BY CAROLIN BRINKMANN; ROBERT HEINZ; ELENA WAHLER
Within the past weeks, there has been a significant rise in corona numbers. After a short period of normalization and rest, Germany is currently in its second Lockdown. How can businesses get past the second corona wave and ensure economic survival?
The first lockdown in March and April this year turned into an unexpected and drastic “trauma” for many small and medium sized companies. Many retailers had to close their stores and feared the end of their businesses. Even after reopening the stores was allowed, with strict hygiene- and security rules, many retailers had to ask themselves: Will my business survive another lockdown?
Retail can only prosper if customers are willing to make purchases, are healthy and not insolvent. Customers had to accept drastic limitations in both their private lives, but also their job-related situation due to corona. This included, but was not limited to schools and kindergartens closing, social distancing as well as working from home, reduced working hours or even losing their job. Due to the lockdown, customers quickly had to adapt to an entirely new situation that nobody was prepared for. The most used and classical payment, with cash all of a sudden was replaced by contactless payment methods (increase of contactless payment from 49% to 71% of all payments). Local shopping tours were mostly replaced by online shopping, which changed the entire consumption and social mindset of consumers and partly remained in the customers minds even after the lockdown. The customers need for security and hygiene is very significant and has a long term influence on their purchasing strategies.
This change has already lead to significant profit for online retailers – at the expense of local retail. Already in July 2020 expectations were that a third of all local stores would have to close. A second lockdown is expected to lead to an even faster declination of local retail.
Corona forced many local retailers to an entirely new strategic orientation within a very small period. Therefore, since the first Covid-19 lockdown, thousands of new online shops developed in Germany. There is a shift from local to online commerce. This tendency will increase since financial long-term security for ones’ business is most likely to only be possible with online commerce.
What can (local) retailers do? Approaches to solve the current problems
There are different tools retailers can use in a strategically optimal manner: the most common payment methods; an online strategy that offers omnichannel solutions; innovative shopping experiences as well as an intelligent use of loyalty programs. Regarding the second lockdown, an individual online strategy for one’s business is essential. In addition to a user-friendly interface and navigation, the online shop should provide easy and fast checkout solutions, e.g. via Paypal, as well as different payment methods. In order to ensure an online strategy´s long-term success, the entire strategy should have an omnichannel system, i.e. customers can be reached via all commonly used channels. Online channels are often handled separate from the stationary contact points, but in order to provide a good customer experience, both local and online contact points should be linked closely. By that, customers can use both local (offline) and online contact points without media breaks. That way customers can for example try on a clothing item during a shopping tour or test an item and then have it delivered home. Even Payments can be postponed – e.g. by paying per bill or debit.
The local stores will continue to turn into a showroom. If online and local stores are aligned, storage capacities can be used much more efficiently – as a mutual benefit for customers and retailers.
This development towards local stores as showroom is mostly based on the fact that retailers know their local customers and are able to reach them, taking into consideration that all data has to be stored correctly according to the European GDPR. Additionally, the option to demand partial or full deletion must be provided at any time. Networking on social media becomes increasingly important in today’s increasingly digital world. Customers can be provided with the newest information via Instagram, Facebook and Twitter at any time. They can be informed over new opening hours, ordering processes or digital events. Loyalty programs can be useful to reach customer commitment and a new customer base.
Customer Loyalty programs have gained crucial importance due to the pandemic. The purpose of loyalty programs is an increased customer loyalty. They allow retailers to build a stable customer relationship and to be able to continue communicating with their customers even after local stores are closed and to keep customer relationships alive, even with all difficulties. Those programs also allow retailers to get to know their customers. A successful loyalty program should not focus on discounts only, but also provide a qualitative benefit for individual customer needs.
In order to enhance customer relationships even with the lockdown, Digi Cafés can be used. Digi Cafés are digital appointments that allow the company to both introduce new products but also ensure great customer service. Customers’ questions can be answered directly and combined with new digital selling concepts. Access to such events can be provided in newsletters, on social media channels or the company’s website. Well-known video conference systems can be used, and customers can be provided with necessary log-in information.
Conclusion: Doing nothing is not an alternative
Small and medium sized companies are entrepreneurs and entrepreneurs do business. What’s crucial is to find the right strategy and to precisely and realistically define and consequently implement it.
SHC has long-term and large-scale experience in successful development of retail- and business strategies and gladly supports your company in developing individual concepts to successfully overcome the corona pandemic.