Why being bold and brave is the key to retail success

The COVID-19 pandemic redefined how retailers operate and what, how and when consumers buy. A decade’s worth of change in UK consumer behaviour has happened in a few months, rewriting the rulebook forever.

The impact is already clear in retailers’ results. Listed UK retailers issued more than a year’s worth of profit warnings in the first quarter of 2020 alone, with three-quarters of the UK FTSE Retailer sector warning in the first nine months of the year. This exceptionally high level of earnings downgrades inevitably leads to significant sector-wide distress.

To avoid becoming another negative statistic, retailers need to act now, pivoting their businesses to take advantage of changing consumer habits and requirements. Being proactive is a must. There simply isn’t a choice.  

The changing consumer demands a changing retailer

The EY Future Consumer Index has been tracking UK consumer sentiment since the start of the pandemic. The Index shows that, as well as the huge shift to online shopping, there have been other significant changes in consumer behaviour, including: 

1. Online: long-term propensity to shop online has increased. In early April, at the start of the pandemic, 37% of UK consumers said they would shop online for products previously bought in store. This rose to 42% in our latest (October) survey.
2. Trust: UK consumer trust has decreased - down from 92% to 74% for independent retailers and 62% for chain retailers in October respectively.
3. Affordability: unsurprisingly, 49% of UK consumers now rate affordability as a key driver when shopping, up from 42% at the start of the pandemic.
4. Local: for 38% of UK consumers local sourcing has become more important, compared with 28% in April.
5. Quality: the number of UK consumers that say they will pay a premium for quality in the long term has risen from 34% in April to 40% in October. 

The consumer isn’t the only factor

Even before the pandemic, retailers were facing a barrage of escalating, ongoing pressures. These included the challenges of Brexit planning; rents and business rates; the changing landscape of the high street; and an increasing demand for improved traceability and sustainability of products and supply chains. These pressures were already creating a need for the retail sector to reshape, but the pandemic has amplified and accelerated this need to one that retailers cannot afford to ignore. 

Now is the time to be brave and bold

To position themselves for the future, retailers need to adopt attitudes and actions that will help them drive value and give them a clear, strategic direction.

Adaptability is a must. We have already seen some impressive examples of the agility required to pivot to new operating models and consumer demands during the height of the pandemic. In fashion, for example, some retailers have taken the opportunity to acquire new brands during the crisis, creating multi-brand strategies that broaden their appeal. Many quickly pivoted their collections towards loungewear and sportswear as consumers’ needs shifted during the first UK lockdown. Others have recognised the emergence of a more price-conscious consumer and are launching new budget brands in response.

Within the grocery sector, retailers reacted quickly to boost delivery capabilities to meet consumer demand. Leaders have made bold strategic moves with new partnerships and leading ecommerce players to further improve last-mile delivery. The creation of new self-serve and bring-your-own packaging offers has also helped reinvent the store, as well as creating a more contactless experience. 

Driving value transformation and value creation

What differentiates the leaders of the pack from the followers is a clear focus on value transformation and value creation. They recognise the need for change and are willing to challenge core assumptions about their business and how it operates, grasping the opportunity to reinvent themselves.

By taking an outside-in viewpoint of their business, they are becoming clearer about what needs to change to be best in class and what needs to be lowest cost. And they are driving that transformation forward with strict discipline and conviction. They are reallocating resources to where they can make a strategic difference, transforming their business to deliver new strategy within a defined cost envelope.

This transformation also includes simplifying their businesses, with a review of the return on investment of key activities and rationalisation when required. They are automating processes where possible, or are looking to outsource to partners, even for core commercial processes such as monitoring promotions performance.

In doing this, retail leaders are focusing on agility, empowering decision-making and investment, without further complicating the business by adding unnecessary complexity.

The opportunity is there for you to grasp

The retail industry has known that major change was coming – the pandemic has just sped up the pace. There remains an unparalleled opportunity for forward-thinking retailers to gain market share, embrace the chance for reinvention, and redefine themselves for the new retail future through a focus on value transformation and value creation.

This isn’t a time for the faint-hearted. It’s time to identify opportunities and ensure your business is in the right shape to make the most of them. There’s no room for halfway house measures, but instead a need to be bold and brave. Are you ready for the challenge?