THE RETAIL WORLD 2020 - ISSUE 05 RETAILING IN A TIME OF CRISIS - A WORLD RETAIL CONGRESS PUBLICATION
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CONTENT INTRODUCTION ANALYSIS: E-Grocery: The $200 Billion Opportunity Ahead . . . . . . . . . . . . . . . . . . . . . . . . . . 4 A OPINION: A wakeup call to the fashion industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 cross the world, But what has also become dramatically clear in the time retail is gradually between the last issue of this report and this one is that ANALYSIS: Developing Local Responses to COVID-19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 re-opening for the world has become galvanised by a powerful movement business. As you to address racism, lack of diversity and opportunity. As ANALYSIS: INNOVATION SPOTLIGHT: UNITED KINGDOM | Partnering for success. . . . . . . 10 will read from the country Matt Shay, the President of the National Retail Federation, ANALYSIS: Serving the Anxious Consumer after COVID-19 . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 reports in Issue Five of states in this report, Black Lives Matter is an issue of our ‘Retailing in a Time of fundamental importance that the US retail industry INNOVATIONS: Retailers respond to coronavirus through innovation . . . . . . . . . . . . . . . . . . 16 Crisis’ series, retailers are is taking a proactive stance on to help tackle the long- working hard to remodel overdue issues of racism and inequality. His message will and repurpose their stores resonate with retail leaders around the world. COUNTRIES to incorporate the required This issue also hears from the President of Lane Crawford GLOBAL and necessary safety & Joyce, Andrew Keith. He is leading a global campaign Spar International: How the West can learn from the East . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 measures. What we can see right around the world is within the fashion industry to take decisive action against that this is what consumers expect as a minimum before the issues around the environmental impact of the sector, Walgreens Boots Alliance: Going above and beyond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 they will even enter a store. Where they are confident in its wastefulness and unnecessary discounting that has entering a store or a mall, people are spending money as we hear in this report from Australia to the Middle East, led to what Andrew describes as ‘a broken model’. All of ASIA these issues were seen as top of the agenda before, but China: Livestreaming becomes a new revenue generator . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Europe and Latin America. There is pent up demand and he argues that the arrival of the COVID-19 crisis presents people will spend with retailers and brands they can trust. India: Indian markets open up to a tough reality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 the industry with an unprecedented opportunity to bring in Despite this very welcome move towards the re-opening real change. of stores, no-one believes that it is a return to ‘normal’. If these extraordinary times are creating unbelievable MIDDLE EAST This is more like the ‘end of the beginning’ phase in this Saudi Arabia: Adjusting to new retail norms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 challenges, it is good to see that retail leaders are working global crisis which is reshaping everything. A strong theme out how best to respond for the good of their customers, from many of the reports in this Issue is the dramatic shift to online by consumers around the world. With that their employees but also it seems to the wider societies, EUROPE has come an enormous challenge for retailers to build economies and communities they serve. We hope that Europe | EuroCommerce: A crisis affecting 29 million retail workers . . . . . . . . . . . . . . . . . . . 32 you find the insights, case studies and ideas contained in their capabilities and resources to meet this demand that Denmark: A feeling of normality for Denmark . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Issue Five of our reports to be inspiring and provocative. for many retailers is 100% higher than 12 months ago. But we are also hearing about incredible examples of Thank you to all of our contributors for their on-going France: A boom in food, beauty and toys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 contributions to this report. leadership and also resourcefulness, innovation and skill Germany: Germany’s plan to save more and spend less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 shown throughout retail organisations of all sectors and geographies as they re-set their business to satisfy the Italy: Deep discounts fail to lure the Italian shopper as economic fears grow . . . . . . . . . . . 40 demands of their newly omnichannel customers. Russia: Russian retail adapts and innovates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 IAN MCGARRIGLE Spain | El Corte Inglés: Customers returning with confidence . . . . . . . . . . . . . . . . . . . . . . . . 44 CHAIRMAN | WORLD RETAIL CONGRESS Spain | Tendam: The excitement of serving customers again . . . . . . . . . . . . . . . . . . . . . . . . . 46 IAN.MCGARRIGLE@WORLDRETAILCONGRESS.COM United Kingdom: Re-open for business at last . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 OCEANIA Australia: Waking up from isolation to the new reality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 LATIN AMERICA Latin America: Tentative steps for Latin America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Brazil: Brazil’s digital revolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 NORTH AMERICA United States | NRF: Retail’s role in fighting racial injustice . . . . . . . . . . . . . . . . . . . . . . . . . . 58 United States | Coresight: Coronavirus fallout could prompt sourcing shift away from China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 2 | Issue 05 Issue 05 | 3
ANALYSIS C OVID-19 has caused an unprecedented spike in • Lasting increases in e-grocery penetration following E-GROCERY: THE $200 BILLION online grocery demand. Almost overnight, the barriers (real or perceived) that had previously limited adoption of online grocery were eliminated. past crises - MERS in South Korea caused a permanent uptake of 4-5% in online penetration, with total online penetration reaching roughly 20%. South OPPORTUNITY AHEAD This resulted in a demand spike that has accelerated online grocery penetration by three to four years across all markets and driven a growth in grocery ecommerce penetration of 2-3x pre-crisis levels. To meet this demand, Korea continues to be the most advanced e-grocery market in the world. However, we believe some customers will revert to retailers have rapidly overcome technology hurdles and an pre-pandemic behaviours. As confinement measures Chris Biggs, BCG Managing Director & Senior Partner, and Dan Bodley, BCG unclear path to profitability to quickly launch offerings. wane across countries, we expect a moderate reversal in Managing Director & Partner, offer their perspective about what the future The result is an unprecedented evolution in the e-grocery e-grocery sales due to: may look like for e-grocery and why retailers should act now. market: adaptation of innovative operational models, • Reduction in online transactions across all segments new click-and-collect emergency stations, changing over – Our survey found 91% of consumers plan to reduce of stores into ‘dark stores’, the release of pre-packaged or maintain online grocery spend when the