There can be little doubt that the ongoing COVID-19 pandemic has irrevocably altered the retail landscape: Storefronts have shuttered, industry heavyweights have filed for bankruptcy, and millions of workers have been furloughed or, in some cases, laid off. When you factor in the disruption that COVID-19 has caused to the global supply chain, a very grim picture of the future of retail starts to emerge — one that would make even the most stalwart optimist question how any brand could possibly survive.
Despite the disruption, major retailers such as Costco, Kohl’s, Nordstrom, Target and Walmart have all weathered the storm by developing adaptive retail strategies that embrace the latest omnichannel trends.
The Rise of E-Commerce
The early days of the pandemic were characterized by a sudden surge in demand for household goods, such as cleaning supplies, toilet paper and non-perishable food items. This led to widespread shortages — we’ve all seen the photos of empty shelves in various news reports and social media posts — forcing retailers to ration certain products and scramble to restock others. Once this initial wave of panic buying subsided, retailers found themselves faced with a new challenge: With governments around the world requiring non-essential businesses to shut down, temporarily or otherwise, how would they be able to mitigate loss?
With shelter-in-place mandates rendering traditional retail channels inaccessible, consumers and retailers alike have turned their attention to e-commerce. Though e-commerce itself is nothing new, the volume of traffic to online marketplaces has been unprecedented, quickly outpacing pre-pandemic levels. In fact, online sales in the United States for the month of June, alone, totaled $73 billion — a 76.2% year-over-year increase. A recently updated report from eMarketer forecasts 18% growth for U.S. e-commerce in 2020, suggesting that this increase in online sales is unlikely to be just a flash in the pan. It’s clear that, in light of COVID-19, e-commerce isn’t just a key component of an omnichannel retail strategy — it’s vital to retail’s very survival.
For retailers who have chosen this moment to dip their toes into the world of e-commerce — or, out of sheer necessity, dive right in — the best place to start is by identifying a suitable e-commerce platform. There’s certainly no shortage of options from which to choose; some of the most popular are BigCommerce, Magento, OpenCart and Shopify.
Prior to the pandemic, retailers were under pressure to provide “free” same-day delivery or next-day delivery and to navigate the various financial and logistical challenges associated with last-mile delivery. The dramatic increase in online sales as a result of COVID-19 has only placed additional strain on final mile logistics, spiking the demand for local delivery and contributing to capacity constraints.
In order to alleviate this pressure and meet heightened consumer expectations, many retailers are taking advantage of the latest last-mile delivery trends, from crowd-sourcing delivery to investing in urban warehousing, which effectively brings the fulfillment center closer to the end consumer. Some retailers have even chosen to insource deliveries — that is, to handle last-mile delivery internally using their own fleet of vehicles or a hybrid fleet to fulfill orders. According to Brendan Keegan, CEO at Merchants Fleet, a fleet management company, insourcing can even help retailers overcome labor challenges.
“Sourcing alternative vehicles to combat the influx of needed delivery providers could help ease the already taxed delivery system,” Keegan says. “Last-mile deliveries can be done in vans, transits and even vehicles, eliminating the need for CDL licensing and commercial training. Removing this barrier could allow online retailers and logistics companies to tap into the recently unemployed who are seeking new opportunities.”
Demand for warehouse space has remained consistently strong over the past few years, while vacancy rates have reached historic lows. In light of COVID-19, the demand for warehouse space has only grown more desperate, with an increasing number of retailers ramping up e-commerce operations and carrying an excess of inventory with no place to put it.
“Despite significant new construction of distribution space, there are several driving forces behind the continued downward trend of space availability,” says Kyle Krug, director of marketing and communications at Legacy Supply Chain Services, a third-party logistics provider. “As businesses continue to evolve their omnichannel supply chains, there are new pressures to deliver faster and at lower costs than ever before. Other contributing factors include forced expansion as a result of uncertainty around trade tariffs, contraction of distribution center space usage, and inventory buildup as a result of COVID-19.”
Fortunately, where traditional warehousing methods fall short, innovation finds a way: Enter, dark stores. Hailed as “the future of post-pandemic retail” by some, dark stores have enabled retailers to make the best out of a bad situation by converting shuttered retail stores into micro-fulfillment centers. The practice of using dark stores for online order fulfillment predates COVID-19, however, a growing number of retailers are looking to make dark stores — or, at the very least, hybrid stores — a permanent fixture in order to keep up with the demand for curbside pickup and e-commerce delivery.
Are full-time dark stores the way of the future? Only time will tell, however, experts say that retailers who want to capitalize on this trend in the long term will need to heavily invest in automation in order to accommodate the additional infrastructure needed to support it.
If there’s one silver lining to this pandemic, it’s that it has fostered a larger sense of community and motivated people to work together toward the greater good. For many, this has involved incorporating certain practices into their everyday routine in order to promote safety for themselves and others. Similarly, retailers have found ways to adapt and even expand upon their existing range of services in order to promote customer and employee safety. From requiring employees and patrons to wear masks to reorganizing aisles to accommodate one-way flow of traffic to installing hand sanitizing stations throughout stores, retailers are taking precautionary measures to provide a safe and comfortable experience.
One notable customer and employee safety trend is the rise of buy online, pick up in-store (BOPIS). Although many stores offered BOPIS to some degree prior to the outbreak of the pandemic, COVID-19 has dramatically accelerated its growth. According to the Adobe Digital Economy Index, BOPIS orders increased by a whopping 208% year-over-year in April 2020.
In addition to driving a surge in BOPIS orders, COVID-19 has also led many retailers to introduce a buy online, pick up at curbside (BOPAC) option. As its name implies, BOPAC enables consumers to order goods online, park in front of a store (often in a designated parking area) and have their order brought out to their vehicle. Both BOPIS and BOPAC are designed to minimize contact, though BOPAC takes this concept a step further, making it so that customers never have to enter the premises.
A few tips for retailers interested in implementing BOPIS and/or BOPAC in their stores:
COVID-19 has turned much of the retail industry on its head, and it’s become clear that only those retailers willing and able to adapt to rising consumer expectations and sudden increases in demand will survive. Incorporating these and other omnichannel trends into your existing retail strategy will help you navigate these unprecedented times.
Deborah Marotta is vice president of retail industry at Hitachi Ltd.
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