“Operational-efficiency software” refers to software that helps farmers plan, monitor, and analyze all operational activities. Car manufactuerers and their retail partners should use COVID-19 as a catalyst to a new model for automotive retail, according to a new report by McKinsey Automotive. Please email us at: McKinsey_Website_Accessibility@mckinsey.com But things are getting a lot tougher: growth of online retail sales is cooling, dipping from the heady 40 and 50 percent annual rates seen in the early part of the decade to 25 percent compound annual growth in the past few years (Exhibit 2). hereLearn more about cookies, Opens in new Proving that farmers aren’t digital averse, they rely on many digital sources (such as online searches, brand and company websites, and social media) to identify new products and conduct initial research. We'll email you when new articles are published on this topic. 5 Use minimal essential Digital upends old models. For every store slated to be closed, the retailer was able to calculate the halo effect and recapture rate of that store in sales volume. The company then created new offers based on insights from the social media analysis. By simulating store closures, the retailer was able to calculate the total economic value of each store, which provided insight into the portion of e-commerce sales that stores contributed as well as the volume of sales redistributed to other physical stores. This article was edited by Cait Murphy, a senior editor in the New York office. McKinsey emphasises that the pandemic has generated an unprecedented crisis that has altered the shopping habits of consumers. The COVID-19 pandemic has upended the retail industry, forcing the closure of physical stores and causing uncertainty for the future of the in-store experience. As consumer companies trend more and more toward 24/7 customer service, farmers too are likely to shift toward a more “instant” mentality. The speed at which some retailers have been able to stand up new omnichannel models (for example, launching a new delivery business in three weeks) shows what a truly agile operating model can unleash. The priority for many customers today is to get in and out of a store as quickly and safely as possible—if they choose to go in at all (Exhibit 4). Press enter to select and open the results on a new page. McKinsey Global Institute Our mission is to help leaders in multiple sectors develop a deeper understanding of the global economy. People create and sustain change. Retailers need to raise their metabolic rate—that is, the speed at which they process information and develop new offerings. For example, a website should make it easy to direct farmers to the nearest store or to a salesperson. Online shopping is central to both the economizing and the nesting trends. According to a report by McKinsey & Company, 15% of online … 2 Done properly, this effort will help companies enhance customer experience and safety while trimming operating expenses. Brands are retail's most powerful connection points, creating lasting bonds with customers, employees, and investors and driving higher sales and more stable profits. Footwear retailer DSW, for example, has partnered with grocery chain Hy-Vee to offer products through the grocer’s extensive network of physical locations. The pace of change in the post-pandemic environment will force retailers to continually reassess their strategies. European farmers do not purchase much online, but they have proved willing to adopt new technologies and practices in many areas. Optimized for your mobile phone. ... McKinsey's message for business leaders is: Congratulations for making it through 2020. Retailers can partially offset diminished foot traffic in physical stores by boosting investments in online acquisition. These abrupt shifts have left many retailers scrambling to effectively serve customers through other channels. With more customers now engaging through mobile devices, retailers must ensure that all digital channels are integrated and offer consistent services (such as payment options) and experiences (such as shopping carts updated in real time across devices). Additional priorities include high-functioning landing pages and consistent marketing messages. Download the full report on which this article is based, Rebooting retail: How technology will shape the future of retail (PDF–7.9MB). Examples include accounting and payment processing, calendar and planning programs, and collaboration tools. European farmers are early adopters in many areas—for example, yield improvement, sustainability, and animal welfare. Even so, there isn’t a single product category in which online retailers lead other buying channels (such as in-store retailers, company sales representatives, and farmer–dealer or co-ops) in the sector. If not everything can be done via the phone, laptops are the next preferred option (82 percent use them to research or purchase products). McKinsey Quarterly. For example, cutting-edge data sources can be used to get a detailed view of micro traffic patterns. 