The retail industry is in flux, and the coronavirus has only complicated and accelerated an interlocking web of transformations set in motion over the past decade.
The old, tried and true strategies are no longer effective or tenable. In the past, CEOs built a retail business based on a simple logic. Success came through doing whatever was necessary to acquire as many customers as possible — even if the business wasn’t profitable — all in the pursuit of achieving a large market valuation.
That’s not how things work anymore. In the big picture, growth is still more important than profitability, but in this strange year, many leaders and their teams are focused on one thing: survival and sustaining their businesses until the pandemic subsides.
Modern Retail’s Deep Dive is a collection of videos and key takeaways from our Virtual Forum event that will provide valuable tips and insights to help your company understand and internalize the changes that are sculpting the new retail model. You’ll learn about the strategies that are helping retail businesses weather the coronavirus storm, and you’ll get a look at how the future of retail looks when the dust settles.
Below you’ll find key takeaways, quotes and stats, as well as videos from our recent Virtual Forum.
When the coronavirus pandemic hit earlier this year, it affected every industry differently. In retail, the effects were immediate, far-reaching and dramatic, leaving virtually no aspect of the industry untouched.
Of course, the most obvious change was the shuttering of brick-and-mortar stores, necessitating the furloughing or elimination of thousands of jobs. The supply chain was similarly disrupted, with factories and warehouses also closed. Before business could restart, processes had to be reviewed and safety and hygiene protocols implemented to ensure that workers were protected and the risk of further disruptions minimized. The stock market plunged, with many corporate giants taking a hit — Coca-Cola lost 25% of its global volume in April alone.
With stores and malls closed for months, consumers went shopping online in unprecedented numbers, across all demographics. Amazon’s profits doubled in the second quarter, hitting $5.2 billion. This forced many retailers to bring their e-commerce offerings up to speed with the latest standards.
For many, the catalyst for this was Amazon’s decision, at the height of the crisis, to limit its Prime marketplace only to essential businesses. Overnight, those deemed non-essential were left to fend for themselves and build out their own e-commerce storefronts.
In a Modern Retail survey carried out in April, 96% of fashion and beauty executives said their number one priority was optimizing e-commerce channels. Many turned to e-commerce specialist Shopify to build those stores, which is one reason why the Ottawa-based company registered 97% year-on-year growth in the second quarter, with revenues hitting $714.3 million.
It’s impossible to predict what the rest of the year holds for the sector. The coronavirus will likely be a major factor through the end of the year, and there is anxiety over the possibility of a surge in cases when the winter flu season arrives. Even in the best case scenario — declining case numbers coupled with approval for new treatments, perhaps even a vaccine before the end of the year — retail will still feel the pain into 2021. Consumer confidence will take time to recover, and a prolonged economic slowdown will have primary and secondary effects on the industry. All that retail executives and entrepreneurs can do is keep themselves and their teams nimble and ready to adapt to a constantly changing picture.
Brands have ripped up the playbook and experimented with new strategies. Some pivoted from reliance on physical stores to become efficient e-commerce operations in a matter of days, while others collaborated across industries to find new ways of connecting with consumers. Both the novel coronavirus and the growing calls for racial equality have tested brands’ ability to communicate authentically, and to live up to the words they speak.
As Nate Checketts, Co-founder and CEO of Rhone said, “consumers want to believe in the behavior of the people that they’re buying from.”
The disruption of normal commerce created opportunities, and some brands have turned that to their advantage. Companies have made the most of lower customer acquisition costs and doubled down on analytics and data. In an unpredictable environment, teams have learned how to be more agile, turning content and marketing materials on the fly to seize the moment. And brands are rethinking what their brick-and-mortar stores represent, seeing the potential to use their space in different ways.
For some companies, the pandemic came along right as they prepared to launch new products — and they still decided to press on. That might mean adapting the message to meet the moment, but resisting the impulse to put everything in cold storage.
The ride is not over yet, and the forecasters can’t predict whether the winter will bring a new round of major outbreaks, or the slightest green shoots of recovery. But brands have learned the lessons of the spring, built out flexibility and their capacity to improvise, and are buckled in for the long haul.
Here’s what you need to know.
In a time of vast retail upheaval, the entire framework for what guided a company’s quarterly goals and longer term missions has almost entirely evaporated. In just a matter of days, brands had to diversify their supply chains, rework their relationships with wholesalers and stockists, forge new partnerships, and curate their merchandising strategies to match new sets of habits and demands. Those that relied on physical or experiential retail had to move completely to the digital space, navigating everything from new e-commerce channels, to marketing on social, to remapping their ad plan.
