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EDITORIAL Dunelm, ASOS and Dixons Carphone show that investment in digital now essential

Digital transformation: COVID-19 has sped up change

With a number of key retailers publishing their results for the quarter that included the lockdown, the theme that is emerging is that those that had a strong digital presence did better than those that did not – or indeed those that were further behind with digital transformation.

Dunelm is a case in point. It has had an ongoing digital investment strategy in place for longer than many retailers and, during lockdown, that investment paid off.

While its store sales crashed 78% in April – logging an aggregate fall of nearly half across April, May and June – online sales soared by 85%. This in itself is not news. What is news is that the pressure brought to bear on Dunelm and all other retailers by this almost overnight shift to online, was dealt with. And that is because it had the systems in place to do so.

Huge spikes in orders, issues with meeting delivery service levels with a workforce and supply chain hit by illness absences and social distancing and unprecedented website traffic all had to be coped with. And the company did.

ASOS, too, shows that growth can come in this tough environment if you get what you do right. In its case, it had the systems in place to cope with the level of demand. Instead, it faced the challenge of what that demand was for changing. Where it predicated its spring summer sales on summer work clothes and ‘event’ wear, it suddenly found that the customers were there, but they wanted ‘lockdown wear’.

In March, ASOS saw sales drop by a fifth, but by April it had shifted what it sold and was back on track. Thanks to that agility, it has seen 10% overall growth and increased its customer base by 16% – driven by expansion in the EU, where it was more timely with its ‘lockdown wear’ offering than domestic retailers on the continent.

Dixons Carphone, on the other hand, hasn’t been so lucky – but only because its digital transformation programme was less advanced. It is actually in good shape for the next generation of retail that is upon us. It was in the process of rethinking how it used its store footprint and had shifted strategy to base its sales around tech advice and help.

A good strategy, but one that has been hit hard by social distancing. Shifting that to a more omni-channel process – which was phase two of its plan and is now very much front and centre – places it in a good position for the months ahead.

Many retailers have heeded the cry and are already accelerating their digital transformation plans. According to a study by Twilio, on average UK businesses say that the pandemic has already sped up their digital transformation strategies by an average of 5.3 years.

That strategy is one that has to involve mobile at its core. The growth in ecommerce in UK has been driven by not only a shift online of consumer shopping habits, but of a shift therein to mobile and social.

According to the latest Salesforce Q2 Shopping Index, UK m-retailing grew by 57% across the lockdown, with 13% of that growth coming from mobile social shopping.

The changes that are facing retailers are multiple and complex and understanding and meeting them is what Dunelm, ASOS and Dixons Carphone are all starting to show us.

However, there is a caveat. All of this is dependent on consumer spending. While shoppers have been unable to buy in stores, much of the drop in sales has also been down to a halt to discretionary spending. Grocery retailers have done alright, as we all still have to eat, but will homewares, fashion and electronics be something consumers have the confidence to buy?

This is the big question haunting retail and the government. Plans by chancellor Rushi Sunak to pump money into the economy by investing in infrastructure, training, de-furloughing and, essentially, taking everyone out for a £10 Nando’s, may yet help, but it is this that will be the real test of the robustness of all retail strategies.

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