Marc-André Kamel (WG'92) featured in the Wharton Magazine

A New Reckoning for Retail

Even before the spread of the coronavirus, retailers were rethinking their business models. Now, Bain & Company partner Marc-André Kamel WG92 is helping them adapt to an even bigger threat.
Marc-André Kamel
Marc-André Kamel WG92 of Bain & Company
by Braden Kelner
May 7, 2020


As the head of global retail at Bain & Company, Marc-André Kamel WG92 has been grappling with the coronavirus since its earliest days. “Because we’re a global firm, we have been deep in this crisis since the end of December with our clients in China,” he said. “It was really interesting at the start to see two worlds working at the same time: that of China and that of the rest of the world.”

Now, those two realities have converged, and the virus is having an unprecedented impact on business. Kamel recently spoke with Wharton Magazine to discuss some of the challenges facing retailers and the emerging trends that could help savvy leaders weather the storm.

Wharton Magazine: The coronavirus is reshaping almost every aspect of our world and will have longstanding implications. How will it affect consumer shopping trends?

Marc-André Kamel: There are three shopper expectations and three behaviors that are going to matter. First, because of the deep recessions most countries will experience, we expect increased price polarization and a flight to value. There was already some polarization happening before the virus, but it has been accelerated. Every consumer, including the wealthiest ones, are potentially going to trade down because they expect things to worsen.

There will also be less conspicuous consumption. That was already the case with younger generations, but this is going to spread to the whole population. People are less attracted to owning things. This is why, for example, in apparel we see new business models of rentals and secondhand shopping emerging, even in luxury.

The third expectation is the end of the globalization era, in a way. This one has two sides. The dark side is a rise in nationalism. The brighter side is that people have become more interested in local brands, such as produce from a local farm that was sold by a nearby supermarket that needed shorter supply chains. There has been an increasing sense of community, with people trying to make sure their local businesses stay afloat and collaboration between businesses.

As for shopper behaviors, the first thing we see is the explosion of digital strategies, in particular online commerce. We believe this is a trend that has been accelerated for good. But it’s not just e-commerce. It’s the use of social media, digital content, and other strategies. And as a result of the accelerated rise of e-commerce, we see the expectation of ultra-convenience. With this crisis, people who had never bought online before have tried it and found it acceptable.

Does that mean stores are dead? No, and the sixth trend is actually consumer expectations of new, adaptive, in-store experiences. By nature, we’re social beings who like to congregate, to touch and see things. We will still go to stores, but we now will expect stores to provide — beyond hygiene and safety — more experiences, better use of their space, and better use of our time in their space.

WM: Which retailers are most susceptible during this crisis and which ones are thriving?

MK: There’s a deep divide between the businesses that are thriving in terms of sales, and those that are almost dead because they were first to close — nonessential businesses in discretionary categories such as apparel, luxury, furniture, and restaurants. On the other side, we’ve seen grocers having problems with supply issues and labor shortages. It wasn’t easy for them but at least they were open and they were seeing a boost in sales.

If you are in a seasonal business like apparel, you had just brought in a clothing collection that you were supposed to sell all winter and spring long, but the stores are closed now and demand is depressed. So these businesses tried to secure more loans, money, government subsidies. It is highly likely that a number of them will not survive.

“Every business has a duty to try and become more agile.”

WM: What are some of the ways retailers will need to react moving forward?

MK: If you think that you can serve your customers after the crisis with exactly the same value proposition as before the crisis, you’re dead. It is imperative that every company revisit its value proposition, go with the flow, and meet customers where they are.

For me, there’s also an existential question here on scaling online profitability. Today, none of the traditional retailers are making money online. So the question is how fast can retailers change the business model and tweak the revenue and cost models to ensure that they can grow profitably. And as they do that, they have to think about their retail assets. They have stores, capital expenditures, money actually in the walls. Do they need all those stores? Should they take back the capital and put it somewhere else?

Another major question has to do with productivity and complexity. We have had to experiment during the crisis and have seen companies like grocers that were able to scale their revenues dramatically. At the same time, they experienced some labor shortages. Those factors combined have resulted in a massive surge in productivity. The question is, will retailers try to keep at least part of this productivity in the future? And I’m not just thinking about cutting things like labor costs. Retailers will have to think, “Do I need the marketing that I used to do before? What about the complexity of my product assortment, my supply chain?” The smart ones will try to maintain productivity, especially when people are trading down, and the others will lose market share and eventually die. Retailers will have to prioritize flexibility and resilience, because the worst possible thing they can do is be taken by surprise again by a second round of the virus.

The fourth imperative for retailers is the ability to think about open ecosystems. Like other trends, this has been accelerated by the virus. Retailers used to do everything themselves. Now, they have tasted working with businesses that have different resources and models. For example, a grocer could go to Uber Eats seeking that business’s capacity to help deliver groceries to clients. And if you expand that idea, retailers could start selling not just products, but services, by partnering with others and without needing to put up their own investment.

Then there’s a question revolving around the complexity of decision making. For example, Best Buy in a matter of days, implemented curbside service at all its stores in the U.S. The agility that all retailers have demonstrated tells you something about the virtue of fast decision making. This type of agility is unsustainable because leadership teams are working almost 24 hours a day, but they have gained in the ability to compete and serve the new needs of clients. You cannot go back; it’s impossible.

And the final thing is to be your own activist. Activists will take stock of everything — the need to change, the complexity of operations, the need to scale online profitability, to become more agile — and actually might go to management teams and force them to go in the direction to create more shareholder value. Retailers need to do this on their own terms. They can’t wait for someone to impose it on them.

WM: On the idea of agile business, do retailers that are struggling have the same opportunity to adjust as ones that haven’t been hit as hard by the virus?

MK: In our brief “The Future of Retail,” which we published 10 months ago, we identified seven retail archetypes that every retailer falls into. One of them we called “legacy laggards” —  incumbents that either don’t have the financial means or the capabilities to both run the business and also to change in the face of all the turbulence retail was already going through before the virus. In trying to maintain a certain level of profitability, these companies usually start to cut costs. We know how this ends: either in consolidation or failure. The crisis is accelerating this trend even more than we previously predicted. There are a bunch of retail companies that fall into this category, and they will find themselves in a very difficult position to react. But even the legacy laggards have to try. Some will succeed, and some won’t. But every business has a duty to try and become more agile.


For more on how the coronavirus is impacting the retail industry, read the latest from Knowledge@Wharton.