The five zeros reshaping stores

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Shoppers are reshaping the retail landscape faster than ever before. Nearly 40 percent have switched brands or retailers during the pandemic, and more than 80 percent have new shopping behaviors. More than half of those who used a new channel or service such as “buy online, pickup in store,” for example, said they would continue the practice post-COVID-19. As such, the omnichannel consumer has never been more powerful. They make purchases 70 percent more often and spend about 34 percent more than people who shop exclusively in stores.1 Based on the above, we expect cross-channel shopping to continue even as the pandemic fades.

However, consumers today are likely to be looking for more than convenience and cross-channel connectivity. As one 20-something shopper told us, “I don’t spend money in places I don’t believe in.” According to our survey of 999 American consumers in 2021, 45 percent of all consumers and more than half of Gen Z, millennial, and Black consumers believe companies should support Black-owned businesses. Among our survey respondents who agreed that companies should pledge to support Black-owned brands, more than 40 percent intentionally buy from Black-owned brands and are bigger spenders overall, doling out an average of 30 percent more on holiday shopping.2

The implications for retailers are profound. As the shopper continues to change—and expects retailers to do the same—customer experience, store operations, and talent become more inextricably linked on the journey to keep pace with customer preferences.

A great customer experience, in store and online, now requires end-to-end product availability and visibility, which in turn requires first-rate operations: talent in IT, logistics, procurement, fulfillment, and other functions. Similarly, in-store staff need to recognize when customers need help—and when they don’t. And with high employee turnover and the need to keep up with rapid changes in the marketplace, retailers must train new hires and longtime employees quickly, effectively, and at scale.

In case that to-do list doesn’t seem long enough, consider that one in three shoppers now expects same-day delivery—a share that will accelerate as fast-moving retail giants and nimble start-ups compete in the realm of customer experience.

One thing is clear: shoppers aren’t just browsing—they’re taking sides. To win their loyalty, retailers will need to keep raising their games.

How retailers can meet rising challenges

The margins for error in retailing are shrinking toward zero in five areas: shopping channels, customer assistance, delivery times, equity and sustainability, and talent (exhibit). We believe retailers will have to bend, reinvent, and innovate to meet customers where they are—and where they’re going.

Five ‘zeros’ are transforming the role of stores.

Zero difference in channels

To serve omnichannel customers better, winning retailers are reimagining channels and bridging the gap across supply chains, stores, web presence, and partners. Some players, such as Target,3 are transforming stores into supply chain nodes to serve customers both online and in the store. Target moved quickly and early to devote operations and space to e-commerce fulfillment, including curbside and in-store pickup, and has since evolved to ship-from-store in most locations. Staff are now cross-trained to pick goods from the sales floor and “fast moving” zones for certain SKUs to get nearby customers what they want, when they want it. A few retailers are now bypassing stores altogether with manufacturer-to-consumer (M2C) models.

Further blending channels, the “all on, anywhere” service model is permanently raising consumer expectations of zero differences in channels. Apple,4 a leader in this realm, makes specialist advisers available by phone, online, and in stores. Across every channel, advisers are armed with data about what products customers own, what updates they have made to their operating systems, and what support they have needed in the past. Staff are trained to advise customers on multiple elements of the purchasing process, including product selection, carrier plans, and financing options. Channels integrate seamlessly with Apple ID, allowing customers to schedule in-store appointments in seconds and helping reps to quickly recognize customers.

As channels blur, retailers will need to rethink traditional measures of productivity and what success looks like in the eyes of the consumer. Omnichannel is the new four wall,5 and metrics should reflect the cross-channel contributions of stores and managers.

Take action—suggestions on where to start

Redefine channels and the bridges between them. To provide a seamless omnichannel customer experience, companies can identify their weakest links and build a road map to strengthen them. Retailers could start by integrating back-office processes, for example, using inventory-management systems that incorporate distribution centers with stores and building reporting and tracking capability to track new four-wall metrics.

