Merchandising Strategies for the New Normal

By Flora Delaney, Author of RETAIL: The Second Oldest Profession, Founder of Delaney Consulting, and One Door Contributor | October 14, 2020 | Blog

The following is a recap of the One Door’s on-demand webinar: Merchandising Strategies for the “New Normal” available here.

This has been one of the most disruptive years for retail in living memory. COVID-19 has fundamentally changed consumer behaviors and has forced retailers to respond rapidly to today’s market while adapting new merchandising strategies for the store of tomorrow.

I wanted to hear directly from retailers how COVID impacts their merchandising, store design, space planning and customer experience, to better understand their current challenges.

So, in August and September, I interviewed leaders from over 20 retailers, including the two largest U.S. mass merchandisers, the largest U.S. dollar retailer, two rural farm suppliers, big box stores in the home improvement, consumer electronics, office supply and pet space, national drugstore retailers, three regional grocery chains, as well as a sampling of apparel, footwear and nutrition retailers.

How will retail bounce back in 2021? Here’s what I heard.

Getting the Right Assortment Mix

Retailers will need to recession-proof assortments. Much like after the 2008 recession, people are making choices driven by their budget. Although shoppers are making fewer trips to the store, we’ve seen larger basket sizes during the pandemic to load their pantries. This trend is likely to continue.

Importantly, retailers are making decisions on where to hold assortments. With more subscription and delivery models available, which inventory needs to be housed in distribution centers, and which in-store? Do super premium brands still deserve a place on the shelf, or should the focus be on core SKUs?

Store Real Estate Fundamentals

Work-from-home has become the new norm, and all indications are that trend will continue long after the pandemic. Because they can work from anywhere, people are expressing a desire to leave populated urban and expensive suburban areas for more affordable, or more desirable, regions.

So, where should retailers site stores in the future? Should they stop trying to penetrate urban locations or is that short-sighted? Can they expand into rural and secondary markets that will now be supported by a growing and wealthier population? What does that mean for long-term planning, construction costs, and malls? Leases are coming up for renewal fast and retailers will need to make critical decisions on their real estate portfolios.

Macro Space Planning the Store of the Future

COVID has everyone rethinking their space. But, it’s important to separate permanent changes from short-term ones. Buy online pickup in store (BOPIS) and curbside pickup are here to stay. The people have spoken, and they sure love convenience. This will have lasting changes for how stores are planned and organized.

Sanitation is also a long-term trend. Stores will need to demonstrate safety in conspicuous ways. Are you making it obvious that carts are being sanitized and that touchpads are fitted with antimicrobial protectors?

Limiting time in-store is another long-term trend. Apps to help shoppers find products in the store quickly through their phones will continue to be table stakes. Store-within-a-store, grab-n-go, and more formal queue management systems will almost always be incorporated into space planning in the future.

More Precision in Micro Space Planning

Inventory went through upheaval during the pandemic as more people adopted omnichannel shopping. As we move into 2021, micro space planning will have to be more precise than ever. With less shelf space available in 2021, and fewer promotional locations, retailers really need to understand and forecast the most effective SKUs that will satisfy their customers.

Gaps in Space Planning Technology

The pandemic revealed gaps in legacy space planning systems that many organizations weren’t aware of such as:

Lack of store-specific planograms (POGs). Many organizations discovered they have POGs that are sent to specific stores, but not store-specific POGs. Are you sending one POG to 13 stores or creating 13 different POGs tailored to each store? Hint: it should be the latter.
No streamlined feedback mechanism. This perennial issue was magnified during COVID because many retailers deployed shopping apps. However, lacking precise, real-time feedback between stores and HQ has led to shopper disappointment and order picker inefficiencies when they aren’t finding items where they’re supposed to be.
Lack of integrated systems and two-way communication. It’s become clear that retailers need to more easily and seamlessly integrate a number of different systems, including customer mobile apps. What is your plan for a seamless digital ecosystem?
Work-from-home access. Space planning data is massive. As space planners and visual merchandisers work from home, many are finding problems with bandwidth capacity, locked databases and connectivity issues.
Ease of use. Legacy space planning systems are so complex to use, you have to be more technologist than visual merchandiser. Look for programs that are easier to learn and master so that planners can focus on what really matters – merchandising products in a way that makes it easier for customers to make decisions.

The pandemic is changing where people live, how they shop, and what they shop for. Brick and mortar stores are re-tooling their space and re-planning assortments, all while figuring out where stores should be located. Technology that might have worked 15 years ago is no longer meeting the needs and acceleration of change in the new normal of retail.

But there’s good news. As we head into 2021, it’s clear that excellent merchandising and space planning can give retailers a competitive advantage in the market that will make a difference to their customers.