Tia Cummings, the VP of marketing at Walker & Company, which was acquired by Procter & Gamble in 2018, said her team “built out a robust calendar from March through October” to do a variety of on-the-road, in-person experiential marketing events. “Then Covid happened in March and that whole chunk of our plan really just had to disappear,” Cummings said. “We really had to think about, in this new world, how can we engage with our consumers, how can we still have those conversations with them…how can we take live real person interactions to the virtual world?”
- Cummings’ team was quick on their feet and shifted media spend from areas like radio into other channels like digital and paid social video to catch consumers at home. “We were planning to be running ads during the morning commute, and there was no morning commute once everything went into lockdown.”
- Cummings not only had to rework her entire marketing calendar, but reconsider how her team at Walker & Company measure success. For example, when they were evaluating an influencer strategy before the pandemic, they looked for influencers who were getting their followers to engage and clicking through to purchase. “Fast forward to now and it’s about who are the influencers that are resonating people in this time,” Cummings said. “There’s so much stress in the state of the world right now; we need to work with influencers that people really feel a connection to and influencers who truly understand.”
Her company’s influencer marketing approach also changed in terms of how it was leveraging influencers and the kind of feedback Walker & Company was seeking out from customers. “Are they really engaging with this, are they enjoying this type of content, are they responding to this type of content? That’s what we started focusing more on,” she said. “And we saw really great success — so much so that we’re going to continue that approach moving forward.”
Meanwhile, other companies had make similar swift changes. Take Everlane, for example.
- The DTC apparel brand has had to take a new approach when it comes to merchandising for its offline experience as customers’ priorities and shopping habits shifted, said Everlane’s director of stores Adrienne Hardy. It’s now serving a shopper who is getting a longer, more personalized boutique experience instead of an in-and-out shopping trip.
- The brand is still stocking the basics for its “tried and true” customer that knows what he or she is looking for. But there’s a new “emotional” buyer at the same time, Hardy said. “They want comfort, they want color, they want something that feels fun for going out there and actually shopping, so we have looked differently at how are female customers are shopping,” she said. “And how our male customers are shopping in bulk– there, we are merchandising in bulk as opposed to merchandising more like a lifestyle and a range.”
BOTTOM LINE: As sales tumble with forced closures, quarterly goals are missed, supply chains stalled, and consumers’ needs transformed, businesses big and small are recognizing that profitability and stability are key to success. Forecasts are still completely unpredictable, but brands are focusing on strategies that are sustainable — and rapidly adapting at every angle in the process.
Even as brands are scrambling to change course to adjust to the new frameworks put in place by the coronavirus, they are taking opportunities to benefit or make up for disadvantages elsewhere in ways that may have been too costly pre-pandemic.
Karina Rhem, offline media manager at Ro, pointed out that now is an ideal time for companies to experiment in spaces like TV advertising thanks to considerably lower customer acquisition costs and a lockdown landscape that’s putting more people in front of their TV screens. “It’s a unique moment and so there’s still a natural increase in viewership just because there’s limitations of what else you can do,” Rhem said. “There’s not as much efficiencies as there were in the beginning, but there still are some so it’s a time where people can still learn and iterate without having to pay as high of a price point.”
- For some companies, lower customer acquisition costs can be an opportune moment to really dig in and experiment to understand the data and performance. Rhem said businesses can do that in-house with tools like Google Analytics or work with an agency. For her team, it’s important to have an agency that allows them to have a hands-on approach and flexibility in tune with the fast-changing trends of TV viewership during the pandemic. “We get to see the data the next day so we can make optimizations immediately,” she said.
- With the pandemic disrupting typical production schedules, it’s been important for Ro to be innovative and agile in order to put out commercials that best respond to the current climate and trends. This especially true when it comes to opportunities in the return of sports. “We just had to think of ways we could find already pre-existing content and get that together,” she said. “…It’s pretty much staying close to the news every day to see where things are going to net out.”
Many companies would see lower foot traffic in stores as detrimental to the future of brick and mortar retail. But Everlane’s Adrienne Hardy, has reframed the purpose of in-store shopping, and that shift has ultimately resulted in larger transactions and baskets.
