HVO Search brought together Doug Stephens, Founder Retail Prophet and Retail Futurist, Matthew Drinkwater Head of Innovation, London College of Fashion, Peter Cross, Customer Experience Director John Lewis and leaders in Fashion, Beauty, Luxury & Lifestyle to discuss the future of these industries and life after Covid-19.

 

In the past few months, consumer behaviour and the way we view the world has changed dramatically. We are rethinking what is truly valuable to us and using different means to purchase products. Retail has not just been put on pause, but is being redefined. The way people buy will continue to change once restrictions are lifted.

 

In our live conversion, we explored what the “new normal” will look like and what retailers need to do if they are to survive.

 

Here are our key takeaways from the topics raised in our HVO Search Live Discussion - ‘First to the Future: Opportunities after COVID-19’.

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The Questions We Explored...

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During our discussion, we explored the following: 

 

Will things go back to normal once lockdown lifts? 

What will the “new normal” look like online? 

What will the “new normal” look like for physical retail?

How are brands innovating? 

How do you see the customer experience changing?

In what way has the psychology of the consumer changed? What’s their mindset right now?

What will the high street be like when we start to return?

What are the core skills companies will need?

Who will be the winners and losers?

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Key Take-Aways

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Will we go back to normal? 

 

This is a multi dimensional crisis and it’s incredibly hard to gauge what the future is going to look like. There’s been shock, a drag on economic activity and the taking over of private resources to turn into government resources. 

There will be no return to normality until people feel safe or a vaccine is found.

The general consensus is no we will not return to our previous shopping habits and our high street will look dramatically different following this pandemic.

When the lockdown lifts consumer confidence will be low and they will have been questioning what they really NEED.

Beyond bricks and mortar, beyond e-commerce, what else is there? Is there a Third Channel for brands to engage with their consumers in their own homes?

Brands need to showcase in a very different way.

Sadly larger brands with greater market share are more likely to survive.

Lots of small businesses likely to close as funding is ripped away from them.

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Q1 saw a drastic reduction in GDP, Q2 will be worse. Q3 expected to see a small bounce back as lockdown restrictions lift, but Q4 will be crunch time for many brands unable to sustain significant losses. Positive green shoots expected in Q1 of 2021.

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What will the “new normal” look like?

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Online / Digital retail

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Both supply and demand of products have been cut off but as businesses begin to open we will see a lift. Based on experiences of Germany and China, online stores are bringing in between 30-60% of normal volumes. It seems that online does not have the capacity to bridge the gap. 

Until we feel safe, we will ask ourselves if we really need to go out. Physical stores will inevitably suffer and brands need to continue to focus efforts on e-commerce and digital. 

Because of the online presence of Amazon, Alibaba and JD they are going to be picking up on this fear and other smaller retailers will lose out.

Retail on the high street wasn’t working before this, so many brands need to radically rethink their strategies and they are likely to put online at the forefront of those strategies. 

 

 

Physical retail

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There will be a different understanding of the physical space.

Demand is going to be weaker when we return and less real estate will be needed.

Leaders need to ask themselves ‘beyond bricks and mortar, what else is there? Now is the opportunity for them to be brave and look at what could be next. 

Belief that this might be a temporary status is dangerous, investing in technology is crucial. 

The majority of brands have a long way to go before their physical stores will make the profits they were making before this. 

Conversion rates with stores have not been good for a long time. People who don’t want retail experience will shop online. People who do want the experience, will go to the store but should be prepared to purchase. The key for brands is figuring out how to modify this behaviour. There needs to be a shift (particularly in fashion) away from the way the product is purchased. So much of buying is governed by gut instinct and stores need to understand locality and consumer mentality. They need to produce less products that will sell. Intelligent merchandising model where you can produce products that consumers want when they want it. 

Retail stores will be used more as a media channel for customer acquisition to attract customers online where they will buy. 

Need to look at more localised production and more bespoke on-demand products.

 

 

How are brands innovating? 

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There is currently a petri-dish of experimentation happening.

With any crisis, there’s always an opportunity for change because the old systems don’t work anymore.

The fashion industry will see a rise in digital fashion shows as it will remain problematic to host shows as they were before. 

For fashion and retail, there is an urgency to look at new business models and new types of retailing. For example, brands looking at 3D models - something new that provides a more meaningful experience for customers.

Virtual services have been enlightening so far and the key is to have a human face down the camera to deliver a more authentic experience.

Brands that allow customers to purchase ongoing services/experiences will do well (e.g. Peloton). The product is the starting point of entry into an ongoing community oriented relationship with the brand. Once the initial barrier to purchase is overcome, buying add-on services should be much easier.

 

 

How do you see the customer experience changing?

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There’s a greater sense that customers know what they want as they have spent time reflecting on their lives and what they value most.

The key to survival is understanding the specifics of your particular customer. Need to connect the right products to the right customer.

Customers are developing beyond just product, it is product plus the engaging services beyond it. Things that drive attachment and re-engagement are key. 

We’ve never had a choice before, we’ve had to go to physical stores. Now, because of online shopping, we have a choice. 

We need more localised production, where automation drifts into the supply chain to offer a bespoke experience to consumers. This will allow for a much better experience. 

