Consumer Discretionary

<p>As many non-essential retailers are now putting into place plans to re-open stores after weeks of being shut down, I have been thinking about how I might approach this new way of operating &ndash; not only from the perspective of stores but more holistically across a broad swathe of functions and activities.</p><p>So, in my fourth article around the impact of the coronavirus on retail, I wanted to share a broad set of questions and thoughts I would have for almost any brand or retailer getting set to re-open. As I tend to do with my articles, a few caveats: these are far from being a perfect set of considerations, or even complete for that matter as much will depend on the circumstances each brand/retailer faces. Are these considerations exhaustive? Probably not. Mutually exclusive? Unfortunately, no, as you will see from reading them, and I do not even get into the interplay between these considerations much, as these interdependencies are largely retailer/brand specific. So, please keep these things in mind. Having said all that, do these represent a reasonable thought-starter? Most definitely.</p><p>Also &ndash; I have purposefully not touched on inventory/merch-related considerations&hellip;.an entirely different and complicated topic that merits its own discussion.</p><p>Even outside of inventory/merch, there is quite a lot to consider below &ndash; the key is developing an approach that is holistic and appropriately culled and prioritized for your business, customers, financial considerations, etc.&nbsp;</p><p>If I can help you think through and/or prioritize these things (and others!), please give me a shout!&nbsp;I would love the opportunity to do so.</p><p><strong><u>Brand purpose, promise, and vision</u></strong></p><p>Let us start from the top. Now may not be a tough time to dust off your brand purpose, promise to customers, and vision.&nbsp;While having a clear purpose and vision that is compelling to customers is always paramount, the urgency has never been higher, as customers may be culling the portfolio of brands, they engage with going forward in the wake of the virus.&nbsp;</p><p>In theory, the virus in and of itself should not change your brand&rsquo;s purpose/promise/vision, but as you are likely re-setting several key go-to-market levers, I would argue now&rsquo;s as good a time as any to ensure your &ldquo;north star&rdquo; is still relevant and valued given the circumstances and likely go-forward implications for how customers view brands.&nbsp;</p><p>As Vanessa Friedman said in a&nbsp;recent New York Times article, &ldquo;In this moment of great stress and change, when we are all reordering priorities, questioning value systems and rethinking our own choices, what a brand stands for is crucial to its relevance and survival.&rdquo;&nbsp;</p><p>Is your brand purpose, promise, and vision as relevant as it needs to be to lay the foundation to ensure customers continue to come back repeatedly?</p><p><strong><u>Store ops</u></strong></p><p>This is the most obvious bit of thinking that retailers are spending time on, and as such, also the most written about.&nbsp;While it is important to get tactical around what opening stores means for you post-pandemic from an operations perspective, I would encourage store ops leaders to first develop a set of key principles to keep in mind and to use those principles to help guide decision-making around tactics.</p><p>While there has been no shortage of content floating around on what this looks like, what is right for you as a brand and/or retailer is really driven by how your brand is positioned, what your customers expect, what you can operationalize, and how you would actually execute, what the financial implications are, etc.&nbsp;</p><p>Ensuring the safety of your employees and your customers is paramount while operating in accordance with local guidelines.&nbsp;</p><p>A truncated list of tactical considerations could be:</p><ul><li>Consider a phased approach to re-opening, which has at least a couple of dimensions.&nbsp;One is phasing by geography (which is by and large controlled by state governments, but of course just because a state government says you&nbsp;<em>can</em>&nbsp;open doesn't mean you&nbsp;<em>should</em>), and another is phasing by store &ldquo;operability&rdquo; (e.g., start with curbside pickup from a customer-facing perspective and &ldquo;ship from store&rdquo; capabilities from back-of-house, then layer on in-store appointments, then perhaps fully open but limited hours and limited number of customers allowed in the store at any one time, and then finally fully open, normal hours)</li><li>Social distancing implications: limits to in-store traffic, fixture placement (fewer fixtures to make the floor less crowded and easier to navigate), in-store signage to encourage/require social distancing, spacing out the checkout queue, etc.</li><li>Cleanliness: how would you define your standard of "clean" in this new world, and how do you intend to operationalize that within your stores? This means keeping your stores and merchandise clean and disinfected to put your associates and customers minds at ease and doing so up to the standards you believe appropriate, that at least meet published guidelines.</li><li>Decisions around PPE requirements for both customers and associates (e.g., masks and/or gloves)?</li><li>As mentioned above, consider allowing customers in the store via appointment only (at least at the onset), which can help facilitate social distancing guidelines</li><li>Touchless payment and/or contactless checkout &ndash; if you have the capability for one or both of these, now is the time to turn them on.&nbsp;If you don&rsquo;t, now may be a good time to pilot in a few stores &ndash; customer receptivity has never been higher!&nbsp;While the latter is quite involved, the former (touchless/nearfield payment) is a capability most retailers should have regardless of the pandemic.</li><li>Ensuring that policies and processes are well documented and clearly/frequently communicated to store management and staff; consider a &ldquo;covid-19&rdquo; hotline which stores can use if they have pressing questions/concerns</li><li>Consider implementing testing protocols for store associates, including temperature checks and the like, and clear guidelines for what associates should do if they do not pass the tests</li><li>Perhaps not a priority today or even the next 90 days, but are there &ldquo;back of house&rdquo; or low value add activities that can be automated through data, analytics, robotics, etc., both in consideration of efficiency as well as in consideration of keeping associates out of harm&rsquo;s way</li></ul><p><strong><u>Digital/Omni</u></strong></p><p>While a lot of your attention should and will be focused on re-opening the physical side of the house, do not let that distract you from losing the digital and Omni momentum you have likely gained over the last several weeks.