- Before, the main mission of Everlane stores was to allow customers to touch, feel, and experience products, and for Everlane to acquire new customers and get a sense of what shoppers were looking for. But Hardy now sees the reopened stores as there to help shoppers connect to real people in a safe way and have an easy return process.
- “[We’re] still looking for the store as a marketing vehicle, but it’s still almost like a customer gift,” she said. “I like to think about it as a way to connect with a customer service team that really wants to be an ambassador to make the experience seamless, easy, aspirational, and then ultimately bring you back. … Back in the day you’d be like, ‘No I’ll just go home and buy.’ Now it’s like, I okay I got to engage with you.”
BOTTOM LINE: The massive transformation and uncertainty in the retail space this year has proven disconcerting for brands, yet there have been numerous ways companies have leveraged the current climate to their advantage. Whether it’s creating a boutique store experience or perfecting a new marketing strategy, brands are making good use of less than ideal situations to achieve new areas of growth and engagement.
One of the big lessons of 2020 is that it’s never been more important for a brand to have an authentic voice and use it. From coronavirus to the summer’s protests in support of racial equality, brands have been challenged repeatedly to speak up. Many companies have come under fire for avoiding difficult conversations, or for appearing tone deaf or inauthentic in their statements. Perhaps more than anything, authenticity is key. For example, consumers may be willing to acknowledge that a brand can’t address every problem at once– but the brand should communicate its shortcomings with humility and grace.
That starts with knowing your audience. Tia Cummings of Walker & Company said that one of its men’s grooming brands, Bevel, understands its customers at a deep level and as a result is able to have authentic conversations with the consumer. After the pandemic broke out, and again when protests against racial injustice swept the country in June, Bevel doubled down on partnerships with relevant celebrities, thinkers and athletes to try to speak to how its consumers were responding.
“We saw a huge impact to our sales during this time period just by focusing on the consumer and what they needed,” Cummings said. “It became less of how can we entertain and educate and how can we help and how can we support.” The brand’s essential promise continued to be about supporting black men to look and feel good, but more recently Bevel’s emphasis has been on how it can support customers through these challenging times.
Among a number of recent initiatives, Bevel partnered with Atlanta Mayor Keisha Lance Bottoms’ office to launch a fund to support barbers and beauticians whose businesses were affected by the coronavirus. The brand also donated laptops to Urban Prep Academies, a Chicago non-profit that runs all-boys high schools predominantly serving black students from low-income neighborhoods.
Companies shouldn’t be afraid to try out cross-industry partnerships, she said. Some brands fear pushback from customers, but if you believe the collaboration aligns with your own brand’s spirit and values, or has value for your customer, have faith that consumers will recognize it as an authentic expression of the brand voice.
- Bevel, owned by Walker & Company, recently partnered with meditation app Headspace to offer a free month’s subscription with no signup required. Cummings said the initiative was driven by a recognition that Bevel’s main demographic — black males — are statistically less likely to have access to or to seek help for mental health issues. The Headspace partnership broke new ground for the brand, she said. “This was the first time that we decided to do something beyond just spurring conversation,” Cummings said. “The response we got from consumers and media alike was this is amazing.”
- As long as partnerships don’t feel out of step with the brand, consumers will likely respond positively. “It’s not going to get that pushback because it’s going to feel authentic and consumers are going to know that this is a brand that’s always been talking about these things, that’s always shown that they care about us,” Cummings said.
- It can be tough to measure the impact of speaking with an authentic voice, or to know if the brand is succeeding in communicating authenticity. Don’t obsess over reducing this to a single metric, said Cummings. For example, it may not be possible to quantify a clear-cut ROI for a single campaign, especially when multiple marketing partnerships and influencer campaigns are rolling in parallel. Instead, look for engagement patterns and bigger picture trends.
- “It’s more a sentiment,” Cummings said. Bevel doesn’t necessarily know how many sales its Headspace mental health partnership drove, or what the dollar ROI for that campaign was. The brand was running ads in traditional media, and in addition to Headspace it was working on content collaborations with its brand ambassadors and other influencers. But the Headspace initiative was a big part of Bevel’s response to the coronavirus. And Cummings said the overall results were very positive. “What I can tell you is over the course of April, May, June, we had one of our best quarters in the history of the company,” Cummings said. “We saw sales just grow exponentially … The one thing that was different is everything that we were doing to support consumers from a Covid standpoint.”
