Keywords

1 Introduction

The COVID-19 pandemic has brought unexpected changes to the world that have had a considerable impact on people’s everyday lives. People, businesses and economies have faced many uncertainties and have had to be ready to confront them. Retailers were among the first types of businesses to be faced with a new reality in the wake of the pandemic. Populations have been under lockdown, shops have been closed; consumer traffic has therefore decreased rapidly. New ways of living have changed consumer behavior. The FMCG sector has had to deal with the consequences of the pandemic and has had to adapt to the new reality as quickly as possible. The purpose of this study is to determine how Russian retailers have utilized the mechanisms of the omnichannel business model in order to adapt to the COVID-19 crisis.

2 Literature Review

2.1 Omnichannel Strategy and Consumer Behavior

The retail industry has developed in a step-by-step fashion over the last several decades: from mono- to multi- to the omnichannel approach to doing business [20]. Since the first study of the omnichannel retail concept was conducted by Rigby, more than 100 papers, research documents & business reports have been compiled explaining the idea [17]. Omnichannel is the business concept whereby retailers offer goods & services to consumers for purchase seamlessly, via several channels[9]. The omnichannel model is the embodiment of the key message from consumers: convenience is king, that is, goods should be able to be purchased anytime, anywhere and from any device [6].

In terms of category management, omnichannel development involves creating and managing categories in the right direction with consideration given to new “digitalized” consumer behavior. Furthermore, it affords new opportunities for collaboration between retailers and brands. Omnichannel seeks to create a holistic shopping experience by merging various touchpoints, allowing customers to use whichever channel is best for them at whatever stage of the customer journey they are in.

Figure 1 (left part) illustrates the key ideas of the omnichannel concept: the seamless connection is experienced by the customer whichever touch point is used. On the other hand, omnichannel strategy does not only involve the synergy of channels. Figure 1 (right part) shows that there are also various marketing tools in the “marketing mix” and barriers that must be re-evaluated in terms of seamless consumer behavior, both online & offline.

The omnichannel strategy is based on two tactical principles: showrooming and webrooming. Showrooming is a way of product purchasing whereby consumers are familiar with goods from viewing them in retail stores and then switch to e-commerce to buy them. With the showrooming approach, the consumer tends to receive a favorable price: before making a purchase, he or she wants to be aware about all the features of a product [3]. On the other hand, webrooming is a kind of consumer journey, where he or she searches for information about products online and then goes to the offline store to make a purchase, armed with knowledge about features, prices, responses & ratings [2]. Webrooming allows consumers to make a well-informed choice via comparative analysis of the websites, taking into consideration prices and the reviews of other purchasers. Smart shoppers tend to be those consumers who seek to minimize time, money and energy costs while enjoying a pleasant and worthwhile shopping experience [3]. Using the webrooming strategy, consumers consider themselves as smart shoppers more when they behave as a showroomer. [6]. When they use an omnichannel approach, consumers make a selection from a number of retailers, comparing them in both online and offline stores [8]. In order maximize omnichannel strategy efficiency, so that borders between online & offline become smooth, it is very important to consistently implement and follow the 4P marketing mix concept [8].

Fig. 1.
figure 1

Source: [4].

Omnichannel retailing, overview of digitalization and omnichannel retailing.

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2.2 Omnichannel Tactical and Factors for Concept Development

E-commerce demonstrates the highest growth rate among all channels due to the greater opportunities presented for retailers and consumers to make the customer journey more efficient [1]. Realizing consumer omnichannel behavior gives retailers an advantage over others in terms of satisfying consumers’ needs in the most appropriate way and building up their loyalty [23]. Webrooming is the fastest-growing behavioral strategy among online users. Nearly half of all offline sales are influenced by web searches [11]. This finding provides valuable insights to retailers into the importance of online searches, in terms of not only purchasing goals but also convenience goals. It means retailers must ensure that their web-based platforms provide all of the essential information for users. Do their websites feature in the top search results? Does the retailer give full consideration to 4P, make continuous improvements in these areas and actively respond to consumers’ challenges?

For instance, a good product cart with high-quality, detailed images and descriptions gives a comprehensive overview of the product but does not give a true understanding of the product “in reality”.

Another very important element of 4P considerations is the reviews of current users: positive reviews greatly increase the probability of a consumer making a purchase [20]. Online recommendations are a tool for making purchases, and consumers who follow the showrooming approach usually make use of this tool.

Nearly 82% (Google research) of users make use of smartphones to make purchases or to learn about the features of a product. To make the consumer journey more efficient, retailers must consider this fact and facilitate the process for consumers, for example by offering free WI-FI in shops. Besides this, the omnichannel approach requires that retailers be more efficient with in-store merchandising.

