Retail reporting

How COVID-19 is impacting retail and how it will shape the industry’s future


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    Kaavya Gupta
  • May 01, 2020
TLDR

The latest trends and insights into how retailers can adapt to the effects of COVID-19. 

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As the effects of the coronavirus continue to unfold, retailers are adapting their business continuity plans to suit current and anticipated changes to rapidly changing consumer preferences and spending patterns.

E-commerce is dominating retail

Industry-wide, the global pandemic is accelerating e-commerce’s takeover of retail. A recent UBS analysis predicted that COVID-19 will immediately increase the online portion of total retail sales from 15 percent to 25 percent per year.

Brick-and-mortar storefronts are finding their direct-to-consumer (D2C) footing as online shopping across all products and services grows in popularity: one-third of Americans bought groceries online in March, and tens of millions of them did it for the first time. Similarly, American restaurants now make more than half of their revenue from delivery, drive-through, and takeout.

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Source: McKinsey & Company COVID-19 US Consumer Pulse Survey 4/20-4/26/2020

As retail further transitions its sales and engagement to e-commerce, consumers continue to expect communication on updates and promotions from brands. Our research on current consumer preferences found that critical updates from an individual company is the most desired type of communication for most consumers, and that 26 percent prefer continued communication on normal promotions as expected prior to COVID-19.

The rise of contactless delivery

Consumers want to feel secure and protected, knowing that retailers are keeping them out of harm's way and understand their concerns. This is an opportunity for retailers to demonstrate how they’re taking charge to ensure customer safety, and to relieve their stress.

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Source: Gartner, Consumer Sentiment About COVID-19: What They Expect of Companies, Published 16 March 2020

The massive shift to e-commerce means our economy is now delivery-centric—for groceries, food, and other essential supplies. As businesses try to stay afloat with social distancing guidelines, places like restaurants may likely shape shift into places where food is prepared but less commonly eaten.

Keeping with new cultural and safety norms, retailers are adopting contactless delivery with real-time alerts and notifications to ensure the safety of both the end-customer and courier. Instacart, a grocery delivery service, added the "Leave at My Door Delivery" option for contactless delivery as early as March 6, and to meet growing grocery spend, is planning to hire 300,000 contract workers in the next three months—more than the total anticipated new hires by Amazon, CVS, Walmart, and Walgreens combined.

Retailers who are unable to scale delivery operations are now introducing BOPIS—buy online/pick up in store—options that can solve for logistical concerns without completely hindering the in-store customer experience. Even though contactless delivery is the need of the hour due to given circumstances, it could become the standard practice going forward as consumers change buying behavior.

Reinforcing personalized customer communications

There are two options for brands seeking a competitive advantage: offer the lowest prices or superior customer experience with proactive, personalized engagement.

The advantage of the latter is that consumers are willing to spend up to 16 percent more for a better experience. Consumers are currently operating in a negative mindset, unsure about how long this situation will last. There’s fear around preferred product stock outs, delays in their deliveries, cancellations, refunds and safe handling of their orders and cancellation fees. They expect individual attention now more than ever.

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Source: McKinsey & Company COVID-19 US Consumer Pulse Survey 4/20-4/26/2020

Now’s the time for brands to shine. Brands using data analytics, artificial intelligence (AI), and automated communication technologies are able to scale how they manage consumer expectations. While most retail locations are closed and it’s uncertain if they’ll re-open after COVID-19 is fully contained, digital customer experience is now the sole basis of brand differentiation and trust. And that means the pressure is on for the contact center—in effect, the hub of customer communications involved before, during, and post-purchase—to deliver personalized service. As contact centers now become remote, retailers need to keep in mind key support and operations considerations and that there are also ways to augment, rather than fully rip-and-replace, on-premise contact center systems.

An immediate opportunity for impact is setting up an interactive, self-service voice response (IVR) system, integrated with customer relationship management (CRM) software, that leverages artificial intelligence (AI) for natural language processing (NLP) to provide intent-based routing.

For example, UK retail giant Marks & Spencer’s IVR translates customer queries into actionable intent with more than 90 percent accuracy, automatically routing customers without needing to ask them for a “reason for contact.” Their IVR handles more than one million inbound telephone calls a month, with automation that reduces average handle time by 10 seconds. That adds up to happier customers and more productive, happier agents.

Over the coming months, the retail landscape will continue to transform into a new normal that requires a scalable, flexible, and elastic communications infrastructure. Learn more about how to prepare for the future of retail, and how to leverage cloud-based communications to improve customer engagement and key business metrics, in the new Retail Consumer Impact Report, available free now.

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Kaavya Gupta

Kaavya leads the customer benchmarking and business value programs at Twilio. She has an MBA from the MIT Sloan School of Management with a specialization in business analytics. Kaavya has been an entrepreneur and previously led the e-commerce strategy and launch of India’s largest gourmet food retailer. Her background in business strategy, analytics and marketing equips her to evaluate how communication technologies drive business value for enterprises.