mandates essentials boxes, and CPG companies and wholesalers lift. The slowdown in expected sales is a mix of overall launching direct-to-consumer ecommerce offers. spend decrease due to economic hardship, poor online experiences, consumer preference, and lack of online Now that stay-at-home mandates are easing in many presence of discount store formats. In addition, those markets, grocers are looking to answer two key questions: consumers who have temporarily moved all their food How much of the current spike in e-grocery adoption is purchases online due to safety reasons are likely to likely to stick, and how much can they afford it to stick? eventually return to a mix of on- and off-line shopping. We analysed three potential scenarios for the future of • Shift from grocery to restaurant spend – The large e-grocery. This illustrative example focuses on the US market: portion of the overall grocery demand spike caused by • Scenario A: Permanent shift – assumes continuous the shift away from restaurant spend will revert over penetration, reaching 3.5x the pre-crisis level, with time – impacting both stores and the online channel. slower growth but high adoption rate, as 90%+ of current online customers stay online This channel shift may well be the single largest growth opportunity in grocery retail over the next three to five • Scenario B: Modest demand reversal – assumes years. Even if only half of new COVID-19 e-grocery demand penetration reverts to 2x pre-COVID-19 levels, as 50% converts permanently, we will witness an unprecedented of converted consumers do not remain loyal to the acceleration in the online grocery market, with $200bn online grocery channel globally moving to the channel by 2021. • Scenario C: Limited adoption – assumes penetration reverts to near pre-COVID-19 levels, retaining only But, that growth can come at a cost. Most grocers 25% of pandemic-induced consumer demand struggled to earn profits and a return on capital on their ecommerce business before COVID-19, and the additional RANGE OF POSSIBLE SCENARIOS GOING FORWARD While each market will differ based on customer preferences, competition, and demographics, in most volume has not solved underlying business model issues. Retailers must actively seek new strategies to attain markets we anticipate demand will fall somewhere sustainable profitability of e-grocery and not dilute Flatten Fight Future between the permanent shift to online and a modest margins. There is not a one-size-fits-all model. We expect reversal scenario. several ecosystems will co-exist, with new innovative We believe COVID-19 has caused a permanent increase solutions continuously challenging the status quo. Grocers E-Grocery sales penetration must choose an operating model tailored to the value (indexed to Feb '20 = 1.0x) in e-grocery adoption, and much of the demand surge Scenario A: observed in the past three months will remain online. Our proposition best-suited to their customer base, and then Permanent shift view is informed by: invest in the right technology to execute that model. They must also evaluate the trade-offs between the ease of • Ordering groceries online as habit forming – implementation, long-term scalability, and profitability. Experience shows that after customers complete five online orders, they become channel-loyal. Over one in It is critical that grocers also take the time to re-imagine three digital purchases in fresh and packaged foods the role of stores given this online shift and adjust them to Scenario B: was from first time users. A survey administered rising e-grocery penetration. The challenge is significant, Modest reversal by BCG in May 2020 of 17,000+ consumers globally particularly as e-grocery still has unique operational revealed 25% of consumers consider online shopping challenges due to the temperature control requirements Scenario C: Limited new a new habit developed during the pandemic. for perishable products, weight-to-value ratio, and need for adoption • Post-lockdown growth – Early results in the US in-person hand-off of products in many cases. market indicate that as the panic stockpiling period With new e-grocery players entering the market and current passed, total transactions in bricks-and-mortar leaders quickly scaling their capabilities, now is the time stores decreased. However, the number of e-grocery to act. Players who act now – understand their customer Historical actuals transactions continued to rise. and market needs, find the right business model to reach Sept 2019 May 2020 2021+ profitability, build the right technology – will capture a disproportionate share of this $200bn opportunity. Source: U.S. Census Bureau, Forrester, Brick Meets Clicks, BCG Analysis Issue 05 | 5
OPINION In an industry renowned to be competitive at best, the Lane Crawford, we are verbally communicating this with high level of sharing and openness across both forums, our customers in-store. We have marked merchandise that A WAKEUP CALL has been remarkable. Following the announcement of will not be discounted in store with a dot system, so our both forums proposals in May within days of each other, style advisors can walk their customers through buying industry players from across the Globe have signed on better. From AW20, we will only stage an end of season in support. Not surprisingly, the single most uniting sale on seasonal product from AW20. element in both forums for retailers is the prevalence of TO THE FASHION We are working on sourcing in more conscious ways: we discount. Investing a huge amount of money and resource will be working with more brands in Greater China; we are in travelling the world and selecting and merchandising, is looking at how we can repurpose existing merchandise no longer viable because of the amount of product sold at with brands; and for the small amount of product we discount. The model is broken. produce ourselves, we are working with manufacturing INDUSTRY Both forums have a slightly different approach. Dries’ partners with responsible supply chains. Forum has focused on highlighting the urgent and critical Our buying teams’ travel will be significantly reduced as need to simplify our businesses, making them more we work with partners remotely and digitally with online environmentally and socially sustainable, and aligned more showrooms and more Zoom calls, with the potential to closely to customers’ needs. We’ve proposed to put the also include customers. It is clearly important that buyers Autumn/Winter season back in winter (August/January) Andrew Keith, still have the ability to see and touch product so travel and Spring/Summer season back in summer (February/ won’t be entirely eliminated but this will also be of huge President July); to create a more balanced flow of deliveries through benefit to buyers around the world whose lives were Lane Crawford & Joyce the season to provide newness but also time for products miserable because they were always travelling and for to create desire; and discount at the end of the season many weeks at a time - there’s nothing glamorous about in order to allow for more full-price selling – January for it. Our buyers are young, and they are very enthusiastic Autumn/Winter and July for Spring/Summer. We also about the discussions we are having on defining a more Wirestock Images / Shutterstock.com agreed to work to increase sustainability through the sustainable approach to what we do. supply chain and sales calendar through less unnecessary product; less waste in fabrics and inventory; less travel; Longer term, we are working on how we reduce