For retailers who weathered the pandemic storm, the lull has been short-lived, and they’re now battening down the hatches again in the face of the next assault – the predicted global recession. Driven by the impact of the pandemic, the war in Ukraine, hikes in energy and food prices, and worldwide inflation, the world ‘may soon be teetering on the edge of a global recession’ says the International Monetary Fund (IMF).
The definition of a recession, according to the National Bureau of Economic Research, is a ‘significant decline in economic activity spread across the economy, lasting more than a few months.’
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That decline may manifest across the economy as low unemployment, rising prices and squeezed margins. In retail specifically, the world tends to be divided into essentials and luxury items. Consumers continue to spend on essentials such as food, personal care, and basic clothing, but reduce their outlay on items such as furniture, home electronics, sporting goods and accessories. Retailers across the board are impacted by a scarcity of staff, a factor that will only be heightened in this coming recession by the ‘Great Resignation’ pandemic phenomenon in 2021.
Recessions have a tendency to widen the chasm between those retailers who are effective operators with inbuilt resilience, and those who can get by in good times, but struggle when the going gets tough. As Deloittes puts it: ‘recessions expose existing weaknesses’, but those who ‘grasp the challenge…could well emerge stronger and provide a brighter future for employees, customers, and stakeholders alike’. This is borne out by evidence from previous recessions, where companies who took the opportunity to invest during the tougher times grew faster once the recession was over.
McKinsey’s research into the way that retailers managed cost reductions in the Great Recession of 2007-2009 found that ‘resilient retailers’ reduced their costs by two percentage points, while their ‘non-resilient’ counterparts increased theirs by the same amount.
How can retail technology help retail stores to prepare for recession?
Based on what we know from previous recessions and the way in which retailers’ actions and approaches affected their performance and recovery, it would seem that the key focus areas for retail strategy in 2022 must be:
Streamlining processes to reduce inefficiency and maximise staff productivity – front and back of house
Selling what customers want to buy – understanding trends and changes in what consumers want to buy, reviewing product mixes and having the flexibility to adapt
Retaining existing customers – strengthening relationships, making them feel valued and enhancing the customer experience
Retail technology can help to deliver on these goals
Retail Technology: Efficient in-store operations
Fast, reliable retail POS system and contactless payments for smooth checkout. When customers are buying essentials, they want an efficient customer experience – and smart, fast retailer POS lets them buy their goods and get out and on with their busy lives.
Flawless inventory management – inventory sitting in the warehouse represents a cost to retailers; a cost that can be managed down if stock turns can be increased. Having inventory visibility across all brick and mortar and online stores, being able to get returned goods into the pool rapidly, and knowing what goods are where helps to minimise ‘dead’ stock, reduce cost and increase revenue.
Retail data analytics – retails stores need to have a clear view of what products are selling, where and when, and any changes in demand. Retail business intelligence is the key to picking up on trends in time to adapt to them, rather than being left with stock outs, and missed sales opportunity.
Loyalty programs – Recession or no recession, customers want to feel valued and understood. The difference is that in a recession those that don’t feel that way could be more likely to leave you for someone offering a lower price. So loyalty programs are more important than ever in tough times – keeping your customers with you, offering them offers and promotion types to help their dollar go further, and crucially, ensuring they’re there with you when the good times return.
Online/offline integration – shoppers want the choice to shop via ecommerce solutions, brick and mortar, or a combination of the two. They no longer see a distinction between online and brick and mortar, and see the ease of omnichannel retail (with click and collect/BOPIS/curbside pickup for example) as an important part of the customer experience. Experience in retail is essential to retaining customers, so retailers have to continue to offer a seamless interaction between online and offline.
There is no doubt the next months (or years) will be tough for retailers. But those who get the right strategies in place now, supported by the best retail technology, will be building in resilience, and increasing their chances of weathering the recession storm.