There are various mechanisms for connecting e-commerce & offline sales. For example, a sales assistant may help people to go online and buy products that are unavailable or not in stock in the physical store. To give another example, a salesperson can assist in navigating the consumer through the online purchase of non-marginal products [5]. In the second instance, both parties are beneficiaries; retailers avoid the need for surplus non-marginal SKUs on the shelves, but do not lose customers, while consumers still have the opportunity to purchase the required product, avoiding additional transactional costs.

Table 1 demonstrates two modes of omnichannel research: retail-oriented and consumer-oriented [16]. Omnichannel development requires retailers to reorganize their businesses from two perspectives: inside (firm-oriented factors) and outside (consumer-oriented factors). The table highlights the firm-oriented factors which should be given particular consideration before implementing the new omnichannel mechanisms.

Table 1. Firm-oriented factors of multi- and omnichannel approaches. Source: author’s analysis of literature
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Two distinct approaches can be taken in the formulation of an omnichannel model:

  • focusing on the primary role of retail and the subsequent reciprocal consumer fractions, or

  • considering how changes in consumer behavior determine the behavior of retail in the market [22].

In the wake of COVID-19, buyers’ behavior has changed due to quarantine measures being introduced in almost all countries of the world. Some retailers have changed their strategies in response to the emergence of new players in the market; for example, Marks and Spencer in India has adjusted its supply chain, while Ford has shifted its production from automobiles to highly proprietary ventilators and hospital beds by collaborating with local manufacturers [7]. The luxury industry has adapted to new emotions, employment, and expectations (EEE) by providing the same customer experience online as offline [13].

2.3 Research Questions

The research literature describes the general changes that have taken place in the industry in response to COVID-19 but does not consider which tactical and strategic steps have been required by retailers to modify or introduce elements in order to adapt to the new reality. A systematic review approach was implemented to analyze the literature for outlining tools that retailers can use to overcome some issues in devising an omnichannel approach.

This research proposes that:

  • A shift in consumer behavior caused by COVID-19 has driven omnichannel development in Russian retail since the onset of the pandemic and the subsequent introduction of quarantine measures.

  • Those retailers who developed delivery services, improved processes, and effectively implemented collaborations in their businesses benefited from the new reality by shifting to e-commerce in order to adapt to the customer journey.

3 Research Design: Method, Data, Methodology

The research is designed to identify how retailers in Russia have adapted their businesses to a COVID-19 framework. Moreover, the paper demonstrates the step-by-step development of, and adaptation to, the omnichannel concept in different kinds of shopping outlets: hypermarkets, supermarkets & convenience stores.

There is no doubt that the COVID-19 pandemic and the subsequent lockdown measures have forced consumers and retailers to rethink & re-evaluate the purchasing process. To maintain their competitive advantage and not lose customers, retailers have had to work quickly and effectively in order to adapt to the new purchasing patterns. In the quarantine scenario, e-commerce has become very popular. This is one of the reasons why there has been rapid implementation of the omnichannel concept. In order to highlight changes that have been made in retail, the research is based on a case study approach. This method was chosen within a framework of critical realism. Cluster analysis and quantitative methods have also been applied.

Business cases have been analyzed. From May 2020 onwards, when the first responses from retailers were recorded, news from mass media & from ECR meetings was gathered and was analyzed using quantitative methods. The cases selected for analysis were news pieces and other articles describing innovations & modifications in business structures among a chosen selection of retailers; Lenta represents hypermarkets, Perekrestok was chosen for supermarkets, and Pyaterochka & Magnit for convenience stores. The cases have been taken from business papers, magazines, and online business & news resources, for example Kommersant, Vedomosti, Rbc.ru and Retail.ru, among others.

The case study approach is the most appropriate method for this research, for the following reasons:

  • The object of analysis (i.e., FMCG retail) is very dynamic and, for assessment to be effective, it is very important to examine real cases in order to analyze changes that have had to be made due to the COVID-19 crisis.

  • The subject of analysis (i.e., the tactical steps of retailers) is also reflected in real cases that can be selected accordingly.

  • Real cases allow for the accumulation of practical tools for building knowledge that could be applied to further research in FMCG retail.

The case study method comprises three stages: providing a description, generating a theory, and testing that theory [25].

To identify how retailers have adapted to the new reality, and to construct a theory of omnichannel development in FMCG retail under crisis conditions, analysis of retailers’ tactical steps was conducted and, based on this analysis, a timeline was drawn up. Retailers’ initiatives were analyzed from two different perspectives: retailers’ self-positioning (retailers’ self-reflections, cases being derived from ECR meetings throughout 2020) and their input in omnichannel development; and media reflections on initiatives of retailers (with cases being derived from mass-media).

The first step was to analyze cases of retailer initiatives in ECR meetings. 57 separate cases of retailers’ and manufacturers’ initiatives to improve the consumer journey in terms of omnichannel development were examined. The cases mostly involve e-commerce & cross-channel projects but also include some purely offline schemes.

