When McDonald’s reopened my local Drive Thru restaurant my son absolutely demanded we made a visit. What was interesting was that as lockdown was in place there were no employees required in the restaurant. Cost savings you might think. Not so, because they had all been deployed outside where many more people were required to take orders and to manage the incredible levels of traffic around the outlet.
This scenario is indicative of how managing the reopening of physical stores is a much more complicated task than it might immediately seem. There is no doubt that for many businesses the ability to reopen physical space has been seen as something of a reprieve from being limited to only transacting online for the past three months. I’m very much hoping that retailers are not too disappointed when they do pull up their shutters because this is no reprieve.
Instead, they face myriad challenges. For essential retailers we’ve seen some ridiculous levels of customers going through stores and it has been interesting to see how retailers have sought to manage the number of customer visits through click & collect.
Argos has been an interesting business to observe because although it’s a non-essential retailer it was able to open its stores located within Sainsbury’s outlets – and it made the decision to only offer click & collect. After lockdown it is choosing to only open standalone stores in areas where there is no Sainsbury’s nearby and notably they will be limited to click & collect for the foreseeable future as is still the case within its Sainsbury’s units. This is to help it manage people within a social distancing context and remove as many interactions as possible.
In contrast, IKEA had been managing customer flow by opening its stores without click & collect. The company had initially preferred to focus attention and resources on people who are attracted into its stores for regular shopping visits and not have to deal with order collections.
The other aspect to consider is returns. This is a particularly acute problem for fashion retailers because in-store changing rooms are currently out of bounds. This could well result in shoppers replicating their behaviour online and taking home multiple sizes of an item before returning the unwanted items. The difficulty with this is managing the increased levels of people returning goods into stores (or do retailers only allow returns via the post), and the possibility that these multiple-size purchases could leave the shelves short of the more popular items.
Fashion shopping is also susceptible to browsing and this is problematic when managing traffic flows around stores. Shopping for groceries involves a relatively prescriptive journey but with fashion it is much more random and serendipitous. The question is whether retailers seek to order the flow by implementing sharper product adjacencies.
Initiating such social distancing measures clearly comes at a cost – Kurt Geiger revealed that it was spending £75,000 on the reopening of each store – and ROI (return on investment) is not a metric that is relevant in this context. What makes this even harder to swallow for most retailers is that it comes at a time when they have earned zero revenues from their stores for three months.
There is certainly a lot for retailers to manage from stores reopening and maybe at this point surviving is more important than profitability. Equally retention of customers is more important than maximising profits from them and so there is an argument that retailers should focus on their loyalty programmes – helped by the fact usage is up 20%.
What might also be boosting loyalty at this stage is the positive sentiment people feel towards certain retailers. McDonald’s and Next initially kept their stores closed in order to protect workers, Kurt Geiger is to give its first month of store profits to the NHS, and IKEA is returning its furlough money back to the relevant governments.
It’s very tough to get your arms around such actions and quantify whether they will have any impact on a business, its employees and its customers. But then we could probably say exactly the same thing for all decisions currently being taken by retailers as they welcome back shoppers into their stores.
Richard Piper, business development director, Webloyalty