The current crisis is forcing us, retailers, to take a break and look in the mirror: are we still relevant, do we still see opportunities, do we still want to invest, do we still feel the drive to get back to work?
Urgent questions
Do we experience the major retail debacle? Things were not going well in non-food retail, and on top of that there came the corona crisis: it races through our personal lives as if we were in the middle of a science fiction film. As painful as it is, we do well to put ourselves in front of the mirror: do I still have a right to exist, or is it perhaps time to stop? Do I have to continue to use my own capital or attract additional debt? Those are urgent questions now.
Because what happened? The volume growth of recent years has certainly not led to the expected margin growth. Online sales grew much faster than the physical channel: in the latter, sales even dropped. However, the online strategy does not pay for itself, and even worse: it is often even loss-making. This is partly due to high distribution costs, a lack of economies of scale and a lack of knowledge compared to the major online platforms. Those global competitors kill our online offer with one click or cookie…
Robbers on a raid
The consumer had already settled at the top of the pyramid before the corona crisis. The cheapest price, the best quality, the fastest service and the best experience: he / she wants it all, and all at the same time. Large online players with a wide range, such as Zalando, bol.com, Amazon and AliExpress, will take with the biggest spoils at the online party.
Next to those giants, there are the vertically integrated retailers: flagship stores and category killers such as Zara, H&M, Nike, Adidas, Decathlon and Ikea occupy dominant positions in the (online) shopping street. They design, produce and sell themselves, making it easier to respond to the demanding customer. This way, they are taking more and more turnover from the traditional retailer, both online and offline: their market impact is enormous.
Even worse is the impact of Amazon and Alibaba on the Benelux market. Smart data is behind every click, making Amazon what it is today: the largest private label retailer in the world. No wonder a top brand like Nike is now turning its back on Amazon. Alibaba is also continuing its raid: the group will now connect the offer from its “sweat villages” directly to its platforms. The race to the bottom is there! And the promised thousand employees in Liège? A joke. In any case, they got their Belgian airlift as a gift from our policy makers. Luckily, because that is how we quickly get mouth masks …
Local shopping?
And what will happen next? After the crisis, will consumers be even more critical, more demanding and, above all, will they be buying locally? It is clear that the global market is disrupted. The unsold stocks have to be sold as soon as possible to free up capital: competition is becoming even fiercer, conglomerates are going to attract even more market share and put even more pressure on margins. Big boys like Amazon and Zalando play with stock market money, in other words they do not have to make a profit. Alibaba and Tencent, on the other hand, are directly supported by the Chinese State: also not the smallest of adversaries, I would say!
We, smaller entrepreneurs, only survive in that war if we really distinguish ourselves and know how to tie customers to us. That is extremely difficult! The consumer will take a critical look at everything: the (online) service, the range, the pricing, the atmosphere in the store, and so on.
Conshuman versus consumer
However, there is a big difference between a consumer and a ‘conshuman’. What I mean by that? Conshumans are humane and have the will to be loyal, but the price is always the mother of all objections. Shoppers keep looking for the best deal. Simply and globally: both physically and online. How long will the conshuman win over the consumer? That is the question. Think about that single mother, who wants her children to look perfect: will she be shopping locally, or is she going to buy a dress for just 6 euros via AliExpress?
Think along: about 11 million people live in Belgium. About a third of them are working, but more than one million of them are now temporarily unemployed due to the corona virus. These people now eat their savings every day. Will they, along with the other nine million Belgians, immediately throw the money bag en masse after the lockdown? Or are they going to become more price-conscious?
Look in the mirror
Many independent retailers, but also retail chains, are asking themselves the question: now that the buffers have been exhausted, should we cut our losses before every means have evaporated? Waiting until the capital we have built for years has been completely consumed, would be detrimental for our life.
The question for many is also how long we can keep this up. Do the older traders still want to stay on, now that retirement is beckoning? Many entrepreneurs did not keep up with this pace before the crisis, so what after the crisis? An extra bank loan is not a solution if your business model has not adapted to the enormously changing market.
Both stopping and continuing take courage, especially if you are a family entrepreneur. When you look in the mirror, look mainly at the possibilities and view this as a third person, without too many emotions.
Banks as judges
Cash is crucial for retailers who want to survive this period, but investment banks turned out to be mainly banks after the previous crisis. They now have a great responsibility: if we all want to get the economy going again, they will have to encourage the brave. Today, they determine whether the thumb goes up or down. We can expect our government to turn banks into investment banks again. The retail sector is the second largest employer in the country, do not forget that.
Exciting times? Certainly! The question is pressing: stop … or continue? Who will take up the gauntlet? As for myself and RetailDetail, there is no doubt: we will continue!