One of the secrets to speaking authentically is to take the time for introspection. Do some self-reflection before making statements or launching campaigns to make sure that the brand is in a credible place to be a voice for the relevant messages. This is where knowing and respecting your audience is key.
- “Consumers are smart, they can smell through a lot of the marketing BS and the gimmicks,” said Rhone’s Nate Checketts. If the reality inside the company does not live up to the content or tone of the message, the brand is not going to come across as an authentic voice for that message. If this is the case, work on the situation internally to build credibility to speak out later. This is especially important where diversity and inclusivity is concerned. If you need to improve on these areas internally before affirming your social justice stance to the outside world, take the time to do that. “There’s a lot of responsibility as a founder to make sure that I’m not just doing my part, but that I’m aware of what’s happening in our company to make sure that we are across the board doing our part,” said Checketts.
BOTTOM LINE: Being an authentic, values-based company — and living up to those values, has been more important than ever at a time when social and cultural inequalities are in the spotlight. Sharing a few niceties on social media was never going to cut it — companies are being called on by consumers to hold themselves accountable and truly stand up for what’s right. To do this effectively, it takes listening, both internally (to team members) and externally (to the customer).
The onset of the pandemic caught countless companies completely caught off guard, especially if they didn’t have a robust digital strategy already in place. But brands couldn’t afford to be a deer in the headlights for long. While it would seemingly make sense to wait for everything to blow over, it’s clear nearly half a year later that the current environment is not going away anytime soon, and if anything, the new reality is only an acceleration of trends that were already inevitable.
For many companies, pivoting was the ultimate strategy for survival, and yet, while some aspects of brand operations are nimble and easy to change, others are already years in the making. Brands like the DTC cleaning product company Blueland have had to press on with its plans to launch new products. Meanwhile, Everlane is continuing to open new stores in the face of transformed offline shopping habits. The key has been not stalling, but tweaking.
For Blueland, the products were already set in stone, but the messaging around them was flexible. “The Covid environment has shifted a lot of our marketing messaging and go-to marketing strategies to really adapt to the current environment and things that are top of mind for our target consumers,” said Blueland’s co-founder and CEO, Sarah Paiji Yoo.
- Blueland launched two new categories of products in the past two months that have been in development for three years: a countertop dish soap and dishwasher and laundry tablets. Even though these products broadly fit within the new safety and cleanliness demands from consumers, Blueland still had to prepare and “balance their messaging” for new consumers with different priorities compared to their shopper pre-coronavirus.
- “People were avoiding going to the store and looking for brands they could purchase online, others were just staunchly conventional brand purchasers, but couldn’t find those conventional disinfecting brands in their local physical stores or even on Amazon and thus were coming to us,” Yoo said. “But we continued to have a large set of consumers that were coming to us because they want to eliminate single use plastic from their lives.” Yoo noted that what consumers did have in common was that many of them were thinking critically about cleaning products for the first time.
Even in a world that’s increasingly pivoting to online and e-commerce, pressing on with brick and mortar plans now, especially with landlords in a place to negotiate, can prove beneficial in the long-term. Everlane, for example, was due to open its seventh store in Austin in June prior to the pandemic, and it’s still moving forward with a delay of a few months, recognizing that the metrics of success may have simply shifted.
Of course, in some cases, brands do need to put on the brakes on plans if it means doubling down on what’s working. Yoo said she knows brick-and-mortar should have been a goal down the road for Blueland, but the pandemic “took that urgency off the table this year,” as focusing on the website has been even more crucial — it saw 300% more demand than it was expecting.
BOTTOM LINE: It would seem that this year is all about playing defense against a slew of unforeseen challenges and waiting it out before making any big moves. But brands are learning that things won’t revert back to what they were before March anytime soon — or at all — so it’s important to work with what they have — whether that’s a new product ready to go to market, or a storefront in a new city — and adapt where they can.
If there’s anything that the last five months have made clear, it’s that constant change is normal. For brick and mortar retailers, this means that just because a city has loosened its restrictions and started opening up doesn’t mean they can’t dial them back — thus, brands should avoid getting too comfortable.
Everlane’s Hardy said it’s been important for the company to stay on its toes and keep multiple channels on the table for customers to keep on top of both shifting government mandates around businesses reopening, but also the fluctuating temperatures of consumer comfort. “For customers that still aren’t comfortable with the whole shopping in the store experience, we want to make sure we’ve kept a version of curbside within our stores while they are still open,” she said, adding that the company is also keeping its virtual shopping and styling sessions as easy alternatives for customers continuing to stay at home.