single-use make use of digital showrooms in addition to personal plastic in our business; reducing our carbon footprint; and COVID-19 has accelerated the transformation of retail but it is also putting a powerful creative interactions; and review and adapt fashion shows. recycling waste as part of our efforts to be a responsible spotlight on some major industry issues that need to be addressed. The oversupply, the business. We have already taken steps to reduce our The Forum will not police the industry or actions and waste, the discounting and the environmental impact of the fashion industry is one of because of anti-trust laws, we cannot set down or agree to carbon footprint by shifting from air to sea freight and on-ground to electric and bio diesel. With the objective those enormous issues. Andrew Keith, President of Lane Crawford & Joyce, is leading a a global approach to discounting. Those who are aligned and to recycle our own waste, starting in our warehouse with global campaign driven by a belief that now is the time to fix the broken fashion industry who have signed on will take action in their own businesses. plastic hangers, polyfoams, Styrofoam, plastic film, We all know each other and are in contact so there will be an model. Writing exclusively for the World Retail Congress, he sets out the case for change. organic sharing of the progress we’re each making. bubble wrap, cardboard and plastic, we have established a recycling platform with third party logistics and specialist For too long, retailers across the fashion industry have Since then we have seen the rise of ecommerce platforms, #rewiringfashion is addressing not only discounting but recycling partners, that other businesses are now been buying too much, buying product they had no way of driving growth strategies on breadth and depth of product, also fashion weeks and show schedules, and looking at leveraging. And we are now piloting a new service for Lane selling, and confusing the customer by selling product that and discounting continuously through the season before ways in which the supply chain of the industry can be more Crawford members to take back used beauty plastic and had nothing to do with their seasonal needs at that time. going to an early, deep seasonal sale because they have so sustainable. Discussions continue with subgroups focused glass packaging, our own packaging and used electronics As a consequence, customers have been falling out of love much stock to clear. Most are not profitable. on those areas. At this stage there isn’t an alignment for recycling, using our online returns collection logistics, with what we do and retail is in crisis. among designers on the fashion week and show schedule and encouraging customers to drop off at our stores. Price and discounting are not a luxury strategy. If In late March, when a global ecommerce platform started customers don’t value what we sell because we don’t value – each business is unique and every designer wants to Certainly, we are looking at a very different retail landscape discounting new spring summer season stock as the what we sell, we have killed desire. And if we’re producing look at how they show and sell most effectively. However, whether these two forums drive it or not. pandemic took hold globally, I could see the floodgates too much for longtail platforms and people who are not there is an alignment between the young, independent about to open on markdowns – and a forewarning from prepared to pay for it, we’ll kill the planet. Forget our designers – they will show in March and September and The new world and our customers will keep us on track. our last global crisis. Yes, we were all suffering - I run two businesses. Game over. sell in June and July. The levels of disruption we are facing all around the globe luxury multi-brand retail businesses, Lane Crawford and mean that businesses must be quick and responsive, Rather than taking the pandemic as the death knell, it is our From the second half of 2020 we will see travel to buy Joyce, with operations in mainland China and headquarters defining new ways of producing and how they flow their wakeup call, a time to reset and redefine a new way forward. scaled right back; less money spent on extravagant fashion in Hong Kong, which has had no respite since social unrest merchandise. Brands will work with retailers who will be shows; product delivered at the appropriate time in the broke out in June 2019. But for the short-term gain, the Spurred on by that sale flashpoint in March, I found responsible with their products. Customers will purchase season; less discount; and designers really thinking about industry would likely suffer irreversible damage. through discussions with like-minded brand partners with more conscience and be conscious of how they spend how to connect with their customers in new ways. and retailers, that we were of the same view. Led by as levels of disposable income are affected. In 2008 during the Global Financial Crisis, one of the At Lane Crawford and Joyce, a significant portion of the fashion designer Dries Van Noten, I participated in a series Clearly there is no business as usual. Now is the time world’s most revered department stores went on discount Spring Summer 20 merchandise will not be marked down of discussions with key industry players to determine to future proof our businesses. Now is the time to stop in the US and every other retailer was forced to follow. The because they are timeless, wardrobe essentials. Though a proposal for the future, while also participating in producing and buying so much needless product and American retail market has seemingly never recovered, it may sound counter-intuitive, we are encouraging #rewiringfashion, facilitated by the Business of Fashion, stuffing it in landfill. unable to sustain healthy, full-price businesses because customers to buy better and buy less, and to think about which set forth its manifesto. customers have been conditioned to expect discounted how they use what they purchase. Luxury should last. In merchandise all season round, no longer just at the highly anticipated end-of-season sale. If you wish to be part of this movement for change please sign the open Forum letter at forumletter.org and join #rewiring fashion at www.rewiringfashion.org. Or start your own forums within your sector – it has been a very powerful process coming together and if the luxury fashion industry can down its daggers, anyone can. 6 | Issue 05 Issue 05 | 7
