Survival of the ɫttest: The future of retail

Shopping malls, which represent 30 percent of total retail trade with volume topping TRY 350 billion, have been closed since March 20 and will be fully operational again by June 1. But as health concerns over the pandemic persist, there are no long queues fueled by revenge spending sprees, and it looks as if most consumers are not ready for shopping in the near future, retail experts say. Looking at the future, retail authorities expect some consolidation to happen in the sector. Whoever wins battle for space outlined on page 6 - mall investors or retailer - both will have to face a ‘post-covid retail scene’ defined by a new set of consumption habits. Some experts see it as a catalyzer for retailers to move their operations to a more seamless world where leveraging data and analytics to forecast scenarios both for physical stores and e-commerce will give companies the upper hand. What will be the consequences of emerging consumer behavior in the short term? More importantly, what should retailers expect over the long haul?

>> ADNAN AKAN ˹ RETAILER AND CONSUMER INDUSTRY LEADER, PWC TURKEY NOT EVERYONE WILL SURVIVE THE TRANSITION

“The transition to e-commerce requires a total digital transformation. These investments are not something everyone can handle, due to a lack of financial strength. Therefore, consolidations and mergers may be seen in the future where companies that cannot adapt will disappear. Supply chains will be re-wired. Companies will face significant cost increases when they have to produce locally instead of in China or Bangladesh.

This will lead to economic burdens. Exiting will not be easy. Those with strong brands and successful customer service will shine. As revenues decrease, consumption of luxury food products and secondary needs such as readyto-wear will also decline. The biggest challenge of companies will be liquidity management, then revealing how new trends will take shape. Therefore, they will focus on issues such as supply chains, localization, strengthening e-commerce and direct access to consumers.”

>> ONUR OKUTUR ˾ KEARNEY

TURKEY DIRECTOR FUNDAMENTAL CHANGES IN POSTɓCOVID RETAIL

“We expect the massive shift toward e-commerce will continue to accelerate as millions of consumers have overcome their fear of online shopping and had a chance to enjoy the “convenience” of e-commerce. For retailers, this transition will create new challenges in their operations. Demand and capacity planning will be critical, as retailers need to plan their supply chains even more diligently. Logistics operations will be more complicated with an increased focus on timely and accurate “last mile delivery”, as post-COVID consumers will have higher expectations in terms of delivery speed and quality. And of course, the workforce of these retailers will need to change, as fulfillment and delivery centers will be the new centers of retail operations. Retailers have the chance to embrace digital transformation and use the post-COVID requirements as a catalyst to move their operations to a more digital and seamless world.”

>> GUN GOKKAYA ˹SENIOR DIRECTOR FOR CORPORATE FINANCE, EY TURKEY MALLS WILL BE THE ULTIMATE LOSERS

“The number of SMEs was growing already and those new comapanies had begun to eye e-commerce, where demand has now increased by 50 percent because of the pandemic; food sales through electronic channels has increased by 200 percent. We expect consumption expenditures in shopping malls to decrease due to health concerns. The Turkish retail sector will not see a recovery before 2021. Brands will need to find ways to survive during this period. They will need to strengthen their supply chains and turn to the street-level stores option while beefing up their e-commerce channels. The traffic and turnover of the 436 shopping malls in Turkey and the role of malls in the supply chain will be reduced for the foreseeable future, where complementary channels will strengthen.”

>> EMRAH AKIN˹CONSUMER AND RETAIL SECTOR LEADER ʳ KPMG FORECAST SCENARIOS WILL BE CRUCIAL

“As new covid-19 recovery strategies are cautiously unveiled, it is safe to say that stores will be opening their doors to a drastically different retail scene considering the changes in consumer behavior. Most economists do not project a strong outlook for retail spending in the first phase of recovery. Even if buying interest picks up for certain categories, it is expected to flow mostly through digital channels. E-commerce adoption will continue to accelerate whereas certain physical stores might be closed permanently. It’s crucial for consumer and retail companies to have a solid plan for the upcoming weeks for reactivating their business and adapting to the new reality. Just as consumers were accelerated into the digital world, organizations should follow suit. Leveraging data and analytics for forecast scenarios both for stores and e-commerce will give companies the upper hand in the postcovid retail scene.”

>> BURAK GUNBAL

MANAGEMENT CONSULTANT

NEW ERA WILL NOT BE ‘NORMAL’

“Consumers are not in the mood for shopping in brick-and-mortar shops located in malls in the biggest cities. The main motives for keeping distance is, of course, health, limited budgets and inadequate credit card limits. As a result, there will be four consequences of this new consumer behavior in the short term: 1) Malls will not be able to make up the difference in expected foot traffic, except for those in small cities; 2) Retailers in malls will only see planned buying but not impulse purchasing and markets will test their resilience; 3) We will see the rise of street stores, local stores and planned buying; 4) The new era will not be the so-called “new normal” since it will not be normal in any way. Everybody should be ready for a serious survival game and the best strategy to survive will be managing cash flow effectively.”