Rethinking strategy for retail business

The last six months have been a unique period, not only in the 21st century but in the history of the modern retail business model.  

This has been a busy time for behavioural scientists who have collected a significant quantum of data points to analyse and develop insights into the rapidly changing behaviour of customers. At the same time, it has been a challenging time for the retailers too.

While pandemic is the root cause of such behavioural changes, there have been multiple factors that have driven the rapid change in customers' behaviour.  

One major driver is the economy and the livelihood of the people. Several nations across developed and emerging countries have seen their economies shrinking during this period.  

Simultaneously, a large number of people are moving from the middle-income group to the low-income group, and from there to poverty.  Such a significant shift in customers' income is adversely affecting their buying behaviour.

The Global Consumer Insights Survey 2020, conducted by PwC, focused on four key questions to help us understand such rapidly changing behaviour better.  The survey collected data from urban consumers before the outbreak of the pandemic and after economic activities were resumed.

The first question was aimed at understanding how robust the market will be for goods and services offered by retailers.  To understand this better, PwC analysed the household expenses and incomes of a target group of consumers. 

According to 41% of urban consumers, their household expenses have increased.  These expenses are primarily reserved for food and electricity but included other household expenditure.  

Due to the lockdown and their restricted movement, many of these consumers spent their days indoors and many worked from home like full-time employees. This resulted in higher consumption of household utilities such as electricity and increased their household expenses.  

According to 40% of urban consumers, their incomes have dropped, either due to loss of jobs or reduction in salaries. When the lockdown (with restricted movements) was enforced, most organisations scaled back while many others temporarily shut down their operations.  

Eighteen percent of the consumers said their household expenses have gone up and their incomes have come down.  This group has been affected economically the most.

Such changes have reduced consumers' confidence to a great extent.  Even though their spending pattern was very high before the pandemic, now more than half of them admit that they will spend less in the coming months.  

Before the pandemic, nine percent consumers purchased groceries online through websites or mobile apps. After the outbreak of Covid-19, 63% of the respondents said that they are buying their grocery items online

Their focus in buying will be more on food items and they will actively reduce their expenditure on non-food products. PwC's survey indicated that there will be reduced spending on certain categories such as clothing, footwear, outdoor activities, restaurants and beauty products.  

Consequently, retail businesses should expect volatility and price sensitivity among their customers and design their business strategies accordingly.  

The second question was to understand the experience retailers should offer to attract their customers again. 

Urban customers were fairly upbeat about their spendings before, such as visiting physical retail stores and outdoor activities e.g. visiting restaurants. Today, they are cautious about resuming such activities with the same frequency.  

According to 49%  of the consumers, they said that they are spending significantly less on fewer social events and activities. 

For many of them, indoor activities with their family at home have become their mode of recreation.  For example, many of them have substituted their weekend dinners at restaurants with cooking at home and having meals with their families.

Among the consumers surveyed, 23%  said that they had lost money due to cancelled events.  Understandably, many event organisers did not or could not refund the money to consumers at the onset of the pandemic-triggered lockdown.  

Some of them delayed the refund process.  However, during this period, many consumers have prioritised their health and safety over outdoor activities.

PwC's survey also indicated that 50% of the consumers are spending more time on social media, and 56% have significantly increased their television watching time. This has created an opportunity for retailers to use these mediums to increase their exposure to their customers.

The key takeaway from the data collected is that the customer experience must be rooted in safety and accessibility. Customers are prioritising their health and safety above all else before committing themselves to a certain behaviour, such as visiting retail stores.  

They also focus on the ease of accessing goods and services without worrying about their health and safety. Retailers who can deliver such experiences to their customers are emerging as the winners in this new normal.

The third question related to how retailers should engage with consumers in the coming days.  The pandemic has accelerated the use of mobile devices for shopping and reduced this practice through physical stores.  

According to the survey, 9% of the consumers earlier purchased groceries online through websites or mobile apps. After the outbreak of Covid-19, 63% of the respondents said that they are buying their grocery items  online.  More importantly, 86 percent of such online shoppers expect to continue shopping from online stores in the foreseeable future.

If this changed behaviour is going to last long, retailers need to rethink their engagement strategies.  Moreover, until recently, young shoppers were comfortable with shopping online.  Now digital migration of shoppers is taking place across different segments.  

More consumers are now using Internet-based video or messaging apps on their mobile devices. They are also using high-speed Internet connections, such as 4G mobile data connectivity or fixed line broadband connectivity.  

Data from the Bangladesh Telecommunication Regulatory Commission (BTRC) indicates that there has been a significant increase in the number of fixed-line broadband Internet subscribers in Bangladesh during the last couple of months.  So it is clear that consumers are becoming 'tech savvy' and prefer a diverse range of engagements with retailers digitally.  

The final question was about the experience retailers should offer customers to retain them.  The pandemic has disrupted the value hierarchy to a great extent.  

For example, a well-known restaurant with a wonderful ambience and a celebrity chef could attract customers who also trusted the restaurant to procure good quality raw materials to prepare their meals.  

A grocery store that was selling high-quality food items to this restaurant would not have any visibility to such customers. 

In the new normal, such customers are less willing than before to visit a well-known restaurant.  Instead, they prefer to visit well-stocked retail stores for high-quality food items and cook their meals at home.  

Retailers can now create value by bringing popular chefs' recipes to their stores and offering the assortment of products required in the recipes. 

They can also plan digital engagements for customers, e.g. live interactions with well-known chefs from customers' homes.  

Going forward, there are likely to be many such value creation opportunities for retail businesses.

PwC's survey indicates that customers are now focusing more than before on their well-being, with  69%  saying that they are more concerned about their physical and mental health and well-being than anything else;  64% said that they are focussing on their medical needs to keep themselves healthy and safe;  63% indicated that they are more focussed on their diet now than ever before.  

Therefore, it is evident that it is important to innovate vigorously to create value for customers and prioritise their health and safety.  

Customers are likely to become advocates of a retail business if the retailer demonstrates that it cares for them and innovates to create value.

The pandemic has taught everyone some critical lessons.  Retail businesses need to learn from their experience with customers and transform themselves to be in sync with the new normal.

So we can look forward to the sector witnessing interesting times in retailing in the coming days.

The writer is a Partner at PwC. The views expressed here are personal