Zero need for assistance with transactions

Shoppers are giving retailers less “credit” for traditional and transactional services from checkout at cash registers to beyond. Our research shows that more than 70 percent of those who began using in-store self-checkout in the past two years, or used it more often, intend to keep using it after the pandemic. This indicates that self-service is the preferred service in these instances. By introducing technology at “transactional moments” of the in-store journey, retailers can redirect associates to activities that shoppers value more, such as intercepting the digital experience when it isn’t working and doubling down on consultative selling where help and guidance really matter.

Sephora and Trader Joe’s have both adapted the roles of in-store associates to pack more punch in customer support. At Sephora, they provide personalized recommendations and tips with the help of mobile devices loaded with customer loyalty data.6 Trader Joe’s, perhaps counterintuitively, urges staff to stock stores during peak shopping hours, increasing the chances that they will interact with customers in what they believe is a high value-add way: answering questions, introducing new products, and making cross-selling suggestions.7

Similarly, Sam’s Club and Decathlon have greatly eliminated low-value activities from the responsibilities of associates. Sam’s has partnered with Brain Corp to use robots that not only check for stockouts but also double as floor cleaners.8 Decathlon has partnered with Simbe Robotics to use its “Tally” robot to count inventory, identify out-of-place inventory, and assess trends in customer-purchase behavior to help sales associates serve customers more effectively.9

The race to zero is on for self-service. Self-checkout is at the forefront, and other areas such as stockouts, cleaning, and even returns are well on their way.

Take action—suggestions on where to start

Focus on value-added service. Every retailer should know which services matter most to the customer experience and the bottom line. Do customers truly prefer self-service, and when do they value consultative, personalized selling? How important is the expertise of in-store associates? The answers can guide decisions about where automation investments are warranted.

Zero wait for delivery

Two-day delivery is the new five-day, and instant will soon take its place in many markets. Amazon led the way in raising expectations by cutting average delivery times from eight days in the early 2000s to two days and even same day in some locations. More than 90 percent of consumers now see two- or three-day delivery as the baseline. Thirty percent expect same-day delivery, and they’re more likely to be willing to pay for it, especially if they’re younger, urban, and generally more time constrained.

Falling short on delivery times has consequences. When online customers discover during checkout that they may need to wait longer for delivery, about 46 percent abandon their shopping carts. This helps explain why more than 75 percent of specialty retail supply chain leaders have made two-day delivery a priority, and more than four in ten are aiming for same-day delivery in 2022. Many are now trying to figure out whether two-day or faster deliveries are realistic, how much each customer segment cares about speed, and how to partner with other companies to create new delivery models to meet rising expectations.

Some retailers are responding to the challenge by offering more options. Walmart, for example, has continuously evolved its delivery offering. It acquired in 2016 to offer a broader assortment online and grow e-commerce capabilities. Since then, the company’s delivery model has grown to include free two-day shipping with a purchase of $35 or more or with membership in Walmart+. In the new Walmart InHome program, delivery associates bring groceries into consumers’ homes and put them directly into cabinets and refrigerators.

Retailers that don’t have these in-house abilities are already partnering with third-party delivery services. Macy’s now partners with DoorDash to provide same-day delivery of select goods. The emergence of quick-commerce players such as Gorillas in Europe will raise the stakes even higher. Gorillas’ vertical or “dark store” model includes micro fulfillment centers to deliver groceries and other everyday items by bicycle in as little as ten minutes for a fee of about two dollars.

Take action—suggestions on where to start

Define the delivery promise. Based on what customers expect, a retailer should determine the capacity needed to meet those expectations—and how quickly they might change. Delivery capabilities range from in-house (through ramped-up in-store fulfillment) to new partnerships with rapid delivery players. Retailers whose products are customized or otherwise worth a wait can be more transparent with customers about where their products are in the journey to their front doors.

