In part two of the four-part Blog Series, Pete McCall, senior manager of the ShopperTrak retail consulting practice, discusses what the new retail operating model must consider as retailers emerge from COVID-19:
Pre-COVID-19, brick-and-mortar retail offered few assurances to executives about the optimal operating model. Chief Experience Officers demanded a shift toward experiential retail and personalization at the same time. Chief Financial Officers juggled labor costs, shrinking margins and increasing supply costs. In the long-term there shouldn’t be any doubt; personalization and experiential retail will be foundational to the success of brick-and mortar-retail. Moving forward, however, in a post-COVID-19 era one can argue this complicated duality may have actually gotten a bit easier to solve. Short-term operating models now require a completely different approach: operating safe and clean stores must be considered priority number one for a successful reboot. In fact, our new reality of operating safe and clean stores does not go unnoticed by NRF, who recently published their “Operation Open Doors Checklist.”
Additionally, Sonia Syngal, the President and CEO of GAP, recently stated in a New York Times article that “Shoppers will want to understand what safe shopping practices are in place before heading out and occupancy data is key”. For this blog’s purposes, we’re going to focus on the first part of Syngal’s quote and look to answer the question, “What best practices are required to ensure safe shopping environment is in place?”
Store Design and Proper Social Distancing
A requirement for a store’s go-forward layout is one that allows for more than sufficient space that supports the currently understood social distancing principals. Where do visual merchandisers and store operators start as they think about the necessary changes? In my experience as an operator, there are three obvious changes to be made. The first is ensuring in-aisle presentations are either done away with entirely or done infrequently in spaces that offer more than ample space. Second is offering customers directional signage, promoting the frictionless experience they are looking for. This may come in the form of identifying one-way directional aisles, wayfinding signage or point-of-sale social distancing markings. Finally, and likely the most difficult to negotiate, we’ll be reviewing how to reduce fixture quantities and positioning. This is the most complicated and expensive change, knowing this will likely require fewer units represented on the floor which places a retailer’s gross margin and sales per square foot at risk.
Neat and Clean Stores
Moving past the store design, the overall shopping environment needs to aesthetically project the perception of a “neat and clean” environment. How is this best accomplished? It starts with more frequent housekeeping and store sanitation best practices. Most obvious eligible areas would be the fitting rooms and restrooms, but also visibly extending to the less frequented areas such as counters, fixtures, and floors. More than ever before, customers will appreciate actively observing store teams engaging in these tasks. The challenge for Finance teams (addressed in our following blog post) will be allocating enough labor to take on these added tasks without sacrificing the service model the customer has come to expect from the brand. A second supporting component is developing a strategy for merchandise that has been handled by other customers. Central to this is a strategy for returned merchandise as well as merchandise “go-backs” from the fitting room area. We’ve seen a number of national retailers include a clear returns and fitting room strategy as part of their reopening efforts, notably Macy’s, Saks Fifth Ave and GAP.
Frictionless Point-of Sale
One clear takeaway from analyzing our in-depth shopper traffic data is that the post-COVID traffic rebound will not happen overnight. At the same time, we can express confidence that the in-store customer’s propensity to convert is high; arguably for many retailers conversion is peaking. The question retailers need to be asking is, “How do we efficiently process a transaction and at the same time offer assurances to the customer and employee their health and safety are top of mind?”
An investment in contactless or mobile payment technologies is a good starting point for all retailers. A recent survey conducted by American Express indicates that 58% of shoppers that have used contactless payments in the past are more likely to do so now than before the pandemic. No doubt, we’re about see to a significant spike in the implementation of these technologies and retailers slow to adopt will find themselves behind their competition. An added safety strategy that feels like it has some lasting power is the installation of a protective shield at the point-of-sale counter. The reasons for the plexiglass shielding are obvious; so obvious I suspect some retailers will look to see where else within the store a plexiglass barrier may prove valuable.
What hasn’t changed in our “new world” is that a strategy missing proper measures of success is nothing more than a bad action plan. To that end, let’s take a look at some ways to answer the question, “Does my customer take note of, understand and value the steps we’ve taken to create a clean shopping environment?” At the most basic level, measuring demand (or traffic) will help answer this question. Measuring transactions isn’t sufficient in that you’re only hearing the voice of the customers for those who purchased. What about those who didn’t convert? Retailers successfully executing their strategy should be seeing week-over-week improvements in traffic especially as social distancing restrictions are relaxed, store operations expand, and people begin to feel comfortable shopping again.
Speaking of conversion, we’re seeing and hearing from our client partners that conversion is peaking. Shoppers entering stores are more purposeful now than ever before. Some recent analysis for apparel and accessories shows a significant spike in conversion since reopening stores. Overall, conversion is up 21% compared to pre-pandemic levels. Weekday conversion has increased 6-points with weekends currently delivering a 10-point improvement. Retailers unable to realize seemingly higher rates conversion need to assess whether or not they have a shopping environment opportunity.
Beyond improvements in raw traffic counts and conversion, retailers should consider visit frequency as another measure of a successful reboot. Many retailers rely on loyalty programs, membership data or app usage to help calculate rates of return visits. This approach is a proven methodology that should continue to be reviewed. An additional method to measuring repeat visits or frequency is through the use of Wi-Fi shopper journey technologies. These devices offer retailers a low cost and effective way to gain insight to how often a store attracts new or repeat customers. Visit frequency KPI’s have been traditionally reviewed on a monthly or quarterly basis; however, reviewing these KPI’s on a week-over- week basis early on during their operational emergence will provide insight to customer’s receptivity to shopping brick-and-mortar again.
Strategy Execution and The Voice of the Customer
What we have learned, since our industry has been disrupted, is this – an effective standard today may, or may not be, an effective standard tomorrow. The world around us is changing at a speed that is difficult to understand, let alone properly manage. What I do know is great retailers have always been able to anticipate, plan and execute change. These are the retailers that find comfort in that uncomfortable place. These are the retailers that will find long-term success despite the current challenge. These strengths, or leadership traits, however, are not guaranteed. What we can guarantee is that the shopper is enthusiastically rooting for us and looking forward to all of us understanding the “new reality.” This enthusiasm is conditional. It requires that we partner with them on this journey by communicating seismic changes to how they shop with great transparency. One thing that hasn’t changed throughout this pandemic is we need to engage with and listen to the customer as we all navigate our emergence.
With that note, I look forward to the next ShopperTrak post written by my colleague, Andy Sumpter, where he addresses new considerations for the service model. Click here to read Blog 1 in the series.