Retailers have known that they are headed for trouble long before COVID-19 burst into the scene. Global trends for the past years were already alarming retailers. Recently, numbers for retail sales fell at 16.4% in April, higher than the number estimated by economists. Even big names like Kohls, Neiman Marcus, and Nordstrom are not immune, closing a record number of stores domestically and abroad, signs that they are in trouble and could very well be out of business in the next few years.
Even big-box names that seemed to be immune from previous economic upheavals don’t look so secure. Walmart and Target, for example, know that they can’t just rely on the old way of doing things if they want to survive in this new market, especially in a time when pandemics like COVID-19 can become a seasonal thing and digital platforms like Amazon are eating into their market share.
COVID-19 and Retail
“Retail has been in trouble long before the pandemic came,” said internet entrepreneur, Nicholas Beugg. A digital retail platform like eBay and Amazon have proven to be tough competitors delivering advantages that retail just cannot compete with. Now, COVID has delivered a fresh new blow, causing governments to shut down department stores, specialty stores and boutiques, grocery stores, and big-box retailers to avoid spikes in infection rates. These shut-downs can last for weeks and even months, effectively killing stores that were already struggling before the pandemic. It doesn’t help that government-mandated store closings cause a ripple effect, scaring customers into avoiding stores altogether even once restrictions are lifted.
Stores that struggled before now see this as a death blow and it shows. JC Penney, Neiman Marcus, and other established retailers were forced to declare bankruptcy, and more stores are expected to close in the next two years.
This uncertain environment brought about by economic and health-related factors means that retailers have to be extra-creative in coming up with solutions that will meet current restrictions while catering to customer demands. This means a shift in strategy and business models. But what should that strategy be?
The Perfect Business Model for Today’s Retailers
The vending machine is unassuming, ubiquitous, and efficient. It is also cheap, and it could very well be the business model that could save struggling retailers all over the world.
Vending machines equipped with smart technologies can do anything that a retail store previously did, for a fraction of the operating cost. It is also very space-saving, time-efficient, and secure, with security features like cameras and real-time sensors that can communicate automatically with the nearest police department.
Transforming Retail Spaces Into Vending Hubs
The key to adopting the vending machine business model is to turn existing retail spaces into micro fulfillment centers. These are mini-distribution centers that are located in the store to fulfill online order pickups and even facilitate actual sales through self-service and automated methods. Efficient and low-cost, they can allow retailers to recoup losses, save on operational costs while pivoting operations to adapt to new customer behaviors that are now often integrated with their online activities.
Microfullfilment centers make sense because they are modern, intuitive, and they can easily adapt to social-distancing measures. These centers require less labor but can stay operational 24 hours a day, 7 days a week. Applied efficiently, the retailer can reduce the number of associates to fulfill loading requirements and leave actual store operations to automation. Customers can place orders online and be directed to the nearest store location for pick-up. They can also have the option to have their items delivered from the nearest MFC. The entire process is quick, easy, and requires very little expenditure of resources from both sides.
Adapt or Die
With millions of retailers in the US, retailers have no choice but to adapt to current customer behavior if they want to survive. But this doesn’t automatically mean that stores have to close. Modifications like transforming retail spaces to integrate MFCs can still keep workers employed while improving customer satisfaction and enhancing efficiency by adapting to new technology.
Retail stores with MFCs installed can operate with or without actual customers inside. Online availability, ease-of-use and the fact that these centers can still be available to walk-in consumers mean that retail stores can stay operational and profitable. With MFCs, retailers create a better use for these retail spaces as they benefit from year-round savings in labor. “They effectively serve the needs of the customer, while providing cost efficiencies for the retailer,” said Nicholas Beugg.