With every major economic event of the past 15 years, the debate over whether retail is dead resurfaces. The pandemic has been no exception. While various subsegments of the retail industry have been affected differently since March 2020, with some getting hit harder than others, one thing that experts can agree on is that the retail landscape—and consumer expectations—will never be the same.
Here, we’ll discuss the immediate changes that the pandemic caused in shopping patterns, as well as how these changes affect brand and customer loyalty, and the type of investments retailers can make to set themselves up for success over the next several years.
The Pandemic Caused a Breakneck Pace of Change
During the pandemic, the retail industry experienced a decade of technological change in just a few months. Suddenly, customers were no longer comfortable buying items in store and shipping delays were ubiquitous, which raised demand for things like curbside pickup and grocery delivery. Customers also demanded a robust omnichannel shopping experience with more options and increased flexibility between modes of purchase.
An omnichannel experience itself is by no means new: the move toward omnichannel began long before the pandemic, with demand and availability of more options rising steadily over the last several years. But the pace of this shift during the pandemic was far quicker than anyone could have expected.
Overnight, retailers had to fast-forward their 5- or 10- year plans and execute new modes of operations, adding options like curbside pickup to their offerings. This breakneck shift has been far from seamless, and it’s left many retailers struggling to stay in business as they face a myriad of issues affecting profitability.
Customer Loyalty is Up For Grabs
On the consumer side, the pandemic caused shoppers to rethink and shift their buying patterns overnight. For most, this meant searching for out-of-stock products wherever possible and getting them delivered by any means necessary. According to a recent McKinsey report, over 75% of consumers tried new brands, places to shop, or methods of shopping since the pandemic began. This scramble opened consumers up to new brands and familiarized them with new ways of purchasing from both new and familiar businesses.
This mass forcing of customers out of their comfort zone and away from their routine is proving to be both a blessing and a potential curse for retailers. On one hand, it has put customer loyalty up for grabs. Consumers have inadvertently discovered, for example, that they like a generic version of hand soap as much as their preferred name brand, leading them to abandon their loyalty and their repeat name brand purchases.
Across the retail industry, this shake-up in consumer behavior has left companies and brands vulnerable to losing their repeat business as they struggle to capture new customers while retaining existing ones. So how can retailers set themselves up to win?
The Solution: Investing in the Right Places
Retailers can position themselves to come out on top by making investments that will help them deliver the right experience and win over customers.
Take grocery as an example. The age of customers being comfortable getting anything delivered means that physical proximity to a grocery store doesn’t carry as much weight as it once did. Before the pandemic, I might choose to do my weekly grocery shop from the closest grocery store to my house. This could be true for the sake of convenience, even if I would prefer the discount grocery store, if only it were closer.
Now, however, grocery delivery has become a familiar, top-of-mind option. This change has somewhat leveled the playing field in terms of physical proximity to a store, as people are more likely to get their weekly groceries delivered from their preferred stores. That said, this only works if the stores continue to keep delivery cost down and meet consumer expectations – which is why the race is on to provide the best experience at the lowest price.
One example of how a grocer is investing to meet this challenge is Ohio-based grocery chain Kroger’s new partnership with Ocado, a UK-based online supermarket known for its streamlined logistics and technology. By partnering with Ocado, Kroger aims to provide customers with the kind of on-demand convenience popularized by Amazon.
How? Well, on the front end, Ocado looks like a typical e-commerce grocery platform. The back end, on the other hand, includes a system of highly mechanized warehouses with AI-powered robots zipping around to pack groceries. Kroger’s agreement with Ocado gives them an exclusive license to Cado technology. By prioritizing innovation in warehouse logistics, Kroger is setting itself up to meet shoppers’ new, higher expectations for a streamlined and reliable shopping experience. In turn, the chain will serve as an example of how retailers can make strategic investments to capitalize on the loyalty shake-up brought on by the pandemic.
For those watching the retail industry and studying shopping behavior, it’s been a fascinating— albeit nerve-wracking— year and a half. The shake-up in shopping patterns, the forced accelerated transition to omnichannel, and resulting uncertainty in customer loyalty has opened up and shifted the competitive landscape in a way we have arguably never seen before.
Ultimately, the types of innovation and investment it will take to come out on top depends largely on the subsegment and business model. That said, companies would be wise to pay close attention to Kroger’s partnership with Ocado as an example of how to make a strategic investment that will allow them to better deliver on the customer experience and ultimately, retain and capture new customers.