The transformation of the retail industry Post Covid-19

ZOTTO LTd. (“ZOTTO”) is a UK based Fintech company privately owned. ZOTTO , provides business accounts, payments solutions and automation to medium and small businesses. ZOTTO is registered in United Kingdoms as a payment’s services institution according to UK law and regulations and approved by the FCA. ZOTTO  is regulated by FCA .

Effect of Corona Virus on the hospitality industry and expected post-Corona industry

While the pandemic has shaken up every industry, the retail industry in particular has been especially vulnerable to the effects of the pandemic. Already an industry being forced into transition, how it emerges from Covid-19 will signify the way we shop for the foreseeable future.

Before we look at the post-pandemic world, it is important to understand where the retail industry is now, and how it got to this point.

The decline of the high street

The retail industry has been struggling for several years, we have seen a string of brand names disappear in succession, with brands such as Woolworths closing completely. There are several reasons for this, including a shift towards internet shopping by consumers, offering a convenience that few stores can match. Online portals such as eBay, Amazon, Esty and others have become increasingly popular too, adding to the online exodus of shoppers, which in turn decreased footfall in shopping centres and high streets themselves, impacting physical shops even further.

That is not the only issue that the retail industry has faced, others have been of their own making. The focus on sales, from Black Friday and New year, to Easter sales, Valentine’s day sales and more, have skewed the notion of value for consumers. In turn, this has had an effect on buying habits, causing cashflow issues for some retailers as sales volume varies drastically throughout the year.

Couple all of this with rising rents, and it is no surprise that so many retailers have been struggling for a while. Of course, everything here became much worse as the effects of the Covid-19 pandemic began to be felt, with retail hit from the very start.

The effects of Covid-19 on the retail industry

It seems like a very long time ago already, but from the beginning of the pandemic crisis, retail shops were among the first to feel the effects of the situation. Social distancing presented challenges to shops from day one, as many simply didn’t have the physical space to introduce the kind of distancing measures needed to maintain safe operation.

While some retail operations did see increased business, food retail in particular. Overall, the industry suffered extensively to begin with, and once lockdowns and tighter controls were put in place, many retail businesses closed, never to return. Others switched to online only operations to avoid the ongoing costs of rent and so on for physical retail premises, but that has brought new challenges.

One of the simplest ways for a retail business to switch online is to take advantage of online portals such as Amazon and eBay. This is especially true of smaller businesses who don’t have the in-house IT skills or budget to launch an E-commerce site of their own. However, while this route may seem cost-effective, and also often demanded by customers who are used to making their purchases through one portal account, it is not necessarily low cost. These portals take a significant cut of the retail cost, and they also have very pro-consumer return policies that can incur significant additional costs for retailers on top.

The issue doesn’t stop there, with portals currently being investigated by the European Union for anti-competition practices such as undercutting businesses using their portal by seeking out product suppliers directly.

With so many obstacles in the way, the retail industry is still trying to adapt to the pandemic, with retailers looking for balance between the online and physical worlds that allows some level of business operation as legislation evolves. This shift to online sales has been across all market sectors too, in the UK as lockdown took hold, a third of all retail sales during May 2020 were online, a rapid rise from the 17% average of the previous two years. According to Smart Insights, non-food online retail has risen by 25.7% overall in 2020, with the clothing industry leading the way with a 31% increase.

What these numbers tell us is that there is no going back to a pre-pandemic retail industry, that was a failing model, and post-Covid needs to be something new of the industry is to prosper.

The Future of Retail

To see what that future may be, we can look at the pandemic response for guidance. The increasing influence of online sales has been an inevitability for many years and having embraced the digital space during lockdowns and social distancing, retail businesses are not going to give it up post Covid-19. Instead, retail will need to cater to consumer expectations, with a physical presence they can visit and a website or other online retail options for those that prefer.

In many cases, this will mean a retail store, an E-commerce site for the business and outlets on eBay and Amazon, as their customer base expects it. This approach covers consumer expectations, but drastically changes the management and process needs of the business itself.

Retail businesses will have transitioned from a single point of sale, the shop, to multiple sales channels all with different profit margins and customer service needs. These are:

  • A physical shop where people can walk in and purchase product, or maybe have it delivered to their home, or even collect an online order.
  • A website where product can be purchased and delivered quickly, usually one- or two-day service is expected, or send product to the shop for pick up.
  • Amazon and/or eBay stores that have specific delivery targets to avoid financial penalties.

This all adds complexity to the sales process, with different delivery requirements, even changing profitability across a single product depending on where it was sold. In terms of management, this added complexity to the sales process is only one aspect, it also transforms stock control needs. With so many options for delivery, pick up and so on, stock control becomes a real challenge, and ensuring stock levels are maintained with three or four different sales channels depleting stock increasingly difficult.

It’s not just the product that needs additional management provision, moving from a physical store to online sales also means adding crucial customer support structures that can be easily accessed online too. That includes the obvious, such as phone support included recorded calls for customer safety, covering both complaints and refund requests but also deliver sales support too, offering information about products to help buyers make informed choices.

In addition, online tools are needed to provide hassle-free returns, order tracking and so on, and of course a payment solution to enable both over the phone and online sales. Finally, all of these systems and processes generate customer data, and that needs careful handling to ensure compliance with the EU’s data privacy legislation, GDPR. Failure to do so can lead to huge financial penalties, and requires processes for data handling to be in place from the beginning.

That is why even small retail businesses will need assistance to manage these multiple sales channels effectively, which is where ERP solutions come in. The issue here is that ERP systems have been traditionally designed for large businesses, and as a result the industry leading solutions require a huge investment, both financially and training, which is beyond the scope of the majority of retail businesses.

There is an answer though, with companies like Zotto developing new approaches to ERP that are specifically designed for the smaller business. Cost effective and simple to learn, the system streamlines management for all sales channels and centralizes stock control for all transactions regardless of sales channel. Not only that, but with AI powered reordering, maintaining stock levels becomes much less time consuming.

Zotto’s ERP solution also integrates their banking and payments solutions to provide a comprehensive, all in one system that aids with the multi sales channel model, especially when it comes to refunds.

Online sales generate more returns than a physical store, especially within retail clothing, and because each return also means a refund of money, it can be extremely time consuming for businesses. More than that, with both eBay and Amazon having strict customer service policies that impose financial penalties for failure to refund in specific timescales, an effective return process is essential to long-term business health.

With payments integrated into the ERP, the Zotto system can generate automatic refunds to the payment method on file for the transaction, including partial refunds on orders where only certain items are returned. This ensures compliance with portal terms, and it reduces costs for handling returns from other online sales too.

Embracing retail’s future

When we emerge from the pandemic effected world, the retail industry will look different. Even small businesses will embrace multi-channel sales with fast delivery, as well as high availability in store, and a focus on high service levels and automation to ensure that the service meets consumer demands and expectations.

With ERP, Payment and banking seamlessly integrated into a single, AI driven system as with Zotto, a small team can maintain super customer service standards and manage those multiple sales channels as easily as they managed a single outlet previously.

 

By : Faridoon Qazi