The retail sector has faced unprecedented challenges as a result of the ramifications of the pandemic. Recent news that UK retail figures fell by 1.3% in January, combined with new COVID variants, indicates a rocky road ahead for retailers as the pandemic continues to hamper customer spend and business survival. However, hope is in sight. Shoppers continue to migrate online and retailers that invest in omnichannel and digital initiatives will be poised for recovery and growth in the months ahead.
To enable this, brands should be exploring strategies that provide cost flexibility and resilience in another unpredictable year. To safeguard with a passive approach will be risky, and to overinvest in the wrong places would be equally detrimental to overall cash flow. The key will be to leverage financial management tools that present real-time data and provide valuable insights enabling agile actions. This includes providing visibility over costs for a proactive and sustainable way to free up liquidity and invest in the future.
Ronnie Wilson addresses the five investment opportunities retailers cannot afford to miss in 2021.
Pursuing an omnichannel approach
COVID-19 restrictions and subsequent lockdowns forced consumers into the digital realm for much of 2020, and this seems set to continue this year. Those who were reluctant beforehand may have come around to exploring its ease and immediacy. And retailers’ value-add offerings – in the form of chatbots, augmented reality and email promotions – seem to have encouraged more to convert to online shopping.
However, retailers should be prepared for a rebound effect, should health restrictions lessen later in the year. Despite all modern gadgets and tools, personalisation needs are still best met in person in a store, and many shoppers will have missed this physical experience. For businesses, the answer lies in balance, and not putting all their eggs in the online basket. Consumers supporting local bricks-and-mortar premises may well trigger a wider high-street resurgence, and to ignore investment into improving that area would be a big mistake.
Personalisation online as well as in-store
If there is to be a balance in how people shop in 2021, there will be an expectation that retailers provide the best of both worlds either way. This means personalisation. Shoppers will want the same variety and immediacy in-store as they get online, and they will want the same level of customer service online that they could get in-store. This is why the balance is so important, and why investment into tools that fulfil demand on both sides needs to be factored into the budget.
A prime example that businesses should be exploring is augmented or virtual reality. If consumers are forced into making purchases of items like furniture or clothing without seeing them in the flesh, then this AR compromise can still facilitate that to a high degree of success. Online chatbots, or self-service in-store systems, will also provide what customers really want – which is choice.
A targeted approach amidst fierce competition
While there will of course be exceptions, most retailers will be facing similar pressure points this year, and consumer trends will largely point in the same direction across verticals. Therefore, it should be expected that competitors will respond in similar ways, and it will be a challenge to differentiate.
The ability to stand out from the crowd once again comes down to that all-important buyer-seller relationship. When consumers’ budgets might be strained by outside events, they’ll likely turn to someone they can afford, someone they can trust or someone who’s bringing them the best deal.
Investment into AI-driven market analysis and forecasting can put you ahead in this regard, resulting in more targeted adverts, promotions, offers, rewards or loyalty programmes. Weighing up ROI as part of this process all hinges on data.
Leveraging sustainability as a strategic differentiator
Sustainability should be a primary concern for retailers for two reasons. Firstly, because ethical, environmentally conscious and socially aware behaviours are the right way to conduct a business, and it has become an industry differentiator as such. Secondly, because consumers now demand it. If they want their products to be ethically made and sourced, then they’ll also want them delivered in the most sustainable way possible. High-profile awareness of waste materials, the condition of our oceans and general climate change means that a failure to consider distribution strategies and footprints will alienate a lot of consumers. It’s therefore a revenue-based decision to invest in more sustainable operations.
Overcoming the COVID-Brexit-recession triple threat
The final challenge represents the social climate that businesses will continue to face in 2021. The UK’s COVID-Brexit-recession triple threat means even more unpredictability. It means the prospect of consumer trend fluctuations, mixed with the possibility of more entrenched economic difficulty.
This nexus of concern showcases once and for all the need for flexibility in investment strategies. Preparing cash flow for proactive expenditure in areas that cover the must-haves – technological tools like AR, omnichannel improvements, supply chain sustainability and relationship building – will hopefully bring about the returns retail businesses leaders need to then be nimbler for when unforeseen circumstances arise.
Smart investment for the future
As the financial and economic effects of the pandemic continue to put a strain on businesses in the retail sector, it’s vital that companies take a strategic investment approach. Freeing up liquidity through a successful business strategy is the most proactive and sustainable way to navigate ongoing uncertainty and pave the way for growth on the other side. Retailers must utilise the financial management tools needed to gain a transparent view of costs vs. business value generated. By leveraging this intelligence, retailers can cut costs in one area to strategically invest in another that drives greater value and ROI. Such tools can also enable fact-based scenario planning and effective decision-making. Through greater transparency, companies can then ensure that innovation and digital strategies take centre-stage in optimising services – as well as adding value.