ANALYSIS The next wave of COVID-19 restrictions are likely to play footfall management, returns procedures and cleaning out locally rather than nationally. intensity requirements could all be nuanced, and labour flexed accordingly. It is becoming clearer that demand will not return to retail DEVELOPING stores and brands in the same profile as pre-crisis, and Larger retailers are feeling increasingly empowered to that it will also not return at the same pace everywhere. lobby local governments on re-opening strategies and on Consumers will continue to be reticent to travel to and industry standards and protocols for operation; where shop in locations that they deem to be riskier, and retailers are able to point to robust analysis on the level restrictions on travel (both international and local) will of risk at their site, there may be scope to dial down LOCAL RESPONSES continue to hamper accessibility to certain location types. restrictions and requirements to maximise sales and profitability where risk is inherently low. Furthermore, infection rates have and will continue to vary substantially across individual areas – as of 18 Local risk information can be used to drive customer May, normalised infections (per 100k residents) in some demand, informing outbound marketing strategy and TO COVID-19 parts of London were twice that in Bristol - and the R messages, directing customers across channels and rate is strongly influenced by local mobility patterns. locations appropriately and providing reassurance on the There is increasing pressure on centralised governments real level of risk at sites. to empower local authorities and organisations to And clear indicators combined with effective manage risk at the local level, in an effort to increase the communication can provide instant reassurance to effectiveness and efficiency of outbreak management. By Tom Charlick By Katherine Fiander colleagues that retailers are actively monitoring and care We are already starting to see some retailers planning about the level of risk to their health and that when the differential openings and operating hours across their doors are open, it is safe to be there. estate as a result. In the medium-term, better local understanding of traffic But we believe that the retailers who will manage this flow and risk will enable retailers to make more informed period most effectively will be the ones that go further, decisions around what the store portfolio of the future step-changing the extent to which they monitor and should look like – more residential and less commuter sites analyse traffic and risk at a local level. for example. Retailers are starting to work through the opportunities As the challenges of the COVID-19 pandemic on the retail One of the effects of the COVID-19 crisis has been a focus on ‘the local’. that can be unlocked through local monitoring and decision sector continue to shift and evolve, we are moving into making. The potential applications and benefits of this a local phase – and retailers who adopt a data driven Consumers in lockdown have rediscovered their local services and retailers approach are numerous: approach will be one step ahead. too are having to think more locally. OC&C Strategy Consultants’ Katherine Data on expected store-level demand levels and Fiander, Associate Partner, and Tom Charlick, Partner look at what this local risk can inform decisions around future opening means for retailers. patterns and operational requirements; opening times, TRACKING RISK AT A LOCAL LEVEL ALLOWS RETAILERS TO MAKE MUCH SMARTER DECISIONS ABOUT STORE OPENING AND OPERATIONS Daily R-Rate1 vs. 7-Day Incidence2 Average Across LTLAs Examples: Sunderland and Enfield 2. In 6th 20th April Sunderland was moving through the high risk area 90 Enfield - would be Medium Risk High Risk Enfield closed for 1 week 80 Sunderland (using the Risk matrix with R>1 and incidence 70 >50/100k) 60 Sunderland - would be closed for 3-4 weeks New Cases per 100k Residents 50 Over Last 7 Days 40 Low Risk 30 20 10 0 3. 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 2.2 Both locations are very similar at 1. the moment Low Risk segment R-Rate 2 Both locations started from approximately the same place 1. Displayed R-Rate is a simplified approximation using confirmed cases as displayed, not controlling for risk of infection by social exposure or relative share of immune people 2. Incidence refers to new cases per 100k residents over last 7 days Photo by CJ Infantino on Unsplash Source: OC&C analysis Issue 05 | 9
ANALYSIS In their latest special report highlighting how retailers are developing innovative solutions in response to this global crisis, AlixPartners focus on some outstanding examples of best INNOVATION SPOTLIGHT: UNITED KINGDOM practice in the UK. PARTNERING FOR NEW PARTNERSHIPS AND PROTECTIONS There was a tremendous drive in innovative partnerships of the kind that would not be expected in the normal course of evolution, but became the answer when retailers had to move fast and react to the requirements of the SUCCESS extraordinary situation. Various retailers, including Marks and Spencer, Aldi, Co-op, and Morrisons partnered with food delivery company Deliveroo to offer quicker last-mile shipping to customers. Similar innovative collaborations and partnerships as well as new business models are Matt Clark Dan Coen likely to continue to emerge as recovery continues. There were also efforts to support gig economy workers at the Managing Director, Managing Director, frontlines making ecommerce home delivery possible. AlixPartners AlixPartners Hermes was one major example, with the luxury retailer setting up a £1m support fund to assist its couriers in cases where they had to self-isolate. TECHNOLOGY ADOPTION ACCELERATES UNPRECEDENTED TIMES, UNPRECEDENTED ACTION Cashless transactions were the call of the hour. Several rival grocery retailers and supermarkets came Sainsbury’s SmartShop app had existed prior to COVID-19, together to ride out the increased demand for certain but adoption accelerated much more rapidly than the products and manage supply chain concerns. In a retailer could have predicted as it aggressively marketed remarkable move, Morrisons, Sainsbury’s, Costcutter, the contactless shopping service during the crisis. Using Co-op, Tesco, Lidl, Aldi, Waitrose, Marks and Spencer, the app, customers were able to scan their shopping as Iceland, Asda, and Ocado, jointly published an open letter they walked around the supermarket, pack their purchased that detailed steps they were all taking to maintain both products up on their own, and walk straight out of the consumer safety and flow of goods. The letter also asked store without them or their shopping coming in close customers to refrain from stockpiling popular items such contact with anyone. Safe for the customer, easy for the as toilet paper and canned tomatoes. While the move was retailer. Ocado, meanwhile, set up virtual queues to help coordinated by the British Retail Consortium, it wasn’t keep its website up and functioning during the surge of something anyone could have predicted prior to the crisis. online orders. Expect the pace of technology adoption in various areas of operations to rise as the industry continues to emerge from the crisis. Photo by Liviu Florescu on Unsplash Issue 05 | 11
ANALYSIS SERVING THE ANXIOUS EY’s Future Consumer Index now surveys consumers in China. As the first country to be hit by the COVID-19 crisis and the first to emerge from it, what lessons are there CONSUMER AFTER from the behaviours of China’s consumers? Thomas Harms, EY’s Global Retail Leader, highlights the key findings from their research. COVID-19 W ith the coronavirus pandemic continuing to play out around the world, retailers are trying to anticipate what will come next. How will the attitudes and behaviours that consumers have adopted in lockdown change, as their freedom is slowly restored? To understand the new consumers COVID-19 is shaping, EY has widened the scope of the EY Future Consumer Index to include consumers in China. By looking closely at China’s emergence from lockdown, we can get a By Thomas Harms, EY Global Retail Leader perspective on how the pervasive sense of caution might persist or evolve in other countries, as they remove or ease their restrictions. OUT OF LOCKDOWN, BUT NOT OUT OF THE WOODS The EY Future Consumer Index suggests that as Chinese consumers are able to return to ‘normal life’, many remain deeply concerned about picking up where they left off. If we see this trend repeat in a significant way across other markets, organisations around the world will have to adapt to serve a far more worried and cautious consumer. When people make decisions about what they buy and how they spend their time, risk will be front of mind. CONSUMERS ARE CAUTIOUS, BUT THEY’RE READY TO SPEND Overall, Chinese consumers are now spending more in a wider range of categories. But some categories are rebounding much faster than others. CONSUMERS IN CHINA ARE SPENDING SIGNIFICANTLY MORE IN CERTAIN CATEGORIES THAN THOSE IN OTHER COUNTRIES % of consumers “spending more” next month China Rest of the world 0% 20% 40% 60% Fresh food Household and hygiene products Personal care items Frozen food Canned and dried food Clothing and footwear Beauty and cosmetics Non-alcoholic beverages Alcoholic beverages Methodology We surveyed 12,843 consumers across the US, Canada, Brazil, UK, France, Germany, India, UAE, Saudi Arabia, China, Japan, Australia and New Zealand during the week of 4 May 2020. The survey questionnaire covered current behaviours, sentiment and intent. Kapa1966 / Shutterstock.com Issue 05 | 13
