The scenario of uncertainty experienced by the market and society in the face of the pandemic has required the adoption of urgent measures to keep businesses running.
The progress of COVID-19 around the world has particularly impacted the retail sector, accelerating trends that were already gaining relevance before the outbreak. Faced with these new challenges, while some retailers have found opportunities, others are still looking to survive. Drawing on the collective experience of the network of retail industry professionals, KPMG International produced the report “Global Retail Trends 2020. Preparing for the New Reality”, highlighting the four key trends every retail executive should be following as you move your business into the new reality.
Interestingly, COVID-19 has accelerated fundamental trends that were already influencing the industry: the evolution of the business model, the value of purpose, the focus on cost reduction, and the rise in consumer power. Instead of stopping these trends in their tracks, recent changes have made these trends accelerate and become more urgent.
“In Argentina we are also going through the technological transformation, a process of reconversion of the retail business after a first stage, the one before the pandemic, which was slow and in few sectors, but which later accelerated when the quarantine was put in place, increasing a demand that was depressed and this led to an operational and logistical crisis since the system was not prepared. Now the situation has stabilized, but there is a stagnation and a decline in many consumer products due to economic uncertainty and the drop in people's income."
“In fact, according to recent market research, 75 percent of responses say they are buying what they can rather than what they want. Electronic commerce, digital payments and personalized customer service are trends that are consolidating and changing the business model. After the current crisis, a reformulation of physical spaces will surely come, there will be fewer service locations because they will not be needed or for cost reasons”, said Diego Bleger, Partner in charge of the Mass Consumption Industry at KPMG Argentina.
Evolution of the business model.
Precisely, the international KPMG report refers to the fact that traditional retail has always had the physical store as its main channel, but this channel was already losing space before COVID-19, and this increased significantly during the pandemic. Many retailers are now looking to partner with digital platforms to establish their businesses online and rely on the digital resources they offer. Data analytics, artificial intelligence, and process automation are some of the critical resources for the long-term success of retail businesses.
Putting the customer at the center of the business was already a discussion in the industry. With COVID-19, retailers have focused their efforts on reshaping business models to put people before profit, making their purpose clear. Consumers look for companies that are committed and with a social purpose, as well as those that act in a positive way.
Traditional ways of cutting costs are no longer enough to guarantee margins and business rebuilding in this new reality. The current crisis required more aggressive cost containment and differentiated strategies for resumption, including investments focused on improving the value of existing assets.
customer choice
In search of availability, the variety of products took a backseat in this pandemic scenario. Retailers that have begun to analyze buying patterns now can reap significant benefits in the future. Knowing the customer and offering loyalty programs is a change that was already underway and is now consolidating more strongly in the sector.
The publication also includes an international case study for each of the retail trends, considering the scenario, the importance and the lesson learned from the current situation.
The question that arises is whether the retail sector in the South American region is prepared for these four trends. In this sense, it can be said that, in the countries of the region when the restrictive and social isolation measures were enacted, retailers were simply not prepared for a situation of this magnitude. The positive point is that the region learned a lot from the countries that had been experiencing the crisis for a longer time, so South American retailers were able to quickly adapt to the new situation, implementing digital tools, sales through social networks and associating themselves with platforms, allowing business continuity.
Of the four trends, in the South American scenario the biggest impact for local retailers is related to “business model evolution” and “cost rethinking”. With the closure of physical stores, the evolution of the model towards a platform combined with the use of social networks was a solution for many retailers in order to keep the business running. After this phase of adoption, what we see is the incorporation of this channel by retailers, who will continue to be associated with a platform even after the pandemic has passed. And the issue of costs has always been on the agenda of retailers, gaining more relevance in the current time of uncertainty.
Finally, in terms of what small businesses can do to adapt to online sales platforms, the association with platforms was done by micro, small and medium-sized companies, so in general terms, the change is not a problem .