co-creation functions. Thus, there is a need for new skills, embracing retail innovation and analytics (Pantano et al., 2021). Indeed, acquiring expertise in data analytics (with emphasis on big data analytics) and technology/innovation management would become more and more important to get competitive advantage (Pantano et al., 2021). For instance, proficiency in these techniques would support warehouse automation, logistics operation, supply chain optimization, consumers' traffic and goods path analytics, mobile payments, etc. (Balaji & Roy, 2016; Shankar et al., 2021).
(4)Embracing agile and flexible approaches.
COVID-19 pandemic disrupted many of strategies and practices traditional used by retailers, who had to adapt quickly to the new competitive environment. Retailers should improve their collaboration with customer to be able to respond more flexible to change. Indeed, an agile focus is based on the development of ad-hoc solutions based on the actual market and business needs through successful collaboration (Rigby, Elk, & Berez, 2020). In this way, retailers would be able to generate new value for both company and customers.
(5)Developing new retail business models.
Traditional retail business models consider the value proposition, client relations, horizontal integration, value appropriation, vertical integration and partner relations (Haas, 2019). However, these traditional models should integrate the usage of new technologies, which might beneficially impact on the business model's the diverse components. For instance, some technologies might improve the value chain in which the retailer operates (vertical integration), while others might improve the relationships with partners, such as managing retail buying groups sy...