1. In 2021, McKinsey estimates that online will account for 37 percent of fashion and luxury retail sales, both in the U.K. and in China. Many of the opportunities can be captured quickly by changing store hours, improving scheduling, and altering the mix of full- and part-time employees. We strive to provide individuals with disabilities equal access to our website. If a store is added, what is the halo effect on online penetration? In addition, as retailers reformulate their customer experience, they should bring customers into the design process to share feedback as ideas develop, ensure new offerings are meeting actual needs, and de-risk initiatives along the way. The evolution of the physical store’s role as a core component of the omnichannel journey has also affected store layouts. Such arrangements give retailers access to new shopping occasions and new customers, and can extend one retailer’s brand halo to its partners. In apparel and fashion, for example, one of the main impediments to online purchasing has historically been the inability for customers to see how items would look on them. It covers compliance, crop-economics, inventory-management, pricing, and risk-sharing models. ). McKinsey Global Institute. In China, for example, Taobao Live made it easier for brick-and-mortar retailers to join its livestreaming channel platform, leading to a 719 percent increase in participating merchants in February 2020 compared with the prior month. Investors can capitalize on European farmers’ increased online acquisition of inputs and equipment by … McKinsey COVID-19 Mobile Survey, April 21–25, 2020, n = 5,013, sampled and balanced to match general population (except India, which has a higher focus on consuming class). These adaptations include paying closer attention to paid search (for example, looking at not just keyword performance but also consumer intent) and improving the “shoppability” of social channels (for example, through featured products and clickable content on Instagram). With that in mind, here are some ways to do better: Improve the online experience. Around 45 to 50 percent of retailers had plans to prioritize a mobile app or point-of-sale experience this year, and several companies have accelerated their efforts in response to the pandemic. 4 This effort will require them to reallocate funds for offline media to digital channels. Retailers are augmenting direct customer interactions with engagement in apps and other relevant channels. Europe. 8 Flip the odds. That is why it is important for players in the market to start thinking and working toward 24/7 service, or as close to it as possible. The workforce will need to be redirected from less-relevant activities to priority areas. 1) Determining market attractiveness is a tough task especially looking at the fast paced market environment. 1) Online Retail Business Plan. More than 60 percent of global consumers have changed their shopping behavior, and this adjustment has brought a rise in livestreaming, online shopping, and curbside pickups. Please email us at: McKinsey Insights - Get our latest thinking on your iPhone, iPad, or Android device. Retailers are also reassessing store formats to support third-party delivery services. Use minimal essential Target consumers based on their stated propensity to use digital. Please note that McKinsey & Company does not endorse any of the listed websites or their sponsors. Online spending over Black Friday this year surged nearly 22% to hit a new record of $9 billion while Cyber Monday online sales reached $10.8 billion, the largest U.S. online shopping day ever. In apparel and fashion, for example, one of the main impediments to online purchasing has historically been the inability for customers to see how items would look on them. McKinsey COVID-19 US Consumer Pulse Survey, April 20–26, 2020, n = 1,052, sampled and weighted to match US general population aged 18 years and over. The retail industry has undergone significant transformation over the past decade, and continues to evolve quickly. Indeed, research before the pandemic found that opening a new location increases traffic to the retailer’s website by 37 percent the following quarter. In addition, while building and nurturing online communities are not new ideas, they have gained momentum. Learn about our use of cookies, and collaboration with select social media and trusted analytics partners here Learn more about cookies, Opens in new tab. Dan Alaimo, “Amazon now dominates Google in product search,” Retail Dive, September 7, 2018, retaildive.com. If European farmers increased their online purchases, the opportunity in the four largest country/agri-segment pairings—German crops and cereals, German livestock, French crops and cereals, and Spanish fruits and vegetables—is equivalent to €11 billion. The 2019 survey question asked about farm equipment as one large category that included both new machinery and replacement-part purchases. In grocery, e-commerce penetration, which has risen from 2 to 3 percent