We see the same encouraging signs when we look further into the future. China’s consumers are far more likely to be in the segments we call ‘Back with a bang’ and ‘Cautiously extravagant.’ And it’s interesting to note how few are in the ‘Return to LESS EXTREME SENTIMENT IN CHINA SUGGESTS THAT CONSUMERS normal’ segment. MAY RECOVER OVER TIME Extremely uncomfortable uncomfortable CONSUMERS MAY BEGIN EASING CUT BACKS AND SPENDING N. America & W. Europe China MORE AFTER COVID-19 IF CHINA IS A LEADING INDICATOR Going to a theatre/cinema 58% 20% 29% 35% Exercising in a public gym 55% 21% 14% 28% China Rest of the world Going to a bar or pub 53% 22% 25% 36% Travelling on public transport 53% 20% 11% 27% Back with a bang Cautiously extravagant Get to normal Stay frugal Keep cutting Eating in a restaurant 48% 22% 14% 28% 28% 37% 7% 25% 3% Trying on clothes in a store 47% 21% 6% 25% 15% 21% 22% 27% 15% Going to a mall 37% 28% 5% 16% Going to a hairdresser or spa 37% 24% 13% 27% This is further evidence that Chinese consumers feel positive and are looking to a bright future. But the Index suggests Shopping in a grocery store 15% 23% 15% they are changing their preferences and behaviours fast, and very few plan to go back to life as they used to live it. LIVING MORE RISK-AWARE LIVES IMPERATIVE TWO: ACCELERATE DIGITAL In the heavy lockdown stage retailers showed they could be very agile, creating simple but effective ways to minimise 52% said they will change the way they shop in-store physical touch and proximity, for example. But as we move into the next phase of the crisis, digital will be critical. Companies need to quickly redefine their digital strategies and hit the accelerator. ‘How can we e- everything?’ is the OF THOSE question asked by one of our clients. 70% said they will be more aware of hygiene and sanitation when they go shopping What could this lead to? We expect to see greater use of the smartphone as an interface generally. New shopping 60% will consolidate their shopping trips into less frequent, but larger purchases experiences will become possible as personal technologies become more integral to everyday life, people become more 44% will do more of their grocery shopping online. comfortable sharing personal data, and other barriers to adoption fall away. Ideas from the margins could enter the mainstream. Consumers may be more willing to share their biometric data to get clothes that fit perfectly without having to try them on. Haptic technology could allow people to ‘feel’ products without physical contact. THE ANXIOUS CONSUMER HAS RISK FRONT OF MIND One critical question is whether the new behaviours and sentiments described by our segments will stick. We think that THREE OPPORTUNITIES TO ADAPT TO A NEW KIND OF CONSUMER more consumers, faced with no clear answers about vaccines, will adopt an ‘always-on-emergency mindset’. This is a • Can you create a map of the journey your customer takes, from acquisition to loyalty, and work out how to replace any worldview characterised by a heightened sensitivity to risk, both real and perceived. A new normal emerges as people physical touchpoints that are no longer possible with digital ones? become accustomed to crisis and are more cautious and pragmatic. • Can you encourage anxious consumers back into a shared physical location like a clothing store by rethinking how that The post-lockdown risk attitudes of consumers in China are an insight into how consumer attitudes elsewhere might location works and using digital technology to help consumers re-embrace the physical? change, and what it would take for retailers to remain relevant. There are two standout imperatives we want to share here: • Can you give anxious consumers greater transparency across your supply chain and delivery process, so they know you IMPERATIVE ONE: MAKE THE CONSUMER FEEL SAFE take their concerns seriously and can feel comfortable about buying from you? Consumers in China are today less worried about returning to certain activities than consumers elsewhere after all they Retailers must adapt to a new kind of consumer – one with priorities, attitudes and behaviours shaped by the experience have the longest experience of living with coronavirus and they came out of lockdown first. of living through a global humanitarian crisis. This will require digital change at an extraordinary pace. Can leaders Yet in absolute terms they remain extremely cautious about returning to many of the activities that were once part of their implement five years of digital progress in six months? normal, every-day lives. This suggests the pandemic has affected consumer attitudes at a deep level. The bottom line is that retailers have shaped their business strategies, product portfolios, and marketing or engagement Will time alone change these attitudes? One encouraging sign is that Chinese consumers are much less concerned about around a consumer that values purpose and innovation. But that is not what the Anxious Consumer values. Their buying shopping in a grocery store. Like consumers everywhere, they’ve needed to visit such stores to buy food. That means decision isn’t a trade-off between value and cost, or value and some felt expression of their identity - it’s more about “Is they’ve seen for themselves how stores have changed the shopping experience to make them safe and – critically – to what I’m buying or experiencing worth the risks I’m taking?” This is a new challenge. But it’s one that retailers that act make them feel safe. now can turn into an opportunity. There is a learning here for businesses that need to entice consumers back into a communal space: how will you reinvent and communicate the experience you offer so consumers feel the risk has been minimised? For more insights and to read the article in full, visit www.EY.com/FutureConsumerIndex The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms. 14 | Issue 05 Issue 05 | 15
