Deloitte: Three steps to surviving the COVID-19 recession
Deloitte recommends retailers seeking to successfully reopen stores focus on trust, the role of the store, and operating models.
COVID-19 has created a recession as consumers largely stay home, and many have lost their jobs. Since the current recession is unique in being caused by a pandemic, Deloitte expects the recovery process for retailers will also be different than that for previous economic downturns.
Following is a summary of three steps Deloitte advises retailers to follow in their recovery efforts, from the new report, “The Retail Revolution’s Great Acceleration.”
Establish trust
According to Deloitte, consumers will likely focus on two areas of trust in particular: physical health and digital privacy. Deloitte data indicates that roughly half of U.S. consumers are concerned for their physical well-being, and 42% feel safe going to the store as of mid-May.
Similarly, as of mid-May, 43% of surveyed consumers told Deloitte they are more concerned about data privacy as they are shopping online more. And employees are growing more alert to data privacy, especially as retailers will be taking their body temperatures before shifts.
Younger shoppers are more likely to hold retailers accountable for their response to COVID-19, with 54% saying in a Deloitte survey taken at the beginning of May that they will purchase more from brands that responded well to the crisis.
Deloitte advises retailers to proactively communicate to employees how their data is being protected and used. By building trust through the responsible protection of public health and data now, retailers can gain loyalty and be rewarded long after the pandemic is over.
Reassess the role of the store
As safety concerns shift more retail sales online, Deloitte recommends that it may be time for retailers to assess which stores should reopen at all. For those that do open, historical data might not be a valuable guide to set expectations for store performance in the near term.
Instead, Deloitte says it may be better to use real-time data to understand where people are shopping, how far they are willing to travel from home, and what they are buying. These will likely drive decisions about which stores to reopen and what role each store should play in the portfolio.
Deloitte also cautions retailers it is critical to recognize that reopening a store location may involve additional costs, such as equipment to keep the store clean and safe for the public and employees alike. In addition, contactless commerce carries with it unique costs; and fulfillment is different and can be challenging. There is also the risk of future store closings in case of flare-ups of COVID-19.
Some retailers were better positioned than others during the shutdown solely because their product assortment allowed them to earn status as an essential business. As retailers who had to temporarily shutter stores plan for a new future, Deloitte says they should consider adding categories or products so that if future outbreaks occur, they could be deemed an essential business.
Explore new models of operating
As consumers abandon shopping habits and cope with new public health worries and fresh financial woes, Deloitte predicts they may well embrace fresh retail formats and other innovations. Retailers have the opportunity to imagine or seek out new partnerships and new retail categories, including product and service categories that consumers didn’t know they needed.
To seize this opportunity, Deloitte suggests that retailers rethink partners, suppliers and alliances, and examine ways to serve low-end customers while exploring new markets. Some ideas may emerge from retail models that had been abandoned, such as drive-in theaters and home milk delivery.
In the end, Deloitte expects that retailers will likely succeed only as far as their customers and associates feel secure. Physically, is their health secure in stores? Online, is their data kept private? These questions fundamentally revolve around the trust that retailers are able to build and nurture. If they are successful in achieving that trust, Deloitte says the path of recovery will likely open.