Insight: Re-imagining the customer journey in challenging times for Retailers

July, 2023

The role of AI in streamlining Supply Chains & Logistics

The Retail store of the Future

Retail industries worldwide face an unprecedented combination of disruptions: the transformation due to COVID-19, the economic changes resulting from Brexit, and the implications of the ongoing conflict in Ukraine.

The COVID-19 pandemic has led to a surge in e-commerce adoption. According to a report by UNCTAD, online sales' share of retail surged from 16% to 19% in 2020. Simultaneously, a Pew Research Center survey found that nearly 91% of US adults said they had made an online purchase in 2020.

Brexit has brought its share of economic turmoil for the retail industry, particularly in the UK. The British Retail Consortium reports that Brexit-related issues have led to an additional £3.5 billion annual cost to UK retailers due to customs declarations. Meanwhile, the inflation rate in the UK has skyrocketed. According to the Office for National Statistics (ONS), the Consumer Prices Index (CPI) recorded an inflation rate of 8.7% in the year to May, exerting significant pressure on consumers' purchasing power.

The war in Ukraine has further complicated the situation. Trade restrictions, increased energy prices, and supply chain disruptions have led to cost increases and availability issues for certain goods. The tension also contributes to market uncertainty, further challenging the retail landscape.

Case Study: Walmart's Omnichannel Approach, Aldi's Adaptation Post-Brexit, and Decathlon's Response to Ukraine War

Walmart, amidst these changes, successfully integrated its digital and physical sales channels, seeing a 79% surge in e-commerce sales in Q3 2020. In the face of Brexit, Aldi, the German supermarket chain, adapted by investing in British suppliers to avoid potential tariffs and trade disruptions, a move that resulted in a 4% increase in sales in 2020. In response to the Ukraine war, Decathlon, the sports retail giant, adjusted its supply chains and focused on ensuring the safety of its employees in affected areas, demonstrating resilience in challenging times.

Actionable Insights for Retailers

  1. Leverage Technology to Enhance Shopping Experience: Retailers must offer a smooth, engaging online shopping experience to meet customers' heightened expectations in the digital age.

  2. Adopt an Omnichannel Strategy: Integrating digital and physical channels can help companies keep up with changing consumer habits and preferences.

  3. Develop Diverse Supply Chains: With trade disruptions due to Brexit and the Ukraine war, investing in diversified and local supply chains can be a strategic move to reduce costs and bypass supply chain disruptions caused by new trade regulations and conflicts.

  4. Innovate and Focus on Value Offering: Inflation and increased costs put more pressure on consumers, making them more price-conscious. It's crucial not only to focus on offering value for money but also to innovate in product offerings. Innovation can help to differentiate a retailer from competitors and can create new reasons for customers to shop with them. Offering innovative products that meet customer needs and align with emerging trends can drive sales and increase the average basket size. It's crucial to effectively communicate these product innovations and their value to customers.

  5. Use Data to Understand and Predict Consumer Behavior: Retailers should leverage data analytics to gain insights into the impacts of COVID-19, Brexit, and the Ukraine war on consumer behavior, enabling them to tailor their strategies accordingly.

Conclusion

The post-COVID, post-Brexit, war-impacted landscape undoubtedly presents unique challenges for retailers. By adapting their strategies and keeping a close eye on consumer behaviour, they can navigate these hurdles and continue to thrive.

Innovation might involve a focus on sustainability, personalization, or digital integration, among other things. It can also involve aligning with consumer trends such as health and wellness, home cooking or home improvement, based on changes in consumer lifestyles during the pandemic. Innovation can range from introducing new products, to creating unique in-store experiences, to offering superior online shopping tools or delivery options. It's all about creating more value for customers and differentiating from competitors.

“Change before you have to”

— Jack Welch, CEO of General Electric