New research: 4 post-pandemic scenarios for the future of retail

In recent months, retail, footwear and apparel (RFA) product creation leaders have focused on their immediate response to COVID-19. As retail locations reopen globally, product leaders must shift their focus to address long-term implications for the future. 

Kalypso wants to provide our clients the confidence to respond in the post-COVID world. We brought together Kalypso’s consumer industry leaders and the latest strategic foresight methodologies around the central question:

How might the value chain for North American and European RFA markets evolve and shift in the next 5 years?

What’s a Scenario?

Kalypso developed four alternative future scenarios for the year 2025. Scenarios are plausible, provocative alternative views of the future. They are meant to magnify change happening today and challenge our assumptions about tomorrow. 

Scenarios are not predictions of the future but tools to spark discussion in order to build more resilient operating models and refine product strategies in the face of uncertainty.

Each scenario is modeled after a plausible economic recovery scenario. The economic recovery timelines are an abstract representation of the trajectory of real GDP, real income, employment, industrial production, and wholesale-retail sales from 2020 to 2025.

Below is a summary of each scenario, as well as a high-level overview of the implications these recovery scenarios have on what product creation leaders might make (in the form of artifacts from the future) and how products are made (in the form of value chain enablers).

In this scenario, consumers largely return to pre-COVID shopping habits, but the poor economy stunts spending, driving brands to prioritize efficiency, cost reduction and risk mitigation over innovation. Product teams’ reliance on virtual collaboration during lockdown accelerates the adoption of digital product creation tools, especially in material development, fit simulations, and virtual line reviews. For consumer insights, merchant and sourcing teams, backward-looking projections give way to predictive analytics that more accurately model new consumer behaviors and complex, geographically dispersed supply chains. Meanwhile, channel teams encourage high margin online consumers to continue to engage virtually even as they return to shopping in-store. 

Artifacts from the Future

In this scenario, we imagine products that empower consumers to optimize home environments and express values and personalities. Common product attributes include digitally enabled circular production, climate positivity, versatility. 

Critical Value Chain Enablers

Retailers and brands who lead in this scenario will invest in the following product development capabilities.

  • Product teams adopt more efficient, flexible WFH and virtual collaboration models proven out during lockdowns

  • Merchants rethink assortments to balance desires for expressive, unique and personalized styles with societal values 

  • Sourcing Teams rebuild fractured supply chains to provide visibility, mitigate risk and optimize for speed and efficiency

In this scenario, waves of economic recovery and COVID resurgence drive consumers to adopt a new socially-distant normal defined by home life. Physical product development is a pre-COVID relic as product teams abandon the office in favor of safer, faster, virtual ways of working enabled by the digital thread. Volatility necessitates responsiveness as brands turn to ubiquitous data to frequently tweak slot plans, rebuild assortments, rapidly alter designs, reforecast orders, and remodel supply chains. Product becomes less seasonal, more modular and more dependent on available materials in this domestic and hyperregulated market. Channel teams defund unsustainable brick & mortar in favor of enhanced online experiences.

Artifacts from the Future

In this scenario, we imagine products that monitor health and provide a sense of security. Common product attributes will include smart connected, device compatible, protective, versatile / multi-purpose, and modular.

Critical Value Chain Enablers

Retailers and brands who lead in this scenario will invest in the following product development capabilities.

  • Product Teams abandon the office and adapt to a faster, seamless virtual collaboration model

  • Merchants abandon rigid seasonal constructs in favor of more flexible, but complex, seasonless product capsules

  • Vendors partner with public and private entities to vertically-integrate and automate domestic production and distribution

In this scenario, COVID-19 fundamentally changes consumers, who adopt more localized, less-is-more, values-first buying habits and curtail retail shopping. Merchants strip down assortments in favor of long-lasting, high-quality, seasonless, genderless and sustainable product. Brands reduce central headcount, turning to lean teams of remote talent who rely on virtualization, simulation and automation capabilities to design and develop product efficiently and with minimal waste of scarce resources. Emphasis is given to developing sustainable materials and to local, no waste, just-in-time, automated manufacturing. Retail outlets are retooled to enable a circular product lifecycle with end of life repair and take-back programs.

Artifacts from the Future

In this scenario, we imagine products that closely align to the wearer’s values. Common product attributes include environmentally conscious, DIY at-home, personalized styles and designs.

Critical Value Chain Enablers for Product Leaders

Retailers and brands who lead in this scenario will invest in the following product development capabilities.

  • Material R&D Teams focus heavily on the development of sustainable materials and the enablement of circular design

  • Insight Teams trade macro-market trends and global fashion shows for highly localized or individualized insights

  • Sourcing Teams optimize for locally available, responsive buying, just-in-time manufacturing and minimized inventory on hand

Consumers abandon retail outlets and limit spending to essential products, bought online. Channel teams react by divesting in brick & mortar and optimizing distribution centers and direct-to-consumer operations to minimize inventory and improve response times. Big brands consolidate to battle nimble teams that run entirely remote operations powered by virtual and automated workflows that drive efficiency. Product teams deemphasize sustainability, focusing instead on consumers’ utilitarian needs with simpler product that is designed, developed and manufactured for quality, durability, and affordability. New domestic factories retool for just-in-time, high-quality production using cheap, abundant labor and automation. 

Artifacts from the Future

In this scenario, we imagine products that provide protection and comfort amid uncertain times. Common product attributes will be bifurcated, where high-end attributes include bold, trendy, and high performance, but mass market product attributes include affordability, utilitarian, and ready-to-wear.

Critical Value Chain Enablers for Product Leaders

Retailers and brands who lead in this scenario will invest in the following product development capabilities.

  • Vendors retool for just-in-time, high-quality, production using a combination of cheap, abundant labor and automation

  • Tech Designers simplify patterns, reduce construction complexity and optimize for product quality and durability

  • Product Teams are entirely remote and leaner than ever, relying on virtualization and automation to support workflows

Next Steps for Retailers

With these scenarios, it’s less important to focus on exact timing and more important to assess the impact of the recession recovery pattern on society and the consumer industries. The scenarios will be unevenly distributed. Across and within regions, patterns from more than one scenario may even play out simultaneously. 

Download the full report for advice on how to prepare for an uncertain future.