Pandemic Pendulum
My favorite definition of luck is ‘when preparation meets opportunity’. Those that are prepared see certain changes or challenges as opportunity. Others looking on (and probably not as prepared) point to those who seemingly benefitted from a situation as the ‘lucky’ ones. With the impact of COVID on retail, we have seen many examples of this. Those retailers that had already invested in eCommerce where in a position to take advantage of stay-at-home orders, protecting their employees, while offering contactless commerce and most importantly cash flow for the business. The other retailers had to scramble to maintain their balance let alone keep their business afloat.
Adversity in any business necessitates a response. The roof on a warehouse falls in after a hurricane and a business must scramble to salvage product, move to a new location and restart shipments as fast as yesterday. The US government applies punitive duties on goods coming to the US from certain countries of origin and a business will immediately begin looking for and act on solutions to move production to those countries not impacted by this policy change. These are the sorts of challenges that many businesses face each year. They are isolated and usually finite.
So what happens when a challenge impacts an entire market place? In the case of the 2020 pandemic, we have seen mass store closures creating a huge pendulum swing toward on-line sales. Those that had an established eCommerce business where the ‘lucky’ ones while
everyone else scrambled to expand their on-line sites to eCommerce or even create a new site from scratch. The pendulum has certainly swung hard in this one direction. It seems that every paper I read these days every road leads to digital commerce and the accelerating death of retail (particularly in the Mall). It seems everyone is focused on eCommerce and the challenges it takes to create, deliver, service and build this side of the business to leverage the current state of the market place. Incredibly important for the majority and likely represents the single most important avenue in keeping any businesses head above water.
Sometimes, however, the problem with such swings in correcting a business is that it can take our eye off the ball in other areas that may present a completely separate set of problems in the future and force the ball to swing once again in another direction. These massive swings in direction can sometimes do damage. A business can become so focused on driving an eCommerce business that other revenue streams, already under pressure, dry up or fall way behind in terms of time and attention. We are certainly not yet out of the woods with COVID- 19, but we will get there. Scientists are already warning of other unseen viruses and pandemics in our future. What happens if the next virus does not impact humans, but rather our digital world. We would see a pandemic of a different kind and yes, we would swing the pendulum once again in the opposite direction. Those retailers that managed to stay afloat without investing in digital commerce now look like the ‘lucky’ ones and it is the pure play eCommerce players that suffer. Crazy? Not really.
If you have read any of my other papers this summer (check out mozaiclab.com to read them) you know that I am a believer in a portfolio approach to distribution. Similar to your investment portfolio, it is unwise to place all of your bets in a single sector. I believe this to be true with distribution. Having a balanced approach between digital commerce, owned retail, wholesale and international distribution is usually the most stable approach. If you think about the most established lifestyle brands, they usually take this approach, particularly in the footwear space. Don’t get me wrong, it is right for any retailer or brand to place great focus on digital commerce today. My argument is to do so not at the detriment of the other revenue streams. Each one is there for a purpose representing varying degrees of risk, reward and brand messaging. This is probably the best way to keep such pendulum swings in check.
In my paper from October, I argued that digital might save brick & mortar. I still believe this to be true. It means, however, brands and retailers will have to look at digital well beyond owned retail/ecommerce and how this technology can enable/support wholesale and international distribution (let alone other new channels of distribution in the future). This is how omni- channel, seamless commerce or whatever we are calling it these days will truly occur. It is also a great way to keep the other revenue channels in the conversation and ensure this part of the business is considered and does not get lost or fall too far behind. With a balanced business, retailers and brands are far better positioned to weather storms or more importantly, leverage storms. Ready to shift priorities to other channels that will maintain cash flow and continually drive brand equity. Positioned to be that partner that supports retailers and can be counted on during thick and thin. Always prepared and positioned to view challenges as opportunities. Yes. These will be the lucky ones!