The following methodology was used. All cases were analyzed and categorized into several groups according to the answers to the following research questions:

  • Who was the prime mover of the initiative implementation? Was it the producer or the retailer who was more prepared to promote a new way of doing business and offer the best experience to the consumer?

  • Which tools were more useful for retailers, and which were more useful for producers? (This helps to recognize opportunities for further development.)

  • What are the current trends of the retail & manufacturing industries? (This is useful in making assumptions for future trends.)

  • Are manufacturers more focused on consumer retail factors?

The next step was to gather news articles in which retailers have been highlighted. There was a total of 148 news articles under analysis. The following methodology was applied:

  1. 1.

    Four of the largest retailers—representing different market formats—were chosen: Lenta (hypermarkets); Perekrestok (supermarkets); Pyaterochka and Magnit (convenience stores).

  2. 2.

    Trading and marketing news items from May to December 2020—gathered from the internet and from business mass-media—which mentioned retailers were analyzed.

  3. 3.

    In the next step, the articles were synthesized into different groups based on their main idea: omnichannel development, online development or offline development. In the case of omnichannel development, news was clustered into the following subgroups: offline, online, or both.

  4. 4.

    The articles were further categorized based on context; each item was put into a relevant category (e.g., automatization, distribution extension, collaborations, delivery extensions, etc.).

  5. 5.

    In the building of this hierarchy, two principles were applied: news directly belonging to a group (due to name, words from article, mentions of created category and article wording), and context analysis based on critical estimation.

4 Research Results of Omnichannel Concept Development in Russian Retail Under Covid-19 Framework

Case analysis reveals that in 2020, nearly 70% of all initiatives were developed solely by retailers, manufacturers or agencies, while just 30% of e-commerce & omnichannel initiatives were driven by collaborations between the above. The data can be observed in Fig. 2. However, it is very important to note that, by the end of 2020, the quantity of collaboration initiatives had increased.

Furthermore, manufacturers and retailers, along with marketplaces, built up their ecommerce initiatives in equal proportion. This answers the question about which sector was more interested in building a new type of business strategy. It could be interpreted that retailers & manufacturers have prepared the ground (improving processes, eliminating unnecessary processes) for cross-industry correlation. As proof of this, closer collaboration was observed at the end of 2020.

Fig. 2.
figure 2

Source: author’s analysis

Cases of initiatives in e-commerce & omnichannel concept development clustered by initiator.

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The following motivational factors can be assumed: an omnichannel synergy of retailers & brands started to be actively developed immediately after manufacturers and retailers adjusted their processes. The paper’s suggestion that manufacturers will be more focused on consumer retail factors driven by the coronavirus was partially approved.

Manufacturers have mostly started to work with analytic data, building supply chain and distribution processes: the main goal of analytics is to gain a deeper understanding of consumer behavior. Firm-driven factors allow manufacturers to cut unnecessary costs and improve processes.

On the other hand, retailers & marketplaces have been more concerned with consumer-oriented factors since the start of COVID-19. It was crucially important to build up high-quality content regarding the product in online platforms (products cart, reviews, quality of pictures, ratings & responses, rearrangement of price and promo).

The second tool to be implemented by retailers has been online delivery. Retailers have addressed various consumer barriers and devised ways to overcome them as quickly as possible, for example, expansion of the express-delivery service to save time for consumers.

News research analysis yielded the following results. 54% of all news was related to omnichannel tactical steps, while 46% merely highlighted changes made offline or online. Furthermore, due to the development of the omnichannel concept, the emphasis has been on mechanisms and strategies concerned mostly with online channels, or those related to both online & offline. In terms of development, offline channels have seen four times as many changes as online ones. Omnichannel detailed analysis reveals that the top 5 steps that have been made by retailers in the period under analysis are:

  • process automatization

  • express-delivery concept development

  • online delivery expansion

  • consumer satisfaction tools (e.g. promos, specials clubs, personalized discounts, etc.)

  • collaborations with manufacturers, other retailers, restaurants, delivery companies, etc.

Most of the initiatives (approximately 2/3) were implemented either at the start of the COVID-19 pandemic or at the beginning of the second wave (see Fig. 3).

Fig. 3.
figure 3

Source: author’s analysis

Cases of initiatives in e-commerce & omnichannel concept development clustered by initiators.

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Figure 4 illustrates which tactics were most often implemented by retailers. The research reveals that both hypermarkets and convenience stores mostly introduced, improved and extended delivery services in response to the crisis, while supermarkets focused—in equal proportion—on delivery extension, process automatization, and consumer-oriented and collaborative schemes. These results may be explained by the following factors:

  • Hypermarkets addressed consumers’ fears around visiting crowded places, and in order to satisfy consumer needs, while at the same time handling huge costs & capacities, retailers had to devise and develop new methods of selling products as quickly as possible.