before the crisis to 8 to 10 percent during its peak, is expected to settle at twice the previous “normal” level, 5 to 7 percent, by year’s end. The retail world—with its relentless big bets on trends and timing—has never been a haven for the faint of heart. In the 2020 postpandemic survey, we separated new machinery and replacement parts into two categories. As a result, LVMH and Kering are adjusting their strategy for the affluent Millennial shoppers. Retailers should also adjust their analysis for the impact of COVID-19 and determine if store performance is the result of underlying intrinsics or just the physical store location. However, these attitudes and practices might be changing because of the coronavirus pandemic; a follow-up survey in May 2020 found that a much higher percentage of respondents are now saying they prefer to purchase agricultural products online. For example, making the highest-selling (and ideally highest-margin) products easy to find helps to make the customer journey more seamless. We have seen a consolidation of shopping trips: in China, for example, the number of transactions in grocery declined by 30 percent during the pandemic, while the average value per transaction increased by 69 percent. The graph shows a steady climb from around 1% of retail sales in 2000 to close to 16% in 2019. This is an interview with Sajal Kohli, a Senior Partner at McKinsey, and head of McKinsey’s Global Retail and Consumer Packaged Goods practices, on revelations from this survey. For retailers that have closed stores during the pandemic, the reopening process offers an opportunity to establish new models. Including approximately €50 billion for animal feed, €46 billion for agricultural equipment, €13 billion for crop protection, €10 billion for seeds, €16 billion for fertilizers, and €5 billion for agritech. Shoppers have cited a number of … This approach requires more real-time insights on customers as well as a new agile operating model to harness these insights and put them into action. McKinsey emphasizes that the pandemic has generated an unprecedented crisis that has altered the shopping habits of consumers. Examples include fleet management, guidance systems, and production planning. A third say they prefer to purchase online, but only 13 percent actually do so. 2. Please email us at: McKinsey_Website_Accessibility@mckinsey.com Second, retailers have been developing alternative engagement models to de-risk digital-purchasing decisions. McKinsey research shows that more than 60 percent of global consumers have tried a new shopping behavior since March, and 40 percent have shopped at a new retailer. More than half of dairy and livestock farmers, for example, use animal-health-optimization software. McKinsey Global Institute. 1) Online has grown steadily as a percentage of retail sales since 2000. Many U.S. consumers have experienced economic hardship due to the pandemic. “Taobao live accelerating digitization of China’s retail sector,” Alibaba Group, March 30, 2020, alibabageoup.com. 6. In just two weeks, the company conceived, developed, and launched a grocery-delivery service that enables customers to order entrées from the core business and add groceries to a unified online cart. Please try again later. As stated in the report, in 2014 online retail sales in … Partner Nicolas Denis says covid-19 has helped erode European farmers’ skepticism of buying inputs and equipment online, which only accounts for annual sales of €150m to €200m in a €138bn market. Online retail, on the other hand, is thriving. Launch or diversify delivery mechanisms. Please try again later. We use cookies essential for this site to function well. Retail La rivoluzione digitale e il cambiamento delle abitudini di acquisto e di consumo impongono cambiamenti rapidi e radicali per gestire in modo efficace ed efficiente modelli di business in logica multicanale. Once farmers have left suppliers’ websites to evaluate products elsewhere, they don’t have a habit of coming back to the original sources for purchase. Partner across retail to enhance convenience. Learn more. The implication is that there is an opportunity for companies in the agriculture industry to accelerate their online presence, work out omnichannel strategies, and maybe even change their business models entirely to meet farmers’ needs better. 5. The economy slowed last year, with real GDP growth declining to 1.9 percent in Q3 from 3.1 percent in Q1. Please email us at: Taking a comprehensive, data-driven approach to store closures. Please click "Accept" to help us improve its usefulness with additional cookies. 1 The traditional automotive retail model is under severe pressure 7 1.1 The current retail model does not satisfy customer expectations anymore – pain points across the car-buying journey persist 9 1.2 Customers’ online expectations are rising and acting as a catalyst for change across Our mission is to help leaders in multiple sectors develop a deeper understanding of the global economy. 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