Evolution and opportunity: the impact of COVID-19 on the future of retail

Covid-19 has swept across the world impacting economies and daily lives at a devastating pace. As an industry already ripe for disruption, retail has undoubtedly been affected heavily in the UK with lockdown forcing a further decline in footfall on our high streets, thousands of furloughed workers and a shift in consumer buying habits faster than many businesses were prepared for. Under Chatham House Rule I hosted a number of roundtables with General Counsels and Heads of Legal from a variety of retailers to discuss how they have navigated this challenging period and their thoughts on the future of retail and the role of legal.

The global nature of the pandemic has meant challenges have continued to evolve with the spread and lockdowns across the world. The change in pace has been unprecedented. Businesses have struggled with adapting quickly, switching to e-commerce and trying to cope with variable stock demand. Apart from the obvious financial implications, supply chain and warehouse capacity issues were listed by many as a huge challenge during this period. Spring/Summer stock has been sitting in warehouses as Autumn/Winter is also due to come through, products have been stuck in closed manufacturing factories and stock that had been moved from operations in China when the first lockdown was ordered came under threat and had to be relocated again as other countries followed suit. Many e-commerce providers have experienced an increase in sales and despite being well placed to meet new customer traffic even they haven’t been completely immune to challenges in the supply chain.

Reputation management has been a concern throughout; how are you being viewed by suppliers, customers and employees. Landlord rents have brought very difficult conversations and good relationship management has been key. Ensuring the safety of key workers and customers has been central to navigating through the past few months as well as maintaining morale for both working, whether in-store, warehouses or remotely and furloughed staff.

Understandably legal teams have been busy trying to manage the increase in workload. In many cases, it was felt that the legal role has been elevated during the crisis. Legal leaders are helping to make decisions now, trying to predict what will happen in an uncertain future and mitigate risk for their employer. They have had to get up to speed quickly on government guidelines in the UK and globally on furloughing staff, store closure and safety of workers, in addition to renegotiating with suppliers, landlords and factories, often under different local laws. Many of the participants felt the crisis has been an opportunity for the legal team to show their capabilities and what value they can bring to business strategy. They have been able to demonstrate that they are problem solvers who should arguably be involved in more commercial decisions and wider remits moving forward.

It was noted that during lockdown a fundamental shift has been seen in more thoughtful gifts and mental health products from one e-commerce provider. Local shops have seen a rise of customers choosing to support them and some of the unnecessary buying habits of consumerism have been highlighted. Perhaps this all indicates towards a positive cultural shift; a rise in more conscious and ethical buying. Sustainable over throw away? Investment in a long term product over short termism? Two distinct fashion seasons rather than four? There is no doubt that customers are on a journey that retailers will need to respond to and there will be different phases as we continue to transition from lockdown and beyond.

This ‘social distance’ economy is here for the foreseeable future. Customer and staff safety will be paramount. Checkouts will be redesigned in store, home delivery capacity increased and more options such as mobile scan-and-pay and click-and-collect will potentially be more prominent too. There will be a further technology shift for stores and e-commerce; virtual retail experiences may happen faster than we would have thought. More importantly than ever retailers will require continuous evolution and the key to survival will be their agility. Whether this is moving to e-commerce channels, rethinking business strategy, looking at new product lines or the robust use of data to build better customer journeys. This evolution adds another dimension to strategic decision making by leadership teams and will potentially allow legal to demonstrate even greater value in risk management and business planning. 

Whilst some retailers will unfortunately be unable to survive, hopefully there are some longer term positives and lessons to be learnt coming out of this pandemic around customer experience and employee well-being. The future will bring opportunity for new and existing retailers. New retail entrants will have a chance to thrive, not held back by legacy systems and bricks and mortar stores. Existing retailers can look to find alternative revenue streams and new ways to engage with the evolving buying habits of consumers. Ultimately those that put the customer at the heart of every process will triumph.