  • Convenience stores usually sell goods at a price lower than the market price. Due to the coronavirus, a significant proportion of people either lost their jobs or suffered salary cuts. Retailers mostly concentrated on overcoming the disposable income barrier. This is why they not only developed their delivery services, but also implemented many promotional campaigns and social initiatives; for example, Payterochka & Magnit extended the range of goods for sale without premium during the first wave of the pandemic.

  • Supermarkets were balanced in their range of initiatives and, in general, tended to improve their processes, perhaps highlighting that the crisis helped them to realize their disadvantages. They actively participated in collaborative activities; for example, Perekrestok sells restaurant dishes in their outlets. Through such initiatives, retailers could, on the one hand, enable consumers to eat restaurant-quality food and, on the other hand, help restaurants by supporting their businesses.

Fig. 4.
figure 4

Source: author’s analysis

News clustered into relevant groups, by month.

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5 Conclusions and Discussions

Based on case analysis up to the end of 2020, it can be concluded that the retail and manufacturing industries have shifted from reorganizing their processes separately to collaborating with one another.

The direction of collaboration between industries is more consumer-oriented. The main goal of this is to satisfy consumers’ needs via the following tools & mechanisms:

  • collaboration in consumer analytics based on data and exchange of insights.

  • building effective promotional strategies (personalized promo, cross-channel promo—for example, if a product is not available in the shop, the consumer may order it online).

  • category management both online & offline, strong relationship with partners.

In addition, the COVID crisis revealed certain disadvantages or limitations in the retail industry and caused businesses to address these issues. The research has also demonstrated that the crisis forced retailers to develop an omnichannel strategy, with many of them working effectively to satisfy consumers’ needs, introducing express-delivery services and lower prices, for example. The FMCG sector realized that customers’ journeys tended towards omnichannel behavior.

Considering all of this, and as shown by the research, the implementation and development of omnichannel strategies in Russia was based on the following stages:

  • reactively responding to consumers’ needs, online channel development, introduction and extension of delivery services (due to lockdown constraints).

  • maintaining prices in terms of disposable revenue (quick reduction, boosting new purchasing channels with prices lower than, or equivalent to, offline), introducing promotional offers for some purchases where delivery has been specified

  • considering the needs of consumers and working with them effectively: introduction of express delivery, implementation of no-contact delivery services.

  • automatization of processes and optimization of capacities (for example, Payterochka has opened dark stores in order to optimize delivery time and to have sufficient capacity for increased click and collect services).

  • effective promo introduction: price campaigns, or cross-channel activation (with the seamless campaign introduced by Payterochka, for example, the consumer receives a sticker in the store, goes online, uploads a video and receives a gift in the store).

After these tactical steps were realized, retailers changed their strategies to fit in with e-commerce development (for example, at the start of 2020, Payterochka wanted to extend their distribution network, but their resources were rearranged to prioritize e-commerce development).

From the end of 2020 onwards, it can be seen that retailers have tended to work mostly with quality: launching seamless online & offline campaigns, collaborating with manufacturers & agencies to improve e-commerce services (for example, improving content, launching promotional strategies, and managing assortments and categories both online and offline).

Thus, the research has supported the proposition that retailers’ behavior has tended toward the development of omnichannel strategies; indeed, they have made huge steps in these developments. From the accumulation of data presented, the research proves that the COVID crisis, or indeed other crises, can actually be advantageous for development, but in order for a business to preserve a good position in the market, a swift response to consumers’ needs—even without a set of strategies—is fundamentally important. As an extension of the research, Fig. 5 presents a series of omnichannel developmental steps (from a short-term perspective) that could be used in further research as a model of omnichannel development for businesses in the face of crises such as COVID-19.

This scheme of development will be useful for retail managers whose companies are suitable for the development of omnichannel strategies in the frame of crisis-factors. The model could also be useful in helping managers to realize which stage they are at now and what their next steps should be in the short term. This step-by-step omnichannel development concept could be especially practical for countries in which a common multichannel business approach is already in use in the FMCG market.

In addition to this research, the following steps for further analysis and proposition testing are suggested:

  • continuing to follow up retailers’ behavior in the post-COVID period in order to develop and improve the theories.

  • conducting deeper research into which tools and drivers could help retailers to follow the consumer-centric approach (researching the characteristics of showrooming & webrooming behavior, realizing what consumers want).

  • researching category management tools—both online and offline—that help make the purchase journey seamless for the consumer and evaluating the roles of manufacturers and retailers in the collaborative development of an omnichannel business model).

Fig. 5.
figure 5

Source: author’s analysis

Timeline of omnichannel concept implementation in retail from a short-term perspective.

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