INNOVATIONS Squadded RETAILERS RESPOND TO CORONAVIRUS SOCIAL COMMERCE PLATFORM TURNS SHOPPING REMOTELY INTO A GROUP ACTIVITY THROUGH INNOVATION A browser extension called Squadded Shopping Party allows users to connect with groups of friends and shop Takeaway: Even before COVID-19 there was huge growth in social ecommerce, predominantly led by Chinese apps like Justin Sablich, Editor, online together, chatting through the extension as they Panduoduo. This platform allows people to form groups Springwise virtually try on different outfits or discuss items. Once and shop at a discount. installed, users can go to participating sites and browse. Similar social ecommerce apps are expected to sell more The platform allows users to add items to a wishlist, poll than €39bn (£35.5bn) worth of goods in China alone in friends for advice and see what other users are buying. 2022. For brands, Squadded offers the opportunity for Founded by former L’Oréal brand manager Elysa Kahn, higher conversion rates from the peer-to-peer connection. Squadded aims to inject a sense of togetherness, trust and According to research firm Nielsen, consumers tend to buy transparency into remote shopping. more when they shop with friends, because having the decision affirmed by a friend reduces the perception that a purchase is frivolous. Find out more Photo by Ramon Kagie on Unsplash Krisztina Papp on Unsplash M any of the retail innovations we’ve spotted via Others are making customer service a priority, developing the Springwise community in recent weeks new tools to keep consumers better informed about when to have a particular focus on making the shopping shop, and where. Supermarket chain Lidl recently launched a experience less stressful, and in some cases, WhatsApp chatbot in Ireland, where shoppers can converse more social, for consumers still adjusting to a life affected by and be notified of when their local stores are less crowded. COVID-19. We also spotted the LineScouts app, which takes a While ecommerce activity continues to spike, a downside for crowdsourced and data-driven approach to keep shoppers some is that it lacks the comradery that shopping with others informed on the safest times to visit various local provides. This is something one Israeli start-up is aiming to supermarkets. replicate digitally. NEW ZEALAND’S FIRST VIRTUAL MALL As always, Springwise will be tracking which innovative Squadded allows users to connect with groups of friends approaches gain traction with consumers, undoubtedly seeing and go shopping together online, chatting through a browser many more bold experiments from all corners of the world In the midst of the COVID-19 pandemic, the town of Takeaway: Even as lockdowns around the world begin to extension as they virtually try on different outfits or discuss emerging over the coming weeks and months. Whakatāne, on New Zealand’s North Island, created ease, many people are continuing to stay away from retail what to buy. a virtual mall featuring local and regional businesses. outlets and other communal services. This may well have dire Customers can choose to shop online by store or product consequences for small, local businesses that are trying to type, and can purchase from several retailers using only one rebuild. The virtual mall offers these businesses an option, shopping cart. as well as helping shoppers to support their community by making it easier, safer and more fun to shop locally. The virtual mall allows retailers and service providers According to the developers, within an hour of its launch without an online shopping option to develop one. The the site recorded more than 300 visits and the first sale platform also links shops that already have ecommerce was completed within two hours. When the threat from websites to the virtual mall, while retaining a unique coronavirus recedes, virtual malls like this may well domain name and style. continue to provide a new way to shop locally. Find out more Issue 05 | 17
Linescouts K. Mitch Hodge on Unsplash THE APP THAT HELPS SHOPPERS AVOID OVERCROWDED SUPERMARKETS WHATSAPP CHATBOT HELPS CUSTOMERS FIND THE PERFECT TIME TO SHOP Slovenian start-up LineScouts has developed an app that Takeaway: LineScouts is the type of innovation that we are notifies users of the congestion they can expect at their likely to see more iterations of as the pandemic enters the local store. LineScouts produces an aggregate ‘busyness next phase in many regions of the world. The speed at which In an attempt to provide a solution for long queues, grocer Takeaway: With grocery demands at an all-time high and score’ based on data from Google and crowd-sourced these tools can be released will be interesting to track. Lidl has launched a WhatsApp chatbot in Ireland in which the need to maintain social distancing during COVID-19, reports. The queues are then given a traffic light rating – LineScouts was developed at d.labs, a lean innovation customers can converse and find the quietest times at their an everyday trip to the supermarket has become red for very busy, yellow for busy, green for light traffic and studio based in London and Ljubljana, Slovenia. D.labs local stores. Customers can send the chatbot a message increasingly difficult. purple if there is no data. Users can also help by reporting specialises in incubating digital products to the point on WhatsApp stating the time and day they intend to Utilising a chatbot that is easily accessible via WhatsApp on the conditions at their local store. where they are ready to scale up market-tested products visit a particular store. Using real-time data and customer should lessen the stress for customers while keeping and services. Unlike previous products put out by the lab transaction numbers, the chatbot will respond with an them safer in-store. Post-pandemic one can also see the however, LineScouts was rushed to market in order to help automated message. appeal of such a tool from a customer service perspective. consumers as soon as possible. Can’t find the toothpaste? Just ask on WhatsApp. Find out more Find out more HERE WeGo Deliver OurStreets DELIVERY TOOL HELPS SMES MEET DEMANDS OF COVID-19 ROAD SAFETY APP PIVOTS TO HELP SHOPPERS FIND WELL-STOCKED STORES Amsterdam-based location data and technology platform Takeaway: Organisations around the world are using HERE Technologies is offering SMEs a free tool to help digital infrastructure in attempts to continue business as implement its own simplified and efficient delivery usual. Several other cloud services and companies are also service during the COVID-19 pandemic. HERE WeGo offering their computational services for free to reduce the OurStreets, a crowdsourced micro-mobility and road safety Takeaway: The most successful innovators are not afraid of Deliver will allow businesses to plan and dispatch a impact of COVID-19. Recent data by McKinsey shows that app, has developed a new supplies feature for retailers a pivot or two when circumstances change. This is the case delivery service without paying for software development it took only eight weeks to launch five years forward in the and shoppers. The ‘Supplies’ section of the app provides with OurStreets, which was able to integrate a new tool for or implementation costs. Users just upload their order rate of consumer and business digital adoption. Moreover, relevant and timely local data that’s focused on which a new market into its existing product. Many businesses destinations and the number of drivers to the platform, it looks like the use of digital services is here to stay, with supplies are currently available in area retail outlets. are contemplating how best to capture the gains from this HERE WeGo Deliver then optimises each route and delivery 75% of people using digital channels – indicating that they time away from usual routines. One of the challenges is Retailers who partner with the app can send official sequence. intend to continue using them post-pandemic. how to do so in a manner that works in the long term. The updates on levels of crucial items in stock and, usefully, can Find out more OurStreets team sees potential for supporting smaller and send alerts when something is back on the shelves. local businesses by directing shoppers to stores they may not have previously visited. Find out more Every day, powered by its global community of innovators, Springwise spots and analyses the latest innovations that promote positive and sustainable change from around the globe. For further information and to sign up to Springwise visit www.springwise.com/newsletter or email them at info@springwise.com. 18 | Issue 05 Issue 05 | 19
