Will Covid 19 accelerate the paradigm shift in retail?

Updated: May 28, 2020

The sector has once again had to adapt to the new consumer habits in the GCC. In a single day, non-food physical retail has disappeared, food has massively moved to digital through drive and home delivery channels. The players already involved in e-commerce are resisting better than the others in terms of revenue erosion. At the end of the confinement, retail will certainly start up again, but in what form? Will consumers return to their previous habits, or will they keep their current ones? What will retail have to do to adapt?

The strong growth of digital in food retail during the crisis will certainly have a ratchet effect on e-commerce activity.

The change in purchasing behaviour is accelerating two fundamental trends:

After the crisis, non-food physical retail will have to accelerate its shift towards emotional experiences if retailers want to maintain the attractiveness of their networks.

In spite of this, the non-food trade is currently undergoing an absolutely unprecedented test phase with operation on a 100% digitised model. Obviously, this situation is far from optimal, but it allows retailers to test the resistance of their e-commerce model in order to optimise its operation and to realise the importance of the "physical" aspect, even in an e-commerce model. Thus, for certain players who make a significant part of their sales in click&collect. The store network thus appears as a fully-fledged relay of e-commerce activity. This crisis will undoubtedly strengthen the power of e-commerce vs physical retail because, as in the food sector, behaviours will have changed. If retailers want to save their networks, the complementary and unified nature of the customer experience will be ten times more important than before the crisis.

More than ever, the store will become the nerve center of emotion and customer experience. It will be difficult to revive physical retailing in the long term if retailers do not transform it quickly. Before the crisis, the physical supported the web; after the crisis, the web will support the physical. More than ever, the perfect complementarity of the two channels will have to be basic; more than ever, physical retail will have to offer a customer journey marked by ease, operational speed and above all customer emotion, which the web will never be able to take away. Two moments of consumption will, therefore, emerge in an almost dichotomous way: the response to the need for a product will be provided by the web, and the response to the need for emotion will be satisfied by the physical.

This emotion will also come through the acceleration of "useful" technology in stores, which will be a key factor of success and differentiation at the end of the crisis. It will either bring added value to the customer experience (additional information, personalisation, etc.) or erase irritants (payment, queuing, etc.). It is during this period that the investment effort on useful back-office technology must be the most important in order to appear as a truly innovative and customer-centric brand. It is certain that the model will evolve once again because the need for humanity in commercial relations is one of its main pillars.

Whether we like it or not, humanizing a chatbot on an e-commerce site is a plus but will never replace a real qualitative human relationship. The emotion that a place, a smell, an experience can arouse will not be replaced by a 100% digital tool, and this lever will certainly generate a brand preference. The point of sale has also become a fully-fledged player in the global communication of brands, especially with stores that have become Instagrammable. These generate free User Generated Content (UGC), replacing hundreds of thousands of euros of communication. To do away with them would be to cut off a strong and engaging customer relationship.

This Covid-19 crisis will give a major boost to the digitization of retail, food and non-food. Models will once again be transformed in order to provide consumers with ease of use in e-commerce and real emotional experience in physical retail, which will be one of its only avenues of salvation. What has been predicted for a few years now is likely to happen, digital may overtake physical retail and contribute to its preservation, calling into question all the classic retail models.

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