What Mark Twain actually said is the subject of much debate, but the most popular version is “The reports of my death are greatly exaggerated”.
Whatever the specific wording, the sentiment is one that could be loudly echoed by shopping centres and high streets all over the world. Wounded perhaps, but dead? Far from it.
The global pandemic has shaken the retail sector to its core, but with challenge comes opportunity. So, as e-commerce has flourished, there is still a huge role for traditional retail to play in the new hybrid world. If bricks and mortar businesses want to succeed, they need to do more than adapt to the current environment, they need to think ahead, and think differently.
Over the last year, RSM has been helping retail businesses take back some control by working with them to develop options that enhance consumers’ informed decision-making. In the US for example, as soon as the pandemic hit, one of the first areas of concern for many businesses was managing liquidity. Working in cross-functional teams providing both restructuring expertise and individuals skilled in developing and automating cash flow projections, we have assisted clients to manage, scenario plan, and anticipate their cash flows. As the impact on business has continued, more companies have engaged in new ways of operating; and in some cases, introducing new business models.
As Greg Dudley at RSM Australia explained, “We said to businesses – pause, have a look at your underlying liabilities and assess the new world order and how it affects your business model. How might you move your business model to take advantage of the new business environment and any ongoing government assistance? Think of different markets, different ways of getting to customers and ensure you have something that can thrive moving forward.”
Across the United States, many shopping centres and malls have been dormant for months. David Bart at RSM US stated, “High end premium malls have demonstrated great resilience by offering a quality destination experience that the customer wants, and some would say needs, in this new shopping era.” This suggests that the potential casualties of the rise in e-commerce and declining desires for live experiences in stores may be the lower middle and lower-end retailers who may not be in a position to offer quite the same customer experience.
Whether it is a mall or a high street, bricks and mortar retail needs to offer an individual experience because that is the personalised interaction e-commerce delivers so naturally. That is not to say that e-commerce has all the answers, as Graham Bushby at RSM UK stated, “Clearly the pandemic has accelerated the growth of online and, wherever you are, e-commerce is always going to be more affordable than bricks and mortar. So, for bricks and mortar to survive, it has to be a destination and an experience. But e-commerce needs to get smarter too – customers are much smarter today plus they shop around and communicate with each other for recommendations.”
Geography is another important feature of the retail landscape. For example, in Australia, the national postal service, Australia Post, intends to stop delivering perishable foods as a result of the complex and conflicting regulations across states. Given the huge expanse of the country, the change is likely to prove a significant challenge for small scale producers who are reliant on delivery. Amazon has already tested drone deliveries, in what could become a longer-term alternative.
Thinking differently is not a temporary occupation as RSM Canada’s Bryan Tannenbaum points out, “It is so important for businesses to take preventative measures, constantly look at themselves and make sure that they are relevant. Financial modelling and undertaking sensitivity analysis around those models is essential so that companies can scenario plan. We have to be better prepared.”
The only thing guaranteed with the retail sector in 2021 is another highly eventful year.
Please contact us if you need more information on how RSM can support retail through uncertainty.