- Everlane is following through with a new store opening in Texas, a state with a touch-and-go reopening plan and unclear coronavirus outlook, but it’s approaching it with caution at the helm much like the rest of its locations. It’s going in with a leaner staff size, playing with different ways of scheduling teams, and testing out different types of in-store marketing and communication strategies to see what resonates. “We’re being flexible within as much of an operational booklet that we have thought of in advance, and we pivot when we learn new things,” Hardy said.
- Things are changing so rapidly that it pays to build and maintain flexibility into systems and operations. Falling behind has knock-on effects, so companies should stay abreast of trends and be nimble enough to change things up on a weekly rather than monthly basis.
From inventory to supply chain management, Nate Checketts said Rhone’s team is having daily discussions to stay on top of things. “Where do we see things changing in the next two weeks, not just two months and how does that impact future assortment and basket building down the road,” Checketts said.
For Karina Rhem at Ro, an “always on” strategy for TV advertising has helped the company optimize performance and help them take advantage of any last minute deals for ad spots. “We always look to have a very flexible strategy so that, at any point in time, if an opportunity comes our way, we can consider it. And given where everything has gone with the pandemic that’s actually worked out great for us.”
- The current ongoing tumult doesn’t mean the future is bleak. Brands are feeling the pandemic’s short-term impact — and it cuts deep — but there will be opportunities for those who can ride out the storm. Brands will still need brick-and-mortar, and landlords may be more flexible as they seek to fill shopping malls and other commercial properties.
Checketts believes that in-person shopping will bounce back by fall 2021, buoyed by consumers keen to get out after being denied the brick-and-mortar experience for so long. “It’s a buyer’s market if you’re a brand that’s desirable and landlords want you in their centers,” he said. “And that gives you an opportunity to be discerning and thoughtful about where you make those choices.” Checketts said wholesale is already improving, and believes brick-and-mortar will see a similar revival.
Before coronavirus, 70% of Rhone’s clothing purchases were made in-person. Checketts said that even if that figure drops to 35%, brick-and mortar will still be a vital component of the industry. “It’s never going to be the heyday of what it has been, but it’s still going to be a meaningful part,” he said.
BOTTOM LINE: Retail is far from out of the woods, and for now, obsessive attention to detail is a brand’s best friend. That means rigorous adherence to coronavirus-related hygiene and safety practices, yet also building flexibility and responsiveness into operations so that the brand can rapidly identify and address issues to maximize revenues and capitalize on every opportunity. Brands should also prepare for life after the pandemic, because although recovery may be slow, there will be light at the end of the tunnel.
“The direct relationship has translated into a valuable and continuous customer feedback loop at a time our customers’ priorities were rapidly and dramatically shifting.” – Sarah Paijii Yo, Co-founder and CEO, Blueland
Being a DTC brand during a pandemic offers benefits beyond being a sales channel at a time where everyone is shopping online. This positioning has given Blueland a direct line to the evolving nuances of what its customers were looking for. Some shoppers were coming to Blueland’s website scrambling to locate effective cleaning products as they were flying off the shelves at their local offline retailers, and they would have essentially bought anything as supply was getting increasingly rare. Yoo said that Blueland discovered that other shoppers were willing to trade environmentally friendly attributes for a product that was safe and effective. This feedback helped inform Blueland’s messaging, and it was quick to update “website descriptions, emails, and social media media messaging to more directly address these concerns.”
“You have to just be really ready to take on that risk and have the stomach for it and see it through.” – Karina Rhem, Offline Media Manager, Ro
Many brands have found themselves stepping into uncharted territory this year, whether through necessity or opportunity. With customer acquisition rates lower than usual during the pandemic, Ro’s Karina Rhem saw a chance to explore TV advertising. Testing new waters is scary, and especially when it involves spending money on uncertain returns, but sit with that discomfort and go with what feels right for the brand.
“Let’s make a decision in the short term based on how we want that relationship to be in the long term.” – Nate Checketts, Co-founder and CEO, Rhone
Although the coronavirus forced companies to act with urgency to secure their employees’ health, jobs and the future of their businesses, Checketts said Rhone’s long-range philosophy helped inform the company’s response to the immediate crisis as it navigated relationships with partners and team members. “It certainly turned out to be a good outcome thus far,” he added.