Insights

The new retail landscape: winning in a post-COVID world

Jason Green, Lindsey Leikhim and Michael Thompson

May 27, 2020

Retailers are on high alert as COVID-19 has disrupted every aspect of the category. No sector remains unaffected, whether coping with indefinitely closed stores or accommodating incredible spikes in demand. As the dust settles, a new set of players will emerge: some old, some new and some forever changed. How will the retail world evolve through the remainder of quarantine and beyond? What actions can retailers take now to position themselves to survive and thrive in the new normal?

One foundational element will be crucial to creating a successful future retail strategy: deeply understanding the composition of your shopper base and how they respond to COVID-19. Our recent pandemic response segmentation provides insight on how different cohorts are changing shopping behavior and which emerging retail trends are likely to stick.

Pandemic Response Archetypes provide cues and clues for the future winners of retail

Our COVID-19 segmentation identified five U.S. Pandemic Response Archetypes (summarized below), defined by their response to COVID-19, distinct worries and levels of concern, and how they are evolving their behavior to adapt.

These archetypes highlight massive consumer behavioral shifts, many of which will become permanent. While Confident Skeptics will be ready to go back to the old retail mode, they represent only a portion of shoppers. The other archetypes exhibit trends that will have lasting impact on the retail landscape:

These trends are providing clues – and raising questions – on how the future retail landscape may shake out. Will retailers adapting well now see continued success after pandemic behavior subsides? Will retail models currently being disrupted rise to the occasion?  Can severely struggling players re-emerge in a new shape or form?

 

The race for the winning team – actions retailers can take to position for success

Do now (…or yesterday)

  1. “Meal kits” for unsuspecting categories: Consumers are being very creative during this crisis, learning new skills and DIY-ing everything from hand sanitizers to home-preschool programs to sourdough bread starters. Rather than giving up sales to YouTube “how-to” videos, help consumers solve pain points and build their own more easily. Think with the vision of creating alternative “meal kits” for your categories.
  2. Up your e-commerce game:  The time is long overdue. Now over the barrier to entry of grocery delivery, shoppers will have higher expectations and make retailer selection decisions based on integrated, state-of-the-art experiences… click & collect/curbside, same day delivery, auto-replenish, subscription services will all need thoughtful planning and points of distinction.
  3. Revamp your owned brands: Just as in 2008, the importance of value will have prolonged importance. By analyzing and restructuring your private label strategy, you can generate a halo on your value perception, capture sales across a broader swath of shoppers and encourage trade-up where appropriate with well-structured tiers.
  4. Rethink your vendor relationships: You are not in this alone. Partner with your vendors for joint-business planning. Category captains should be made part of the solution via assortment planning, product innovation, merchandising initiatives and supply chain optimization.
  5. Use “safe shopping” to inspire a new store experience: Shoppers’ demands for safety and cleanliness when they do return to stores may seem like a “table stake”: something you must deliver, but it won’t ever differentiate your store. Instead, think of it as an opportunity to do something unique. By understanding the COVID archetypes of your shoppers, you can be at the forefront of their demand. Could one-way aisles make the shopping experience better? Could store apps help consumers monitor inventory levels to avoid wasted store trips? Could “cart carwashes” be a shopper reassurance and a family attraction?  Could mobile apps directing shopping to shelf location or self-driving smart-carts provide quick and/or contactless store navigation? Could certain areas of the store offer preorder/pickup – an in-store version of click/collect – to reduce congestion?

Prepare for the future

  1. Explore latent demand categories: As you conduct category planning, are there new categories that tap into demand that consumers are unaware of or have hardly adopted?  Could you help bring these categories to life by showing consumers what they are and why they are needed? For example, could Virtual or Augmented Reality be the thing the regenerates demand in Big Box electronics?
  2. Repurpose “loyalty cards”: Too many loyalty programs have become merely avenues to provide shoppers volume discounts. Instead, repurpose these assets to create a truly advantageous membership that makes money and drives loyalty.  What elements of a Prime or Costco membership model could you bring to your store? Free, discounted or super-fast delivery, early access or in-stock notifications for high demand products, product suggestions or tailored discounts on key categories could create a proposition your shoppers are willing to pay for.
  3. Fine-tune offerings to local demand: Consumers in each state, even each city, are responding to COVID-19 differently. Mapping your shopper demand by region, state or city will enable more precise targeting and in-store decisions. Matrixing your shoppers to our COVID-19 archetypes  is one way to determine how demand differs. Building geo-based models to predict customer response as different external variables shift (e.g., hospitalization rates, school re-openings) is another. 
  4. Forecast your future: Despite all the clear shopper trends, there are still many questions on what the future holds for individual retailers. The best way to prepare is to build a robust forecasting model tailored to your individual shoppers that can be updated on an ongoing basis – it can reduce uncertainty and help prioritize business decisions preemptively. 
The path forward: respond with purpose, not panic

Retailers are facing a shock to the category that is entirely without precedent. They are battling huge losses in key areas, seeking to offset the damage by accommodating increased demand in other channels and sectors.  This passing tide will forever alter the retail landscape. Some retailers may not survive, but there are clear actions that can be undertaken now to help position businesses and storefronts for success.

A deep understanding of shopper demand and the behaviors it drives has always been foundational to category excellence, and that remains especially true during rapid change. Success will come to players investing in this knowledge and exploring new approaches to their business. Any qualms about testing new models should be put to rest. The time is ripe to test the waters with new store formats, delivery approaches, safe shopping measure, e-comm strategies – and entirely new business models. Offering direct-to-consumer streaming services was risky business for premium TV networks traditionally viewed through cable subscriptions… but HBO NOW was the most successful new video app on Apple’s app store. It’s time to take a leap of faith.

To read more about our thoughts on navigating your business through COVID-19, please click here

To connect with us to discuss how you can apply these principles to your business, please click here

For more information about The Cambridge Group, please visit thecambridgegroup.com

About The Cambridge Group

We are a strategy consulting firm that has helped clients find profitable growth for over 45 years. Since 1975, we have helped develop and execute strategies that are driven by a superior understanding of profitable demand. Headquartered in Chicago, The Cambridge Group’s strategy consultants apply Demand Strategy across global industries, enabling clients to align their infrastructure, businesses, and resources to meet marketplace demand in a way that is meaningfully differentiated from their competitors. As a Nielsen “Connected Partner” we enjoy  superior access to Nielsen's data and measurement capabilities.

About the Authors

Jason Green is a Senior Partner with The Cambridge Group. He has 30 years of combined consulting and marketing experience working with clients across industries. He is the lead author of Optimizing Growth and is a contributing author to several other books and numerous articles on growth strategy. 

Michael Thompson is an Associate Partner with The Cambridge Group. He has experience building demand-driven growth strategies across a variety of categories, including consumer packaged goods, financial services, human resources, social media and technology.

Lindsey Leikhim is an Associate Partner with The Cambridge Group. She has over a decade of consulting and marketing experience with The Cambridge Group and now leads the firm's Brand and Sales Center of Excellence, directing marketing efforts and sales best practices.