Innovation and Flexibility Will Serve Retail Through the Pandemic and Beyond

May 26, 2020
Innovation and Flexibility Will Serve Retail Through the Pandemic and Beyond

All states have begun the “re-opening” process as the pandemic curve is flattening, with florists, department stores, and other retailers being among the first to re-open starting with curbside only in states with stricter guidelines. But still—progress!

It is critical for our economy that businesses safely re-open and consumers start spending again, as explored in our last blog. While we are all focused on getting through the pandemic-induced global recession, the call for innovation and flexibility are louder than ever.

In this final article of our series, we are examining retailers who employed innovative, creative tactics to get through times of hardship. These companies set the stage for the type of strategic planning and nimble initiatives all of retail can look to for hope and inspiration.

Diversification Is Not Just for Your Finances

Diversification in the way you sell can help you better weather this pandemic. Shopify, for example, has a business model that allows it to make money both from monthly subscriptions and additional fees for premium features.

CEO Tobias Lutke began building Shopify in 2004, offering a place for entrepreneurs to easily design websites without the use of professional developers. Over time, it has continued to focus on its sellers—providing them with small business loans to help them scale, accounting services to help them be profitable, and social media to support their advertising. Deloitte estimates that between 2016 and 2018, companies on Shopify enabled $183 billion in transactions and created full-time jobs for 1.4 million people.

Now, during the pandemic, Shopify is about to start its most ambitious project yet—offering sellers access to two-day shipping to compete directly with Amazon. These kinds of strategic and aggressive moves continue to keep Shopify’s growth trajectory going up, allowing them to continue to serve online sellers both during times of crisis as well as during happier days. Although Shopify has a long way to go to catch up to Amazon, it is making noise—and they are not the only ones taking on Amazon.

Target, who has worked to improve all channels of fulfillment for its customers over the past few years, has just acquired Deliv, known as the “last mile” independent logistics technology supplier. Deliv is a big reason why many retailers were able to effectively compete with Amazon on same-day delivery, and it is a perfect addition to Target’s already established delivery network—having previously acquired Shipt and Grand Junction in 2017. On his March earnings call, Target CEO Brian Cornell said sales fulfilled by same-day delivery grew 90% in 2019. Focused on both in-store and delivery-based fulfillment, same-day orders went through the roof when the pandemic hit the US. The purchase of Deliv will help Target streamline and improve the ordering process even further, helping the retailer maintain and protect sales as it re-opens stores. Target’s continued innovative approach on managing multiple delivery channels to customers will help the large retailer survive and even thrive.

Leveraging Technology

There’s a lot to be said about utilizing technology to pave the way for bringing more customers back into the store while keeping them safe. Warehouse-style food and supply retailer Smart & Final is one company leading the way in bringing technology to the check-out line, ensuring customers and employees stay safely apart and protected. By Memorial Day weekend, the retailer will install a queuing system that uses digital displays and automated swinging gates to safely guide consumers through check-out. Customers will line up at the front of the store waiting for a digital sign to announce an open register. They will go into a swinging gate that closes behind them as they unload their cart. Sneeze-guards are also part of the equation so the check-out clerk is protected while in closer proximity to customers.

Smart & Final is not the only grocer to take these steps—Kroger, Sam’s Club and others have installed technology and different methods to keep both customers and employees safe. Expect to see more retailers use technology to help assure shoppers that it is OK to come back in—and help build store traffic again. As we discussed in a new article, recent research Escalent conducted revealed a 400% growth in online grocery shopping due to COVID-19. Nonetheless, the majority of consumers would still rather head back to the grocery store to do their shopping in person, so innovative tech steps like these will hopefully bring customers back in-store feeling safe and comfortable.

Innovating to Serve the Customer and Community First

Retailers are working hand-in-hand in innovative ways to put customers and community first. From soap makers to shoe manufacturers, small businesses are partnering together to keep the doors open and serve the public good.

One example is Mount Royal Soap Company that pivoted to making on-demand hand sanitizer and was offered production space from a local brewery. When they ran out of packaging, they brought in unused ink bottles from tattoo pigment maker Waverly Color to fill up.

Asking their community how they could support the COVID-19 relief effort, shoe retailer Rothy created the Open Innovation Coalition, uniting like-minded brands to share resources and collaborate with the goal of helping one million individuals over the course of three months. Their first project? Rothy open-sourced their mask-making knowledge with other manufacturers to design and donate 100,000 non-medical masks.

Sam’s Club created its “Shop from Your Car” service for the elderly and at-risk populations. With this program, these at-risk customers can stay safely in their cars while Sam’s personnel does their shopping and places items in their cars.

These are but a few examples of both large and small retailers that have pivoted their business model to keep the cash flowing—even when it involved a potentially temporary departure from the reason they originally opened their doors. It will be interesting to see how these retailers continue to pivot as a more normal state returns. Will retailers keep these programs and practices in place as an augment to their existing business? Perhaps some of these programs will stay in place or even become part of the new business model as we emerge from the crisis.

The Continued Need to Innovate

Coming out of confinement does not look the same for each state. Within phase one of re-opening the economy, some states are allowing stores to open but only for curbside pickup. Can retail establishments sell enough online and curbside if they are not allowing people to walk into their stores and shop? Can a restaurant make it if they can only open 30% of their tables due to social distancing? Some have suggested they will add structures or tents outside to make room for more seating, thereby increasing the number of customers they can serve in a day.

Constraints like this mean it is still critical for retailers to be flexible and adapt while opening their stores again. National retail stores have the added complexity of being well informed on the differences in guidelines between states and countries in which they have establishments and minutely managing how they conduct business again in a safe manner for all. Whether a small, local brick-and-mortar shop or a large national chain, all retailers will need to continue to think creatively and act nimbly on a day-to-day basis as this situation evolves.

We cannot know what will happen next, but we can help you tap into how consumers are feeling and what they are doing to help you create a flexible, innovative and repeatable strategy to keep your business afloat and prospering. If you’d like to speak with one of our Consumer & Retail experts about this, please send us a note.

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Nancy Arter
Senior Vice President

Nancy Arter is a senior vice president in the Technology & Telecommunications divisions at Escalent. She has more than 25 years of experience, most recently serving as SVP at HarrisX (acquired from Nielsen). Nancy has built a reputation for forging close client relationships by uncovering specific research challenges and developing innovative and effective solutions to solve them. At Escalent, she uses her leadership skills to nurture a number of the firm's most important client relationships. Outside of Escalent, Arter is the newly elected chairperson of the Board at Pediatric Therapy Network, a sensory integration clinic focused on children of all abilities. Nancy is a native Californian, an avid fitness nut, and loves spending time with her loved ones, including her pug, Woody.

Jill Miller
Senior Director, Consumer & Retail

Jill is a senior director in the Consumer & Retail division of Escalent. Throughout her career, Jill has applied her passion for research to both quantitative and qualitative research studies in the CPG, food & beverage, entertainment, durable goods and technology industries. By combining a background in advanced analytics with her qualitative experience, she has expanded her skill set to include a variety of methodologies such as A&U, consumer journey, segmentation and qualitative techniques. Jill earned a master’s degree in biostatistics and a bachelor’s degree in psychology from the University of Michigan. When not at work, Jill can be found spending time with her husband and two daughters, and trying not to melt in the Las Vegas heat.