SPAR CHINA Social distancing norms are shaping shopping trips GLOBAL | SPAR INTERNATIONAL Following a challenging period, SPAR has successfully expanded its presence in China with six new supermarkets in the provinces of Shandong, Guangdong and Beijing. In with a preference for proximity retailing on the rise. The implementation of digital or frictionless technologies has become even more pertinent, prompting more stores to By Tobias Wasmuht these stores, the proximity retailing and in-store measures explore cashless, self-checkouts and other self-service that are a part of the new normal in retailing have been options to facilitate social distancing. implemented. Ecommerce continues to show strong growth as The new stores ensure more communities have easy consumers shift their purchasing patterns from in-store to access to daily essentials. Beyond offering produce, all online, with growth numbers as high as 150-300% in Italy. HOW THE WEST CAN LEARN stores have implemented comprehensive measures – including mandatory face masks – to ensure that the health and safety of customers and team members are safeguarded. Social distancing guidelines are prompting more customers from different demographic backgrounds to explore online grocery options. FROM THE EAST E-grocery platforms have been on the rise throughout Tailored to local preferences, the products on offer provide the SPAR network for several years, with full-service shoppers with all they need, in addition to online shopping operations in 12 countries before the COVID-19 outbreak. and home delivery services – ideal for customers looking to A Since March 2020, the number of these solutions has s a worldwide brand operating across 48 countries customers amid measures by the authorities that had a shop from the comfort of their own homes. grown even stronger, offering more communities easy and and four continents, SPAR has extensive dramatic impact on business operations, providing valuable SPAR stores across China have infrared thermometers convenient access to groceries. E-grocery is now available experience in responding to ever-changing global, lessons as the outbreak started to affect other regions. at the entrance, signage to encourage space between in more than 25 countries where SPAR operates, and the regional and local market conditions. Now that more countries start to ease lockdown measures customers in the checkout area, as well as ventilation importance of this channel is likely to remain after we The COVID-19 pandemic has presented the retail industry and we move towards the ‘new normal’, we are again systems to ensure constant airflow. settle into the new norm. and society at large with an unprecedented set of taking stock of developments in Asia, where retailers are To further safeguard the wellbeing of staff and customers WORLDWIDE VIEW challenges. As a global retailer we have had the unique charting a new course in their communities with adapted alike, stores are fully disinfected before and after trading For the first time in our almost 90-year history, SPAR vantage point of the pandemic’s impact on the sector as it business practices and trends progressing at a rapid pace. hours as well as throughout the day. Cash registers, retailers across the globe are tackling one common issue. moves from East to West. weighing platforms, shelves and shopping baskets are The response to the pandemic has proven the true worth of As the first country to implement decisive measures to regularly disinfected. Both customers and in-store team the SPAR ‘Better Together’ strategy – from procurement, reduce the spread of the coronavirus, China offered key members are required to wear face masks, and body buying and supply chain to sharing strategies to help lessons on dealing with the COVID-19 outbreak. SPAR temperatures are checked before anyone enters a store. mitigate risk and prepare for the future. partners in Asia have successfully continued to serve PROXIMITY RETAILING AND CONFIDENT CONSUMERISM Throughout the pandemic, SPAR retailers have achieved an Given the changing social distancing norms and economic exemplary standard in serving its respective communities concerns around the world, we are seeing a growing by providing shoppers with their daily necessities in a safe importance of community and proximity, as well as a and convenient environment. growing focus on value. As stockpiling seems to be coming As we move forward, the year ahead will not be without to an end, customers are buying less, and in some cases its challenges. Shifts in consumer confidence and the lower-margin products. negative impact on household incomes will see consumer Disadvantaged shoppers and communities will need our spending move toward health, sanitation, value and online support. Sourcing locally will be top priority and part of the further, and SPAR well-positioned to respond to each. new normal, as will shortening supply chains. We must One of the key lessons from the ongoing pandemic is the empower shoppers and staff to be safe and responsible to essential and proven role that local proximity retailing avoid a second wave of the coronavirus, which would lead plays as a critical lifeline for local communities. Many to drastic social and economic effects. SPAR stores perform a function well beyond the sale of As an industry, we need to be ready and agile to respond products or services. The stores are community hubs, to possible future virus outbreaks. In stores, building meeting points and communication platforms supporting employee trust as well as consumer trust through the broader needs of the people they serve. additional safety measures and communication is of critical importance. Here, the retail sector must continue to develop new ways Tobias Wasmuht, Managing of working. Costs will continue to increase as we need to Director, Spar International keep stores and factories hyper-clean while engaging with fewer customers and workers. 20 | Issue 05 Issue 05 | 21
B oots has been at the heart of healthcare in the Caring for the most vulnerable has remained our top GLOBAL | WALGREENS BOOTS ALLIANCE United Kingdom for 171 years. It has operated throughout many crises, some as life-changing as the one we are facing today, but each time it priority throughout the pandemic and our pharmacies have long been a place that people can turn to for help on their local high street. In response to the desperate situation By Sebastian James, Boots UK & ROI has been our duty at the company to step forward and do facing victims of domestic abuse during lockdown, we are all we can to care for the nation in its time of need. The incredibly proud to be working alongside Hestia to turn COVID-19 pandemic is no exception. our pharmacy consultation rooms into safe spaces, where victims can contact specialist services for support and We at Boots are incredibly proud to be working together advice. on the frontline with the National Health Service (NHS) GOING ABOVE during this extraordinary time. Working to support the UK Government, our fantastic teams set up the first drive- through testing station for NHS workers in just five days. Ensuring that everyone has access to the essential medicines they need is also