The global pandemic set off a chain reaction of shocks. Lockdowns restricted retailers from operating physical premises. Retail bankruptcies reached a ten-year high. Consumers switched brands at unprecedented rates. And, digital penetration jumped forward ten years in just 90 days. The scale of change was unprecedented, giving birth to a new kind of consumer or Generation N.
Consumers are redefining convenience with new habits and channel preferences by directing their share of wallet toward digital spending. To the extent that most categories in the US saw a 15 –30% jump in online sales according to the latest McKinsey research. This led to tailwinds for some. The big, chain retailers that came together and created a new digital muscle-set to respond to the needs of the new kind of “Generation N” consumer came out stronger.
The future success of retailers relies on maintaining and building up their new digital muscles. There are five markers that can indicate how well retailers are doing that:
- Turbocharge e-commerce and omnichannel. This digital gold rush isn’t just a fad; it’s here to stay, but retailers need to have a clear understanding of what their customers really want. Retailers are twice as likely to be selected by consumers, for example, if their digital experiences are outstanding, while customers are also embracing contactless shopping and new online-offline shopping behaviors. Retailers should consider putting greater emphasis on creating omnichannel offerings that can fulfill fluctuating order demand, and tailoring their offers to how customer decision journeys are being reformulated.
- Granularity of opportunity. The flight to digital has sparked a torrential surge in data. Within that data lie clues and insights about where the pockets of growth are developing or closing. Companies can rearchitect their tech stack and retrain their algorithms to ensure they can quickly spot demand signals and act with speed to capture market share while protecting consumer privacy.
- Virtual agility. With a massive shift to virtual channels, retailers are rewiring for speed and agility. New agile war rooms are pulling together new multi-disciplinary teams that enable an iterative test-and-learn approach across operations and teams. These virtual, dispersed teams can succeed when they commit to a collaborative culture and accelerate the process for faster reactions to market and consumer demands.
- Business model reimagination. The future isn’t what it used to be. Companies may benefit from investing the time to really figure out where the next horizons of growth are coming from. The emphasis is on reimagining ways to emerge stronger – perhaps new business models based on monetizing existing assets, expanding into new ecosystems, or launching new products or services that address a new need.
- Self-funded growth. Near-term cash management goes beyond cutting budgets. It is about using the right technologies, tools, and approaches to radically increase productivity, and reallocating the savings to areas enabling growth, such as R&D. This will drive rapid revenue recovery as consumer confidence grows.
Manage multiple speeds to capture growth
The global pandemic accelerated retail transformation, but retailers must not only think about the here and now. Success will be marked by retail leaders that are able to move beyond the turbulent shifts by operating simultaneously across three speeds – navigate the now, plan for recovery, and lead the next normal.
Brian Gregg, senior partner at McKinsey & Company, outlines the five markers that could lead retailers to rapid revenue recovery.