Zero tolerance for inaction on equality or sustainability

Consumers, especially the coveted Gen Z and millennial segments, are increasingly anchoring their retailer and brand choices on sustainability, diversity, equity, and inclusion. About 90 percent of Gen Z shoppers believe companies should address racial equity, for example.10 Their convictions can be strong. As one shopper told us, “Companies have huge leverage. And if they don’t support diversity, equity, and inclusion efforts, they do not share my values. So why would I give them my business?”

More than half of Gen Z and millennial consumers say they’re aware of brands’ commitments to sustainability, and more than 40 percent consider sustainable practices in their purchases,11 spurring a rise in preowned items in the circular economy. Retailers are responding with innovations in their business models. Rothys, for example, has moved to streamlined packaging including a minimalist, eco-friendly shoe box that can be resealed without tape for returns. The company relies on wind to power its headquarters.12

Consumers no longer just talk about their values; they spend to support them. In the current marketplace where 40 percent more shoppers are trying new brands, their zero tolerance on values is more consequential than ever.13

Take action—suggestions on where to start

Put diversity front and center. Every retailer should take a clear-eyed look at diversity in the ranks and on the shelves. It can count the number of diverse and Black-owned brands in its merchandising mix, for example, and tally the revenue generated by those brands. (Most fall short of where they and their customers want them to be.) It can also review diversity in staffing, particularly in leadership positions. Based on its baselines, the company should set aspirations, craft realistic plans to get there, and near-in key performance indicators (KPIs) to measure progress. Many companies enlist the guidance and partnership of nonprofits, accelerators, and other third parties.

Zero wiggle room for talent

The pandemic has greatly raised the stakes in recruiting and retention. Retail job vacancies in the United States rose from about 446,000 in April 2020 to more than a million in December 2021, according to the St. Louis Federal Reserve.14 To recruit and retain the right people, retail leaders are raising pay, providing more autonomy (through, for example, flexible “gig” schedules), promising better career paths, and more. Traditional recruiting and onboarding will not be enough for most retailers in the years ahead. They will need new approaches to talent that infuse data from end to end, from AI-driven hiring to digital training throughout employees’ careers to flexible staffing models.

Automated recruiting and management are still in their infancy but showing great promise. For example, CVS partners with Modern Hire to bring data and personalization to the hiring process and raise recruiting success.15 Modern Hire automates parts of the hiring process including screening and initial interviews while gathering and leveraging personalized data to ease the process for candidates, recruiters, and hiring managers.16

On the training front, Walmart pioneered the use of virtual reality (VR) in 2018 in a partnership with Strivr, using Oculus Go headsets to train employees on in-store pickup.17 Since then, the company has offered this training to more than a million associates in the United States.18 According to Walmart, those who use the new system report 30 percent higher satisfaction, score higher on tests 70 percent of the time, and demonstrate 10–15 percent more knowledge retention than before VR.19 Sam’s Club put its own martial arts spin on training by awarding white, blue, and orange belts based on the skills employees master, from using knives in food preparation to budgeting.

Take action—suggestions on where to start

Modernize talent management. With competition for labor fiercer than ever, retailers must up the ante on how they hire, train, and retain people. We often recommend surveying frontline employees to understand their pain points. Some retailers are too slow to respond to applicants and lose out on great talent. Some training creates stress rather than getting associates excited about their work and career opportunities. Compensation is always important, but talented people are looking for much more today, including autonomy, flexibility, and especially a sense of purpose. (For more on this topic, please see “Great Attrition or Great Attraction? The choice is yours.”)

The time is now

As changes accelerate in consumer behaviors and attitudes, retailers with “wait and see” approaches will only fall further behind. The bad news may not be apparent immediately, since frustrated or disappointed shoppers may not lodge a complaint. Instead, they may simply walk out the door or abandon their shopping carts, never to return. They will find another retailer that understands them and moves fast to meet their needs.

There’s no time to waste—the race to zero has already begun.

Hear Tiffany Burns and Tyler Harris discuss the “five zeros” on this related McKinsey on Consumer and Retail podcast episode.

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