Retail Reset

A Virtual Forum Addressing COVID-19 Recovery Strategies

Store Profitability Metrics, Business Restructuring Take Center Stage Post-Pandemic

Well before the current health crisis brought store closures and economic challenges, Alexa Driansky was working closely with clients optimizing pricing and promotions, redesigning processes and making operational improvements. In her role as Senior VP in the Retail Practice at AlixPartners, a global consulting firm, Driansky now is even busier, as brands across sectors have been forced to rethink their businesses from the ground up. Retail TouchPoints recently caught up with Driansky to discuss the recommendations she has changed or accelerated, and what she expects as the retail industry re-emerges from this current crisis.

Retail TouchPoints (RTP): We have heard some projections indicating that holiday sales could be down 50% or more from past years. How would you guide clients to think and plan?

Alexa Driansky: What retailers need to do right now is be agile and nimble, and rely on consumer insights more than ever. The way that retailers used to plan will no longer work for the upcoming year. Retailers really need to react to changing consumer preferences and shopping behaviors. So, for example, instead of making big bets early, retailers need to be flexible and reactive, incorporating real-time consumer insights into understanding new product preferences and planning out what the future will look like.

RTP: How will brands do that in areas like apparel, which have tended to have longer lead times and supply chain orders that are usually booked far in advance?


Driansky: What retailers need to do is work close in hand with their vendor partners. There should be an emphasis on really strengthening key relationships in order to reserve inventory and space. There also are opportunities to work with different vendors that have shorter lead times. But this is really now a time when retailers need to focus on being flexible, enabling speed and pushing down decisions in order to make quicker decisions about the future.

RTP: You recommended in a blog early on this crisis that retail brands should be expanding their e-Commerce capabilities. What are some of your guiding principles around the ability to expand on the e-Commerce side?

Driansky: From an e-Commerce perspective, we really need to triage the customer journey and the conversion funnel to understand their actions, identify gaps and what is impacting the purchase decisions. For example, returns are going to be a big issue for retailers as we come out of this. In turn, they really need to understand, from an online perspective, how to account for returns, how to process them, whether it’s to extend the return period, or to not take back a return. There are going to be a lot of new considerations.

RTP: Would your recommendations around a returns strategy vary depending on the client? Will it need to align with the brand or sector?

Driansky: Not only does it need to fit the brand; it also needs to fit the category. There are certain categories like consumables where you might limit the return policy. However, in categories such as apparel, we see a lot of retailers extending their return policies because oftentimes, consumers come back into the store to make returns. This usually gives stores an opportunity to gain back trust with the consumer and help. After all, they have a qualified customer within the store that’s likely to make a radiated sale throughout the store. When stores are closed, you need to reconsider how you continue to build trust with the consumer when they have products that they want to return. Extending your return policy is one way to do that.

RTP: You also wrote about making cash management a priority. What kind of financing trends or options have you seen that might affect that?

Driansky: What we see retailers of all sizes doing right now is prioritizing conserving cash as much as they can — whether that’s taking actions to push out payables, through furloughs or taking actions to limit inventory for future seasons. We see a variety of actions that retailers are taking that will help them get cash today and limit cash outflows.

RTP: Would you anticipate potentially more merger and acquisition activity, or more investments than we’ve seen in the retail sector? Possibly by necessity?

Driansky: What we see is that there are a lot of retailers struggling right now. Before COVID even happened, retailers were struggling from an operational standpoint. The crisis is really accelerating and amplifying the need to change operations — and change them quickly. Many retailers might not be able to turn the ship so quickly and adopt these new, nimble ways of operating. This reality will give other retailers, and also investors, an opportunity to come in and take advantage of this, either through acquisition or buyout.

RTP: You wrote a piece about a year ago around the state of retail being overstored. I wanted to get your perspective on where you think we’re going to come out of this. Do you expect a lot more store closures?

Driansky: The stance is the same. We were overstored before and we continue to be overstored. I think COVID and the store closures across the country have really forced retailers to rethink their store fleet. What we will see coming out of this is there will be a new normal that will impact how much consumers buy, what they buy and where they buy. When you think about where they buy, consumers are being forced to shop online more than ever before, and this is going to force increased acceleration of online adoption. As a result, store traffic likely will come down in the future. That will ultimately lead to more store closures, which will hit retailers that are in the middle market hard, because there is significant competition there.

RTP: You have also written about four key recommendations that seem especially relevant today: Make the trip worthwhile, don’t overcomplicate data, make the checkout simpler and evolve store profitability metrics. Have any other tips emerged that you would add now in terms of store strategy?

Driansky: Those are still all very relevant. I think the last point on store profitability is even more relevant than it was back then, as consumers are shopping online more and picking up in-store, doing click-and-collect or curbside pickup. We need to rethink how retailers think about the profitability of the store and the use of the store.

To that end, retailers need to rethink both the front-end and the back-end of the store to support these experiences. How do you enable customers to pick up the product and shop the product in the way that they want it? But then, you also have to enable the back of the house to essentially be a fulfillment center. Associates need to quickly pick and pack online orders for in-store pickup and support home delivery.


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