Real Answers With CEO of One Door, Tom Erskine
This year, the way we shop needed to change, for obvious reasons. Limited inventories, changing consumer purchasing behaviors and fluctuating demand played significant roles in altering the baseline of our typical shopping experience. To discuss the current state of retail and the impact of COVID-19 on the industry, we spoke with Tom Erskine, CEO of One Door, a leading provider of merchandising software.
Did you see a large impact when it comes to consumer demand fluctuations and purchasing behavior fluctuations over the past eight months or so?
There are two different stories in retail. The first is that for certain essential goods and services, demand has skyrocketed, especially grocery. Grocery, home improvement, DIY, all of these categories have seen phenomenal sales growth over the past eight months. Second, other segments were initially decimated, although I would say the bounce back has been impressive. There was a lot of talk at the beginning of the pandemic about kind of a “V-shaped recovery” and, thankfully, we’ve definitely seen that.
In terms of purchasing behaviors, one of the biggest things that we’ve noticed is a massive reorientation around very purposeful and directed shopping. As you look at major retailers, they are evolving their stores to be more aligned against their perception of a new normal where customers go into a store with a very clear understanding of what they’re looking to buy. The old days of browsing, serendipity and just going in not really knowing what you want have changed dramatically.
From your point of view, what crucial pivots needed to be made for grocery store planning?
The grocery vertical has seen massive increases in demand and sales. But while they’re seeing big top-line revenue growth, it’s not like they’re rolling in dough. Much of this is offset by overtime, hazard pay and rewarding frontline workers, as they should. Grocery stores are also really on the front lines of the transformation to curbside pickup, and going forward we’re going to see big changes to grocery layouts to be more aligned with the needs of what we call the professional shopper. That’s either a freelancer or the gig economy worker for Instacart, or an associate with the grocery chain fulfilling orders for curbside pickup. Optimizing the layout for this kind of shopping is very different from optimizing for browsing. And looking out even further in grocery, what you’re likely to see in the next five years is that some pieces of an order will be fulfilled from a micro-fulfillment center on premise that stocks the bulk inventory, while the rest of that order will get fulfilled out in the perimeter of the store with fresh items, frozen items, etc.
How do you think this pandemic is affecting the customer experience in physical stores?
Let’s start way up at one end of the spectrum, with high-touch luxury experiences, like a high-end apparel experience. I think it’s going to be a really long time before customers are comfortable with going in and having a latte at a high-end luxury retailer. But it’s not all bad news. When you step down from there to experiences that are a little more utility and less luxury, there are plenty of examples of places where differentiated, compelling experiences still matter.
Take a Whole Foods experience. It’s still all about the curation of products to create a differentiated, higher-end experience. It’s all about the physical look and feel of that location. And I think that will continue. So, while there are certainly changes in retail as a result of COVID, I think that brand experiences still have to be consistent with the overall ethos of the brand.
Do you have any other specific predictions for the retail industry moving forward in the coming years?
For me, the biggest thing is that COVID is just accelerating a transformation of the role of the store that was already underway and will continue into the coming years. Going forward, stores will play a dual role – part fulfillment center and part showroom. This evolution creates incredible process and strategic challenges for retailers. For example, how you optimally merchandise a store is becoming a completely different question than it was just two years ago.
The majority of retailers won’t have the luxury of dark stores, or 100% dedicated local fulfillment centers, so they will be stuck in a position where they have to fulfill orders using inventory in their stores. And that changes everything from how much inventory you carry, to where you carry that inventory, to what are the processes you employ for picking up online orders for curbside pickup.
In many ways, retailers need to rewrite their in-store merchandising playbooks, and in the big picture, it’s actually an awesome time to be doing what we do because we can help.