Service is king
New Zealand’s new way to shop
Shoppers in the postCovid world could see a return to the style of the old department store days, when service was king. Jonathan Elms, Massey University professor of retail, says “Mr Selfridge” days are ahead, with retailers more aware of trends in the market and what consumers want, and reverting to service-based retailing.
There is no doubt that the pandemic and subsequent closure of shops has changed New Zealanders’ spending habits, says Elms.
After more than six weeks of spending being limited to the essentials, retail analysts expect consumers to be more cautious about parting with their money and who they spend with.
Elms expects retailers to return to simple ways of operating: a focus on quality products, building strong customer rapport, a concentration on service, and offering consumers a reason to visit a bricks and mortar store.
“It’s all about personalisation and individualisation, trust and rapport — that’s what good retailing is about,” he says. “The principles behind the ‘Mr Selfridge’ type era are as relevant today as they were 100 years ago.
“Today it will be on different platforms, it won’t necessarily be a department store per se. Consumers will demand more and retailers have to live up to it — and it’s not just about price; it’s about the service and experience.”
Elms says lockdown would have been a time of reflection for consumers and many would not have missed the non-essential goods they’d become accustomed to buying before the pandemic.
Most Kiwis would now be in a “positive space” and used to life under lockdown and the new norms it had created, he says, so the old ways of living and purchasing would not have the appeal they once did.
“Covid has messed everything up in the sense that we are having to relook at and re-think through how we buy things, why we buy things and where we buy from.
“Some of the activities that we have been engaging in over the last four weeks, we’re likely to take them forward with us,” he says.
Online spending domestically has enjoyed a huge increase over the past couple of months, at the same time as spending at international merchants has fallen. Sales at domestic online retailers were up 24 per cent in March, boosted by an increase in spending on groceries and liquor. Spending at international sites, meanwhile, was down 18 per cent on March last year, according to figures from BNZ.
The rise in online shopping is expected to continue, now that people who were not familiar with buying on the internet have enjoyed the convenience, says Elms.
He predicts that once the pandemic has blown over, New Zealanders will buy in bulk, and online will become the preferred method of shopping, with visits to a physical store perhaps limited to checking out a product ahead of a purchase, or to pick up an online order.
“[It may be] that we change and don’t want to be in stores for a variety of reasons. Covid-19 has acted as a trigger to displace what we were used to, and the more disruptive it has been, the more we have reflected upon our past behaviour, and the more likely we are to continue that moving forward.”
Online orders will grow in volume and sales values, and the range available online will be wider, he says.
Consumer research conducted in recent weeks has found that New Zealanders are now more patriotic and willing to support local businesses than they were before Covid-19.
“There’s this feeling that we’re trying to get the New Zealand economy going again, that we’re all in this together and need to be supporting our local domestic businesses,” Elms says. “Things seem to be more localised than they have ever been, and I think this trend will significantly increase.” Sustainability will become paramount for consumers once a new sense of normality is established.
Elms says the pandemic’s impact has the potential to be positive, as it is causing a rethink in the way businesses operate, and in consumption habits. “I think there’ll be a move towards fix and repair, I think fast fashion retailers will accommodate and evolve to match those new realities,” he says.
“Absolutely, Covid-19 has the potential to do some very negative things for the economy and people’s health and wellbeing, but at the same time there is inevitably going to be opportunities emerge from it in a positive way.”
In the months ahead, it will be crucial for retailers to have a userfriendly website. Before the pandemic, this was not considered essential for an organisation’s success.
“I would have said six months ago that some businesses could operate very successfully having a robust bricks and mortar store, but I think that is now a risk and to minimise the risk, retailers — regardless of their size or what sector they are from — need to reconsider what they are doing in terms of their online operations because it provides an avenue to reach the consumers,” Elms says.
“Expectations have changed, business models have changed and the landscape as a whole has shifted dramatically.”
As well as developing their e-commerce strategies, Elms says retailers are also re-examining their supply chains. “Over the past 20, 30 years, supply chains have become more and more globalised, involving multiple different businesses and multiple different countries. We’re now in a situation where if one of those businesses falls down or the commercial landscape of a particular country isn’t as gelled together perhaps as New Zealand, then the whole chain will fall apart. So I think a lot of businesses are looking at more domestic or regional supply chains rather than global ones.”
This could result in large retail chains bringing manufacturing back to New Zealand or Australia.
“The indicators at the moment suggest that firms are considering their place and where they buy stock from. Whether that is going to be a shift back to having items manufactured in New Zealand, I’m not sure,” says Elms.
He believes New Zealand retailers will experience an initial spending rush as the alert level eases, but that will die down as people become aware of their personal finances and wider economic uncertainty.
But retail spending could return to pre-Covid levels within six months, depending on how quickly the wider economy can bounce back and security returns, he forecasts. “New Zealand is very well placed to bounce, relative to other places in the world.”
Retail analyst Chris Wilkinson, managing director of First Retail Group, also believes retailing will rebound in the coming months, but he warns that it won’t last long.
“As stores open there may be a flurry of activity, but we shouldn’t confuse that with long term; we think it will subside as people work out where things are at,” says Wilkinson.
He, too, says retailing is faced with new consumer values and changing expectations brought about by the pandemic, which “creates a real need for businesses, shopping environments, town centres and cities to understand these changes and respond to them meaningfully.”
Even before coronavirus, consumers had been moving away from products in favour of experiences, and Wilkinson believes this trend will be heightened as pandemic restrictions are eased.
“People have changed their behaviours seismically through this and what we know is transformational behaviour happens over time, and when you do have that it is hard for some people to go back to the way they were.”
As a result, retailers will have to rethink their store portfolios, particularly where they place their shops, Wilkinson says. “Retail will really need to focus on aspiration . . . and not just being another store or shopping destination,” he says.
“They will want to consolidate and cluster, and what we’re already seeing is an appetite for what we call ‘category clusters’, here and in Australia, where businesses can be confident that they are going to have bigger audiences if they sit alongside a competitor in the area.” Shopping malls would need to shift to become more entertainment-based, or offer compelling events to draw shoppers back post-Covid 19.
Expectations have changed, business models have changed and the landscape as a whole has shifted dramatically.
Retail will really need to focus on aspiration . . . and not just being another store or shopping destination.
Chris Wilkinson, First Retail Group