&nbsp;</p><p>Importantly, rather than apply retail-wide approaches, it is key to understand how the journeys of your specific customers (you could start with your most loyal customers) have shifted during the pandemic and how they will likely moderate post-pandemic.&nbsp;It is imperative to develop this customer-centric understanding of how they will shop and engage with your brand as you work to continue the momentum you&rsquo;ve gained over the last several weeks&hellip;from a tactical perspective, for example, considerations include:</p><ul><li>Curbside pickup (popularized during the pandemic, and I would be surprised if this went away post)</li><li>Ship-from-store (opaque to customers)</li><li>BOPIS (related to curbside &ndash; if customers can buy online and pickup in-store, they can surely pick up curbside &ndash; and vice versa)</li><li>Serving customers outside the four walls of the store (e.g., via chat, SMS, and social platforms), and not just to answer questions, but by enabling commerce!&nbsp;Are your social channels shoppable?&nbsp;Do your store associates have the capability to transact with customers remotely?&nbsp;Is your web platform agile, optimized, and mobile-first?</li><li>Presuming your customers engage through digital channels, and this engagement peaked over the last few weeks, how do you continue and build on this engagement, driving both commerce and emotional connections with customers?</li><li>Augmented reality, virtual fitting rooms, and other &ldquo;arm&rsquo;s length&rdquo; new engagement tactics. (e.g., both Warby Parker and Kendra Scott have implemented a virtual try-on feature, joining a host of other retailers with these capabilities); perhaps not priority #1, but certainly something to consider</li></ul><p><strong><u>Store network</u></strong></p><p>No doubt, retailers are re-thinking their store networks, particularly considering the digital and omni sales momentum they have likely experienced.&nbsp;As I&rsquo;ve said in a prior article, I think the first order question that brands/retailers should consider is what the overall purpose of and experience within their stores should be, as I believe this will need to evolve post-pandemic - more than just a place to transact, stores should be the physical manifestation of your brand, be unique and differentiated, and work seamlessly and harmoniously with your digital channels. If you are not sure, talking to customers and observing what retail leaders are doing within and tangential to your space would be instructive.</p><p>Once you have answered that question, you can jump to the more typical networking-type questions:</p><ul><li>How many stores do you really need (hint: there are fewer than 300 A malls in the US&hellip;)? As you think about store performance, account for both store sales and digital sales/returns which can be attributed to that particular store or broader MSA, rather than simply looking at mono-channel sales and profitability (for example, e-commerce returns to the store that drives traffic; BOPIS sales that originate online but culminate in the store&hellip;would you close a store that has extremely high online return volume? Maybe&hellip;but these sorts of data may also lead to different decisions around store format/prototype)</li><li>Where?&nbsp;Enclosed malls?&nbsp;Lifestyle?&nbsp;High street? Strip malls?&nbsp;Outlet centers?</li><li>Model/prototype?&nbsp;Pop-ups?&nbsp;Return centers?&nbsp;&ldquo;Flagships&rdquo;? &ldquo;Dark stores&rdquo; to support e-commerce?</li></ul><p><strong><u>&ldquo;Digital-first&rdquo;</u></strong></p><p>Being digital first is not just about a great website, mobile app, and omni capabilities.&nbsp;If you have not yet, perhaps now is a good time to think about how digital capabilities can transform the way you work behind the scenes, including:</p><ul><li>Supply chain digital transformation</li><li>Sourcing (e.g., 3D printing)</li><li>Back office/home office activities</li></ul><p><strong><u>Apply what you learned over the last several weeks from an org perspective &ndash; &ldquo;how we work&rdquo;</u></strong></p><ul><li>Org structure &ndash; presuming much of the team has been on furlough and thus not working, and also presuming you've accomplished a great deal even while on a skeleton crew, can you continue to operate at full capacity, yet with a flatter, leaner org?</li><li>Working remotely &ndash; what have you learned and how can you apply these learnings going forward?</li><li>&ldquo;Agile&rdquo; work principles, working more efficiently and nimbly, etc. &ndash; no doubt you have experienced some of this while quickly implementing and then adjusting your pandemic response.&nbsp;Don&rsquo;t lose these learnings!</li></ul><p><strong><u>Supply chain and logistics</u></strong></p><p>Consider addressing supply chain &ldquo;soft spots&rdquo; that the pandemic exposed (e.g., over-reliance on one supplier and/or country); as you think through this, consider the digitization point above, as well as thinking through ways to make your supply chain more sustainable and transparent (trends that seem to be gaining momentum).</p><p><strong><u>Get proactive!</u></strong></p><p>For me personally, this might be the most energizing bit here.&nbsp;Identify &ldquo;soft spots&rdquo; amongst your competition and white spaces within your sector that may have surfaced during the pandemic (I am willing to bet that every retail sector has had opportunities exposed!).&nbsp;Once identified, if appropriate and the timing is right, attack them!</p><ul><li>M&amp;A &ndash; are there, competitors, in your space that are vulnerable and offer a compelling acquisition case?</li><li>Outside of being acquisitive, if competitors in your space are weakened, do you have strategies in place to drive share gains against them?&nbsp;If not, you should.</li><li>Are there opportunities to partner with complementary brands/retailers?</li><li>You have identified a capability you think is critical and buying that capability versus building in house might present a quicker and better route to market?</li></ul><p>&nbsp;</p>