As coronavirus takes its toll on economies and businesses across the globe, Retail Week brings you regular dispatches from international retailers and experts, who provide their insights into how they are coping with the pandemic.

With just one week to go until non-essential retailers in the UK start to welcome shoppers again, Boston Consulting Group (BCG) managing directors Chris Biggs and Dewang Shavdia reveal how a smart approach to reopenings will prove the difference between success and financial ruin for retailers across the globe.

This article first appeared in issue four of the World Retail Congress report The Retail World 2020: Retailing in a Time of Crisis.

The reopening challenge

As the Covid-19 crisis continues, markets globally are beginning to emerge from lockdowns. For retailers looking to reopen and return to regular operations, the challenge is far from over.

Open sign

Demand will likely be suppressed for the foreseeable future as record high unemployment leads to lower disposable incomes.

Where demand remains, it may shift across categories and channels, requiring retailers to rethink their offering.

BCG’s latest consumer sentiment survey, across multiple countries, found that only 10-15% of customers felt comfortable shopping in store right now for non-essential products, while 30-45% of consumers expect to spend less in the next six months across categories such as cosmetics, home decor and home appliances.

reopenings should use a data-driven approach that considers various scenarios and reflects changes to customer behaviour and cost structures brought on by Covid-19.

“Reopenings should use a data-driven approach that considers various scenarios and reflects changes to customer behaviour and cost structures”

At the same time, cost relief will soon end. When stores reopen, retailers will have to bear their full cost base, in addition to costs from deferred rents and increased health and safety measures. This will catastrophically impact profitability.

Retailers that open too quickly with their pre-Covid strategy and operations will fail.

Instead, reopenings should use a data-driven approach that considers various scenarios and reflects changes to customer behaviour and cost structures brought on by Covid-19.

Create a reopening team

Retailers must first set up a dedicated reopening team that has the data and authority to make the right decisions.

The team should comprise members from across the organisation and be empowered to build, iterate and communicate the reopening plan.

They should be equipped with regularly updated internal figures such as sales, as well as external data, including Covid-19 cases, unemployment figures and competitor moves, which can be used to develop scenarios of likely future changes.

Set the high-level strategy

Before reopening, retailers must also outline their long-term strategy. Businesses will face significant structural challenges over the next few years as marketplaces and essential retailers disruptively steal share, stores close permanently and ecommerce share of sales grows.

Retailers must form a view on what their future category mix, store network and operations will look like. All near-term moves should be made with that direction in mind.

Build and execute a detailed reopening plan

Once a strategy has been defined and a team put in place, retailers should execute a six-step reopening plan:

  • Protect customers and employees – The safety of customers and employees must come first. Measures such as health screening, providing protective equipment, maintaining social distancing and policies to handle confirmed Covid-19 cases must be implemented. Retailers must clearly communicate safety policies and ensure that costs for safety measures factor into reopening decisions.
  • Rebuild forecasting capabilities – Many forecasts have become inaccurate due to volatile customer demand. In the first few weeks of reopening, retailers may need to manually forecast and order products based on daily sales and traffic, external demand drivers and market data. Manual forecasts should eventually move towards AI and advanced analytics to flexibly respond to changing demand.
  • Adapt your offer to align with evolving demand – Strengthen categories with increased relevance or pent-up demand by refocusing resources and reassigning store space. Where demand is lower, cut tail SKUs. Consider whether customers respond to promotion or price and communicate value accordingly.
  • Sequence your store reopenings –Sequence reopenings (and closures) based on go-forward profitability, customer coverage, co-tenancy and competitor moves. Retailers should also be flexible and repurpose stores towards the most profitable models (e.g. click-and-collect, local fulfilment) now, instead of simply keeping stores closed or opening as usual.
  • Align operations and costs to new demand – Use store closures as a blank slate to rebuild your store operations and cost base from the ground. This should reflect lower demand and new operating procedures around social distancing and health and safety. Run lean support functions and renegotiate all costs (including cost of goods sold, indirect spend and real estate).
  • Reactivate demand through marketing and in-store experience – Give customers a reason to come into stores. Let people know you are open (through digital marketing and updated websites, search engines and store signage) and reassure them that it is safe to visit. Use reopening events, in-store promotions and personalised offers to drive traffic. Where you cannot reopen stores, provide customers with an alternative model to shop, such as curbside pick-up.

Reopening effectively could mean the difference between profitability and bankruptcy. But it isn’t necessary to wait until a perfect reopening plan is ready. Instead, retailers must remain nimble and be unafraid to test, iterate and pivot as they learn from reopenings and when key data changes.

The companies that succeed over the long term will be those that use store reopenings to fundamentally question their business and position it towards the future.

The Retail World 2020: Retailing in a time of crisis

WRC issue 4

Retailers across the globe are facing their greatest-ever challenge as the pandemic grips every country.

How are retailers coping and responding to the needs of their customers, communities and the business itself?

Hear from retailers and experts from around the world in the fortnightly report from World Retail Congress. The fourth issue is available to download in full here.