COVID-19: Retail Innovation Gets Crucial for Survival

In the coronavirus vs. retail fight, the score so far is one to zero. Many retailers, like Macy’s and Gap, have been forced to close their stores, put tons of thousands of employees on leave, and cut their budgets to survive. These actions are just like how our bodies restrict blood flow to limbs in order to preserve vital organs like the brain and heart from getting damaged by the cold.

So far, the market has clearly been divided between two groups — observers and doers. “Observers are just waiting, as adopting major changes is likely to take longer than the crisis will last. Meanwhile, doers see this period as a chance to upgrade their operations, fuel their e-commerce, and grab market share,” comments Alexander Galkin, CEO at retail price optimization company Competera.

Whatever group they belong to, retailers should still regard innovation as a critical element of their post-crisis recovery. A different scale of innovation may be required, but it has to be there. As coronavirus is creating an entirely novel context — which is still shaping — for retailers worldwide, the sooner they adapt to the unprecedented new reality, the better.

Retailers that seek to secure business continuity during the crisis should take these four actions as soon as possible:

• Identify core products that drive demand.
• Find a balance between demand and supply.
• Negotiate and understand the costs of a product.
• Understand the competitive landscape and protect margin, especially from new competitors which we have seen enter the market to exploit the situation.

Every one of these steps can be optimized with the help of technology or influenced by the insights it provides. Making small investments into testing new solutions to boost the efficiency and transparency of these processes will help retailers survive the crisis and differentiate once everything is back to the “next normal,” as defined by McKinsey.

Meanwhile, retailers shouldn't invest blindly. There are several criteria that innovations should meet: they have to be fast to implement, as well as help to cut expenses, streamline processes, defend revenue, and make quick decisions in a more complex environment while reducing costs.

Another big challenge that retailers need to deal with is creating the best customer experience. As offline activities have been cancelled, the only playground left is the online scene crowded by newcomers. Therefore, it’s tougher than before. Among the tech solutions retailers can use to engage online customers are video conferencing and streaming, as well as augmented reality (AR) and virtual reality (VR). They can also automate order cancellations and refunds with the help of chatbots. Retail sales from chatbot-based interactions are expected to reach $112 billion by 2023, as compared to $7.3 billion in 2019, says a recent Juniper Research study.

It’s true that customer experience is defined by hundreds of little things and nuances, but the price of a product remains one of its cornerstones. According to PwC, 60 percent of shoppers choose retailers with optimal prices. What’s more, Deloitte states that the price of a product is the most important criteria when making a purchase. Therefore, offering the optimal price based on market data and current business goals is becoming a matter of survival for retailers.

Coronavirus has shown retailers need to use technology to defend margin. Supply is volatile, demand has radically changed, and competitors with the best pricing automation are achieving growth.

Andrew Mulvenna is managing director, Americas and EMEA sales at Competera, a retail price optimization company.