Peter on John Lewis: we’re a people business, where people are currency. The sweet spot for us is the coming together of the human and digital. One exciting dynamic which is working far better than we’d hoped, is that we moved experts into one on one consultants and the appetite is great, we’re into several thousand appointments now. People are happy to connect with expertise in the comfort of their own home.

 

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In what way has the psychology of the customer changed? What is the consumer's mindset right now?

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The consumer mind-set during a time of crisis needs to be understood.

Consumer psychology is very primal and once humans enter a ‘risk’ state their behaviour changes. 

Terror Management Theory attempts to explain a type of defensive human thinking and behaviour that stems from an awareness and fear of death. ... In this way, people confirm their self-importance and insulate themselves from their deep fear of merely living an insignificant life permanently eradicated by death. 

Managing that worldview means we reprioritise and view family, work, community etc differently. In a crisis we try to reclaim our security and safety (leading to panic buying etc). 

Only once this has been achieved, can we reestablish our own value (part of this being our purchase of material things).

Knowing your customer, gathering customer data and understanding why they are coming to you and being specific with this knowledge is the key to surviving. 

There are many people wanting things to go back to the way they were. But there’s also a large percentage of people wanting things to change. Understanding what customers are thinking and how they want to live differently in the future will be key.

We will be more accepting of computer graphics being in our lives in a bigger way. There’s an opportunity to create awe-inspiring moments and the ability to do this is becoming more accessible. 

It is also important to understand how those who are working for your organisation feel. Their ‘risk’ or ‘reward’ mindset will impact how they see the world too and how they respond. For more detail on HVO Search’s Behavioural Science expertise and how we apply this, drop us an email.

 

 

What will the high street be like when we start to return?

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Many people would argue retailing on the high street wasn’t working before the crisis, so why would we want to go back? 

High Street will have more stores selling products AND services. There will be far fewer shops and real estate will change to other uses. 

Everything was always on discount, and the relentless race to the bottom was no way to sustainably sell products.

There will be a rush as people want to return to normalcy and the things they used to do. But is this percentage of society enough to save some companies? 

We need to accelerate the change that was coming anyway and redefine the balance of omni-channel. 

Maintaining excellent customer service with the influx of online customers is key. Think about VR, a holistic relationship with customers and a dynamic relationship with appointments and experts with live consultations..

Previously, we’d used social media to attract people into stores. In the future social media will BE the store, with bricks and mortar less about product and more experiential. 

 

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What are the core skills companies will need?

 

CREATIVITY

Statistically creativity is not a skill there is an abundance of in corporations. Companies need to provide an entrepreneurial environment that develops creativity and allows it to flourish.This is what allows people to adapt quickly to dynamic markets and trends.

 

COMBINED SPECIALISMS

People who are comfortable in both the digital and physical spheres needed because customers aren’t binary, so we need people who are comfortable bridging the gap between these areas.

People need to be creative AND commercial. Someone who understands the heritage of the brand, what the customer wants and how to deliver this. 

 

A DIFFERENT KIND OF LEADERSHIP

There’s a need to revisit the concept of leadership. 

There has been a deficit in visionary leadership up to now.

Female heads of state have been better at managing the Covid crisis.

During times of crisis, you see who your ‘A’ players are, those with integrity, ethics and crisis management skills. Let go of people who haven’t been your ‘A’ players and find new leaders who will strengthen your team. 

Companies need more people with good technical skills AND leadership skills. 

We need dreamers, innovators and risk takers. People who are brave enough to challenge the status quo.

 

 

Who will be the winners and losers?

 

Inevitably, there will be a shift in the short-term to the large organisations who have the monopoly. They will have a massive opportunity to grow their businesses.

Tech giants have been the big winners throughout the pandemic and they will continue to grow. 

The bailout beneficiaries like airlines will take public funds, buy lagging competitors and will end up as winners.

We will lose texture and diversity as smaller businesses close. Hopefully we create a fertile environment to allow entrepreneurs get back to the place they were in before this pandemic. 

Traditional high street with a blend of independence may do well as people start to reflect more on their community and their own identity. Humans are social creatures after all. 

The high street might be a winner. Great high streets are about the social identity of a community and communities have been split apart. Great high streets provide a converging point for communities and there will be high streets that come out of it stronger. Humans are cyclical and there is only so much time we can spend in digital channels. 

Nike has been a textbook example of success. The work they were doing prior and during the crisis to invest in digital capabilities, to explore different formats of digital stores and tinker with stores as digital channels was fantastic. Their communication has been unwavering and they have always been about people first. 

Everyone who is watching and taking part in this webinar is doing well, as they are thinking about the future and how to create a better one.

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Retail Survey

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During our live discussion we asked our 150 attendees what they thought about the future of retail. Here are their responses...

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1.Will retail go back to the old "normal"?

79% said NO

12% said NOT SURE

9% said YES

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2. Is the high street dead?

67% said NO

21% said NOT SURE

12% said YES

 

3. Is your company investing more in digital as a result of the pandemic?

5% said NO

22% said NOT SURE

73% aid YES

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3. Is your company willing to take more risks now?

12% said NO

21% said NOT SURE

67% said YES

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4. Will e-commerce / digital save the day?

19% said NO

17% said NOT SURE

64% said YES

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Our Panelists