10 Aug 2020 | 09.01 am
Positive Outlook for Post-Covid Retailers
Insight from Bank of Ireland's Owen Clifford
10 Aug 2020 | 09.01 am
Cost management and margin preservation will be key elements for Irish retailers in a post COVID-19 world, writes Owen Clifford (pictured), Head of Retail Sector, Bank of Ireland
Since the beginning of the COVID-19 public health emergency, retailers and their staff nationwide have demonstrated unflinching commitment to their customers, displaying empathy, community spirit and resilience during these challenging times. They have acted as wonderful ambassadors for the retail sector, and the question now is what the immediate outlook is for Irish retailers, and what areas will they need to consider in detail to sustain their business?
Even before this crisis, it was becoming increasingly clear that a model based exclusively on store-based retailing had passed its peak. While many physical stores will certainly return to growth in a post-COVID-19 world, it is clear that the days of being able to drive growth through physical stores alone are over.
Retailers now need to be good at not only buying and selling products but also at things like online fulfilment, home delivery, data analytics, social media and process/supply chain automation. The capabilities required to succeed in the retail space continue to expand.
Given the current capability shortages and cash flow challenges, retailers should now be looking to refocus on the core retail fundamentals of buying and selling whilst examining partnership options to deliver the other required skills. A partnership model may help deliver some of those important capabilities into the future.
Margin Preservation/Cost Efficiency
Retail, in comparison with many other sectors, has always been for many operators a high volume, lower margin focused model. Cost management and margin preservation will be key elements for retailers in a post COVID-19 world. In terms of costs, retailers will seek to pull the following levers to sustain their business:
Energy efficiency-related savings – can a conversion to more sustainable/green methods support this agenda?
Workforce realignment – placing the right people in key areas such as e-commerce, social media, logistics and financial management is important whilst maintaining customer experience/standards
Better buying practices – how retailers engage with suppliers now will shape their long-term relationships and potential for cost of goods savings into the future
I believe that retailers need to set themselves a realistic cost saving target initially, and this will need to be reviewed, refined and flexed based on market conditions and sales performance. This also needs to factor in the cost of doing business in a physical distancing, health and safety compliant environment. All retailers should develop a flexible, robust business plan with 3, 6 and 12 month targets embedded within same.
Community & Sustainability
As we look to the future, COVID-19 has reminded us all of the importance of health, wellness and community. Irish shoppers will certainly be more mindful of their sense of value to the community and the planet in their purchasing decisions in the future.
Aspects such as product authenticity and traceability, healthiness, and impact on the environment will all feed into our shopping preferences. It is incumbent on retailers to make the Irish consumer aware of their efforts/bona fides in this regard – active communication and engagement will be required.
Whilst challenging times lay ahead, I remain positive on the outlook for the Irish retail sector, and I am encouraged by the fact that we have world-class, resilient, innovative retailers in Ireland. In Bank of Ireland, we remain committed to supporting Irish retailers with all of the challenges and the opportunities that lie ahead.