The COVID-19 pandemic launched retail into an online boom, with digital sales skyrocketing across sectors.
However, the boom was not equal across all categories, leaving some retailers in a crunch to keep up with demand for online orders and others with unused inventory. Coupled with stores closings and lower foot traffic, retailers have been forced to define how shoppers behave during a global pandemic and figure out how to do well in a changing business environment.
Amazon Web Services is one of the largest cloud providers, with customers across 22 industries including retail. With all the changes since the start of the pandemic, AWS has helped retailers undergo digital transformations to meet new online demands--and gained valuable insight into how the sector has changed.
Retail Leader caught up with Tom Litchford, head of worldwide business development for the retail industry at AWS, to understand how the pandemic has affected shopper behavior--and what retailers are doing to adapt.
With consumers flocking to online channels during the pandemic, retailers have made major upgrades to their digital presences. While many of these changes were already ongoing, the pandemic gave retail executives a push to invest in new technologies sooner than they might have otherwise.
One of the top changes is how retailers should think about their online presence. Instead of augmenting brick-and-mortar stores, a digital shopping experience should be augmented by stores. According to Litchford, a retailer’s flagship brick-and-mortar store is now also defined by its online presence.
“All retailers have their flagship stores and they're talking about physical [presence], but the flagship store is the online store,” he said. “The physical store augments that. [It’s now about] taking that experience for customers through the digital, mobile or web and making the experience pop for them.”
With so much more commerce online, more brands are realizing they can’t have stale, flat, two-dimensional experiences online, including product searches. In particular, livestream shopping, which has become popularized in the eastern part of the world, is making the rounds in the U.S. and taking the traditional retail experience digital. A number of major brands, such as Burberry, are also using 3D technology to enhance the online shopping experience. Germany-based e-commerce company Zalando, which Litchford likens to Amazon, is also leveraging full body scanning and 3D technology to improve its shopping experience for customers.
Not only are these technologies keeping shoppers interested, there’s also a business case. Better online shopping experiences that can more accurately describe products to consumers tends to lead to fewer returns, “which is a huge problem and reduces profitability,” Litchford said.
Addressing supply chain and pandemic issues
Where AWS is stepping in to help its retail customers is the supply chain. The overnight changes in the global economy from COVID-19 lockdown not only created new supply chain problems for many industries, it also brought existing ones to light.
“It depends on the segment, such as grocery or apparel, but the supply chain is truly broken,” Litchford said. “It's not that we didn't know it before the pandemic, but boy, did the pandemic expose it.”
AWS has been helping its retail customers meet some of the extreme supply chain challenges brought on or worsened by the pandemic. Leveraging some of the Amazon retail expertise, the cloud services provider is working with retailers to figure out how to deal with the influx of online orders and the issue of keeping the right items in stock.
“We have experience in supply chain and logistics for retail,” Litchford said. “[We’re] taking things we've worked with at Amazon retail and saying how to do better demand forecasting and allocation, [how to do] better once an online order comes in and what is the most efficient way to ship to customer to conserve cost on the backend.”
For the rest of 2021, retailers are still grappling with uncertainty. While the National Retail Federation updated its retail sales forecast in June in favor of higher sales growth, rising cases of the Delta variant of COVID-19 over the last few weeks could create renewed fear among consumers and potential restrictions in certain areas. Even without a fourth wave of the virus, retailers have to make critical decisions about seasonal shopping trends.
Apparel retailers faced one of the toughest challenges. With stores closed, merchandise quickly went stale, according to Litchford. If lockdown restrictions return, retailers could face the same issue.
“[Retailers are] figuring out what to order for the Christmas seasons and past spring,” Litchford said. “[They’re looking at] how to not get stuck with this inventory issue again. In physical stores another thing you're going to see stick is consciousness of health and safety now. What are retailers doing to say it is safe to come into my stores?”