The following article was originally published in Loyalty360 here:
More areas across North America are seeing restaurants, shopping centers, malls, and retail stores re-open and welcome back customers, after a few long and challenging months for many.
“It will be interesting to see how loyalty engagement will factor in to the return of brick-and-mortar retail,” said Eric Favaloro, responsible for managing Comarch’s loyalty clients in the United States. “Grocers, deemed essential and having been open throughout the pandemic, have already paved the way for other retailers in terms of operating successfully within the ‘new norm.’ Social distancing requirements and updated disinfecting routines will be adopted rather easily at this point – but the increased emphasis on digital will be paramount and could pose challenges for some brands. Once retailers have shifted their core business processes to accommodate more digital integrations, they can then start to look at unique ways of engaging and maintaining relevance with their loyalty members.”
The U.S Commerce Department announced that retail spending saw a huge spike in May, climbing 17.7 percent, reported in an NPR article. While spending is still down overall (6.1 percent) from a year earlier, the uptick in sales signifies that some customers are ready to shop or dine out again, after slow spending months in March and April.
“While there is no doubting the challenges that retailers will continue to face as a result of pandemic and re-emergence related behaviors, for many this time could be a springboard to innovation,” Dipti Bramhandkar, Executive Planning Director North America, Iris Worldwide, said. “Smaller retailers like Kolkata Chai Company (NYC) demonstrated agility in reframing their service and product offering practically overnight, ensuring that their customers’ emerging needs were taken care of – and all in the tone and style of their very personal brand.”
Retailers realize that welcoming customers back into stores is a delicate balance of re-opening and encouraging customers to shop again but understanding that many areas still have restrictions in place for limited capacities. Additionally, brands now have the added responsibility of ensuring customer and employee safety, especially as “hot spots” begin to emerge with an increase in COVID-19 cases.
“Vesta’s COVID-19 Brand Sentiment Navigator study from late May found good news for retailers, with a majority of consumers (60%) reporting they were at least somewhat comfortable with shopping in recently reopened retail locations,” Susan Frech, CEO, Vesta, said. “Not surprisingly, Gen Z was the most eager and Boomers were the most cautious. With almost two-thirds of consumers planning to make “celebratory purchases” in honor of their returning freedom, retailers of food and beverage products (69%), personal and beauty care (47%), clothing and fashion (47%), and entertainment (40%) should focus on messaging that highlights time outside of the house and events with loved ones, albeit in safe circumstances that align with COVID-19 guidelines.”
While May saw an increase in spending, it may take consumers a long time to feel comfortable shopping as they once did. With an increased focus on digital from brands and it becomes a bigger part of everyday life in work, school, entertainment, shopping, and more – consumer behavior may never be the same.
For many brands, a focus on digital transformation was already in the works but now is a must. According to Kroger’s first-quarter sales report, reported about in a Fox Business article, the brand saw its digital sales skyrocket, growing by 92 percent.
“Our Kobie research shows that a majority of even omni-channel shoppers would like to be able to go to their local stores, although several commented that one of the reasons for going to the store was that they wanted to be able to return merchandise purchased online,” Kate Hogenson, Sr. Director, Strategic Consulting, said. “Retailers cannot think of their digital experience as divorced from their physical stores – the highest value and most engaged customers want to be able to move fluidly across the digital and in-store experiences. Loyalty program members were even more likely to want to shop in-store than non-member customers and had fewer requirements for what they needed to feel safe.”
While retailers look forward to welcoming customers back and bouncing back from a rough spring season, many will not be pushing in-store sales or discounts – or any sales at all. According to a WSJ article, a number of clothing retailers are “packing away” a substantial share of inventory for later seasons or next year instead of marking down items and offering massive sales.
Hogenson concluded, “One of the things that struck us during our research with loyalty program members was the level of engagement – response rates were strong and a higher percentage than usual left responses to open-ended questions. Some of the comments explicitly stated that they appreciated being asked and seeing what was being considered for their safety and the safety of store associates – the very act of sending a survey to the member became a way of reinforcing emotional loyalty with the brand.”
According to the same above WSJ article, “Gap Inc., Calvin Klein’s parent company PVH Corp. and Carter’s Inc., which owns children’s apparel brands including OshKosh B’gosh, were among the companies that said they would hold inventory that long. PVH specifically said it would hold roughly 16% of inventory for later, while Carter’s said it is putting aside 19%. Ralph Lauren said it would postpone some inventory to future seasons and increased inventory reserves by $160 million, or 22% of its stockpile.”
While there is certainly some risk with styles going out of fashion or logistics of storing inventory, some retailers are willing to take a bet to see if customers will notice clothes are from this year when they hit shelves again later in 2020 or 2021.