At the time of writing, retailers in a number of countries are embarking upon or facing a second lockdown period. The added uncertainty, particularly so close to the Christmas shopping period, will be unwelcome. It will also reinforce the need for transformation that 2020 had already emphasized across the sector.

Already faced with a rapid acceleration of existing trends—particularly the shift to digital—and introducing new ones such as the increased complexity in global supply chains and the rise of new multi-brand consolidators, retail CEOs are focusing on what this next generation retail model will look like and how they can harness the coming changes to their advantage.

Of course, much will depend on changing consumer behaviors and priorities—from the driving forces of value versus values, the rapidly accelerated shift to online commerce, and whether another wave of the virus will stall recovery in the winter months.

But there will also be fundamental changes to the operating model that retailers need to understand if they are to adapt and survive. Seven years of change in seven months is a pace of change that presents numerous challenges. It also brings opportunities.

For retailers, this is a unique moment in time where expectations from consumer to investor, as well as colleagues, have been disrupted to the point that change is not only accepted – it is expected. Twenty years ago, the barriers to adapting to new operating models under the current conditions would have been so much more severe. Now, enhanced technology implementation is imperative, plus it’s the best opportunity to undertake this work while employee bases are most open to working in different ways.

Fit for the future

According to the Centre for Retail Research, there have been more than 125,000 redundancies in retail so far this year. It predicts close to 250,000 job losses this year and 20,000 plus store closures. This is a seismic shift in the sector, presenting huge disruption for both head office and core operations. The malaise in retail is a well-told story but the decline and disruption has been exacerbated and accelerated by the pandemic.

The impact of this will be twofold. Firstly, it means the retail model of the future will have to embrace a fundamentally different channel split due to store closures and the acceleration of the shift to online.

Secondly, due to the imposition of remote working, retail leaders will possess a huge amount of data about what happens in their head offices when many—or even all—of their staff are not there. They now have an opportunity to rebase their entire HQ operation.

This is an opportunity to accelerate long-term plans and create a more streamlined business. If approached correctly, it could lay the groundwork for future innovation and success by adding much-needed skills to capitalize on data and consumer insight and respond with greater agility.

Out with tradition, in with transformation

In a steady, stable market, mass restructuring or a huge overhaul of operations could feel excessive. However, today, sticking steadfastly to old, traditional ways of working is simply not an option. The extreme impact of the pandemic makes the need for cost reduction critical but that alone is not enough. Retailers need to look longer term, recognizing that ambiguity is here to stay and greater agility is needed to "roll with the punches" as we navigate our way out of the immediate grip of the pandemic and beyond. Radical and accelerated transformation is essential.

Retail leaders have a genuine opportunity to really think through how their business works, identify problems or inefficiencies, and make changes for the better. Legacy constraints around cost, technology, and culture have simply been blown away this year.

Key to achieving this transformation are data intelligence and network co-ordination—harnessing the ability to "plug in" and understand what consumers, the competition, suppliers, and other partners are doing and make informed decisions based on that data. Add to this the increase of automation across the sector (more than half of the jobs in the sector could be automated within the next decade based on existing technologies alone) and technology and digital move to the forefront of the transformation roadmap. For too long "digital" in retail has focused on e-commerce and taking an existing brick and mortar business online. Now, it needs to be at the heart of the business and its operations.

Look at where the money is going. Investors are not seeing physical retail as a viable investment option and digital retail is receiving the bulk of attention. Ocado recently overtaking Tesco as the nation’s most valuable retailer is the highest profile example of this.

The challenge for leaders

Channel disruption, head office, and operational changes plus the need to embrace new data and systems present huge challenges for more traditional, non-digital-native businesses. In the end, it comes down to capability—having the right people in the right roles. This is even more vital today as the required pace of change is rapid and those that procrastinate could well be left behind.

As the new model takes over, retailers will need a vastly different range of skills across their workforce, with an ever-starker contrast between store employees and those in commercial or core operations roles.

They will need employees who live and breathe customer service in front-of-house roles, alongside very technically adept teams in core functions who focus on what the data can tell them and act accordingly. This is a completely different workforce composition to that commonly found in most retailers and, for an added challenge, there will be huge competition to recruit the brightest stars. Add to that the need to identify the right leadership and competencies to take the business forward, then it is a considerable challenge.

However, there is still the need for differentiation—not every business can or should want to be Amazon. Retail—especially those in the non-essentials market—will always need inspirational thinking on strategy, values, and product to focus and communicate their core value proposition.

The reality is that most retailers are nowhere near the level of operational effectiveness that they need to be able to compete. As retail moves forward, its leaders must decide whether they and their management are ready and able to lead their businesses in the right direction.

Here AlixPartners Managing Directors Matt Clark and Brian Kalms discuss the next generation of retail model with the British Retail Consortium, listen here.