Retailers Need to Plan for Recovery. Here’s How They Can Start.
The retail industry has seen significant damage as a result of unprecedented supply chain disruptions, wavering consumer confidence, and technological gaps for those making the leap from brick-and-mortar to digital storefront.
Many retailers had just started to return to normalcy earlier this year, following a two-year trade war — and a promising Phase One deal — between the United States and China that saw burdensome tariffs imposed on buyers and suppliers in the two economies.
Shortly after the Phase One deal was signed by President Trump and China’s Vice Premier Liu He in January 2020, supply chains rooted in the Sino region began to break down as the COVID-19 pandemic brought manufacturing and distribution to a halt, further crippling the retail industry in the first half of the year.
Now, eight months and billions of dollars in lost GDP later, the U.S. economy has begun to signal recovery in key industries heavily affected by the pandemic. June retail figures, released by the U.S. Department of Commerce, revealed a healthy year-over-year growth of 11 percent, which we can expect to continue.
Individual retailers that saw the majority of their revenue come from in-store purchases must prepare to ensure they're part of this economic recovery.
Pivoting to Online
Online merchants are expected to be a major contributor to the overall recovery of the retail industry. The Department of Commerce's June report disclosed that consumers are still skeptical about returning to stores, which is why the e-commerce sector saw a 36 percent increase. If these trends continue, we may see online sales in specific retail sectors, like apparel, surpass brick-and-mortar sales in 2020 for the first time.
In a recent survey conducted by Veem, the global payments network, nearly a quarter of small businesses reported investing in new technology to support their recovery. Technology-first e-commerce solutions like Shopify, WooCommerce, and BigCommerce remove barriers to get started and extend analytics, tracking and support to merchants. Beyond removing the reliance on in-person interactions, online solutions provide more autonomy and flexibility to business owners.
In an online marketplace with thousands of new competitors, retailers are wise to put their best foot forward by evaluating existing stock and anticipating which products will be in highest demand. Efficient inventory management will support retailers in attracting new and existing customers when pivoting to online.
Adopting Digital-First Processes
Time- and cost-saving measures are paramount as business owners work through new growing pains and capitalize on growth opportunities.
Flexible point-of-sale options like Square and Stripe, and B-to-B payment providers like Veem, offer direct and automated integrations with accounting software like Xero and Intuit’s Quickbooks that streamline existing AR and AP operations.
Adopting and investing in tools that support and enable growth put retail owners in a favorable position to get their head above water today, but also in the coming months as demand for goods and services continue to grow.
Building a Reliable Supply Chain
During major global events, retailers are often disproportionately affected due to their reliance on international manufacturing and intricate global supply chains.
In the same Veem report, more than half of the companies surveyed shared that they experienced moderate to high supply chain disruptions as a result COVID-19-driven factory shutdowns, border restrictions and industrywide furloughs. More than one-third said they were now setting up regional supply chains or rapidly pivoting their supply chain to make necessary supplies, including personal protective equipment (PPE).
Building reliable relationships with multiple vendors and diversifying supply chains to include domestic and international options mitigates the production risks that were exposed during the height of the pandemic. Leveraging business networks provide retailers with easy access to new vendors.
A Light at the End of the Tunnel
While the pandemic drove significant revenue declines and major retail brand closures, real-time data and high-frequency indicators are showing the pendulum swing back in a favorable direction.
Over the past two months, Veem reported a significant increase in payments to China from the U.S. among retail-related businesses. This renewed activity is an encouraging sign that U.S. retailers are experiencing increased demand as American and global markets begin to recover.
If these transaction patterns are any indicator, we can expect substantial recovery and a return to normalcy barring any further escalation in trade disputes and global governments’ efforts to manage COVID-19.
COVID-19’s influence on how we interact, however, has likely changed forever. Small and midsize businesses are the cornerstone of our economy, and have already demonstrated their resilience and creativity, pivoting to respond to disruptive changes. Retailers need to select partners and suppliers that ensure they have the agility to efficiently scale and tune their businesses as our new world continues to unfold.