critical, so we have welcomed over 500 additional drivers to support our prescription delivery and collection service – many of whom sadly found AND BEYOND Now there are multiple sites up and running across the UK, themselves unemployed at the start of the crisis. supported by hundreds of Boots colleagues who selflessly stepped forward to perform swab tests on those with New colleagues like James, a former airline pilot, are suspected COVID-19 symptoms. Their extraordinary effort making a difference on the frontline by delivering vital has meant that Boots played a vital part in meeting the UK medicines straight to our patients’ doors. Government’s target of 100,000 daily tests by the end of Now more than ever, we are trusted by the nation to do April this year. the right thing and like many businesses, we have had With so many of our own colleagues on the frontline, we to make some adjustments. The safety of our colleagues have been inundated with stories that show just how and customers is of great importance, so we were the first resilient, courageous and compassionate our teams really retailer in the UK to order Perspex visors for our stores. We are. Emma, one of our dedicated pharmacists, befriended also procured as much PPE as possible, marked our floors a lonely and isolated 96-year-old patient by setting up a with social distancing guidelines and updated our opening weekly virtual quiz for him to take part in. hours to factor in time for deep cleaning. Similarly, Mick, one of our warehouse colleagues, Exploring new ways for our customers to access our voluntarily postponed his retirement after 50 years of products, services and essential items has also been key. service to help ensure essential products could be delivered Our own skincare brand, No7, now offers personalised to homes up and down the country. Our exceptional virtual beauty services, and vast numbers of our customers colleagues really are going above and beyond to prescribe now prefer to shop online. Boots.com is our largest kindness in the face of adversity, and I continue to share flagship store and since the pandemic began we have sold my most sincere and heartfelt thank you to every one of over 50% more products online than we did during the them for their tremendous efforts. Black Friday sale in November last year. As a true friend and partner to the NHS, we wanted to This is exactly what Boots is about, and in years to offer further help at this time of national need. Some of come, these stories will be our enduring memories of the our isolating pharmacists are now helping to boost the COVID-19 pandemic. We have and always will be more than NHS 111 triage service. just a retailer. For nearly 200 years we have supported our communities, kept our pharmacies open and been at the Patients who call the service will be able to receive expert frontline of healthcare. support from one of our very own pharmacists to help relieve some of the pressure on the NHS. We have also These are strange and difficult times for us all, but we will donated over 500,000 toiletry products to local NHS come through stronger than ever by continuing to put the trusts, hospitals, care homes and community groups. We health and wellbeing of our nation first. hope it will help patients feel just a little bit better. Sebastian James, Managing Director, Boots UK and ROI Yau Ming Low / Shutterstock.com 22 | Issue 05 Issue 05 | 23
5 0,000, 80,000, 120,000, 210,000… Looking at the THE RURAL EXPLOSION ASIA | CHINA skyrocketing number of viewers, Fengju Qin, the head of Baishui county in China’s Shaanxi province, couldn’t believe there were so many people Baishui is the first county in China to be honoured as the ‘Hometown of Apples’, and has been selling to European and US markets. The outbreak of COVID-19 resulted in By Yuchuan Wang, JD.com interested in watching his livestream selling local apples. nearly 200,000 tons of unsalable stock which should He acted like an experienced sales assistant, saying: have been sold out during the Chinese New Year sales “Baishui apples, juicy, crispy and sweet. You’ll certainly not season. To rescue the farmers, Qin contacted JD and went be disappointed!” on the livestream himself, together with influencers introduced by JD. In two hours, his livestream on JD.com’s app attracted LIVESTREAMING BECOMES A more than 210,000 shoppers and sold over 100 tons of Baishui apples. Not only farmers, but many brands and retailers have turned Qin is not the only local official to pick up livestreaming during the period. Over 120 mayors, county heads and other civil servants joined JD’s livestreams during the epidemic to act as anchors and promote local NEW REVENUE GENERATOR to livestreaming during COVID-19 to help reduce the impact agricultural products. Total cumulative viewers has and losses from the epidemic. According to China’s Ministry surpassed 100 million. of Commerce, there were more than four million ecommerce live broadcasts hosted in the first quarter of 2020. “Rural livestreaming is a more intuitive and transparent way for consumers to shop online. But in fact, many “The epidemic is devastating bricks-and-mortar stores, farmers don’t know how to use it at all,” says Zhang. but it also brings opportunities. Ecommerce giants like JD.com have used livestreaming as a new revenue When Wenfeng Wang, the boss of Shouguang vegetable generator for businesses.” says Guowei Zhang, head of JD base in Shandong province, did his first livestreaming on Live, JD.com’s livestreaming business. JD, he did not have any professional equipment, like a microphone. “Farmers like myself and my family had never Livestreaming was already becoming a phenomenon in done a live broadcast before. We just watched how other China, and the outbreak of COVID-19 has only accelerated merchants do it and tried to imitate,” he said. the trend. According to iiMedia Research, the number of livestreaming users increased 10.6% to 504 million in 2019, JD started to help farmers like Wang as early as during the which accounts for more than half of China’s total 854 Chinese New Year holiday to get their businesses online. million netizens. On 13 February, JD announced special support mechanisms for merchants and influencers doing livestreaming ecommerce to better support the rising demand for online shopping. For example, JD Live reduced the take rate to as low as 1%, provided extra traffic support, 24x7 training and quick access to JD Logistics, which is among the few logistics companies still operating at the height of the epidemic. For projects specifically aimed at helping farmers, JD Live also provided special policies like fast enrollment and subsidies. Many influencers volunteered to provide free services to help farmers do lives too. Wang benefited from this policy and his livestreams began to attract more and more traffic. “Gradually, we’d make 1,000 to 2,000 orders each time. The influencer JD introduced helped us reach a larger fan base, and then the local county head also joined us.” Sales of Wang’s farm skyrocketed to RMB 200,000 (£22,000) in February and to RMB 1m (£112,000) in March. The online channel accounted for almost 90% of Wang’s total sales during the epidemic when offline wet markets were closed and other logistics companies were suspended. “I’ll keep doing livestreaming and working with the influencers,” said Wang. He hopes he can bring more neighbouring farm heads to join him to enjoy the benefits brought by livestreaming. Fengju Qin livestreaming on JD JD Health doctors Issue 05 | 25
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