- August 10, 2020
Post-Pandemic Retail: How to Prepare
Written by Russel Beron Aug, 7th 2020
One of the biggest outcomes of the Covid-19 pandemic is a shift in the way people live, work, travel and consume goods and services, which in turn is driving massive shifts in retailing. Retailers that have succeeded during this crisis have adapted their business models to effectively meet the needs of consumers.
With people locked-in at home, malls, restaurants, shops, and travel shut-down, e-commerce was one of the big winners. Online groceries, cleaning supplies, PPE, household goods, fitness equipment and DIY products were some of the categories that saw dramatic increases in online sales. But the retail shift goes beyond e-commerce impacting why, what, where and how people buy, driving retailers to adapt or die.
Consumer Value Shift
In the US alone, around 40 million people lost their jobs since the pandemic began in March. Those who still have jobs also face uncertainty over their future. While government stimulus and benefits helped, for many people it was not enough and as these benefits end, people remain in economic limbo which for the most part has resulted in more calculated spending.
According to McKinsey and other research, the pandemic has highlighted the trend of consumers looking for value, which is a combination of price quality and service. This has meant increased market share for discount and bulk retailers such as Costco and growth in the big online marketplaces such as Amazon and Walmart. Private label products have also gained traction, with 34% of US consumers spending more on private label products during the pandemic.
With people working and cooking more at home, food subscription box providers have gained market share and DIY sales have grown as people look to improve their living and working environment. Customer loyalty has also shifted, as consumers try different retailers, buy larger quantities with less shopping trips, and opt for online ordering wherever possible. Fashion has also shifted as people spend less time in the office and wear more casual and sportswear, which boosted sales for retailers such as Lululemon and similar brands. With people driving and taking less transit and business trips, automotive sales are down, bicycle trips are up and for some the opportunity to live in more remote locations will also affect the way they consume.
While seasoned online shoppers are buying more, the biggest shift is in people who did little shopping online, such as older demographics. Now that more people have seen the convenience and opportunity in online shopping and online retailers have improved their service and offering, digital commerce is positioned to grow even faster. Many people are still hesitant to venture out and face the added pressure of wearing a mask, along with longer lines and more time-consuming check out procedures. This means that e-commerce is likely maintain a high growth rate post-pandemic.
The Adaptive Retailer
According to Emarys and GoodData, in the US, retailers that are primarily brick-and-mortar saw online orders grow 24% between May 31 and June 7 compared to the same period last year. Pureplay online retailers saw online orders grow 5% during that same period compared to 2019. Research from Brick Meets Click, a grocery retail consulting firm, showed that US online grocery sales set a record in May, reaching $6.6 billion, a 24% jump from April. Brick-and-mortar giant Walmart, which was ramping up its ecommerce operations before the pandemic, saw online revenue soar 74% in its first quarter ended May 1 with its grocery delivery and pickup services in high demand.
Many brand names have shut stores and moved towards more hybrid models. For example less stores, more selection online and converting stores into pick-up locations. JC Penney, J. Crew, Neiman Marcus, and Pier 1 Imports are among those that have announced plans to close stores permanently and/or have declared bankruptcy, citing losses caused by the pandemic. Alternative fulfillment models such as curbside pick-up have also grown dramatically, with small and large retailers scrambling to offer touchless pick-up in various forms of sophistication. Retailers have had the opportunity to experiment and improve their fulfillment capabilities and consumers have stepped out of their comfort zone, accelerating the shift in retail.
Spanish retailer Inditex and its flagship Zara clothing brand, announced plans to invest more than $1 billion on its digital operations while closing 1,200 physical stores. Others retail chains are adding new services to accommodate consumer demand for more shopping options, such as curbside pickup and buy online, pick up in store (BOPIS). Target has been building up its BOPIS capabilities for a few years, while other retailers have scrambled to provide the option as consumers avoided the risk of physical stores during the pandemic.
Bed Bath & Beyond is converting a quarter of its stores in the US and Canada into regional fulfillment centers to support its growing digital operation.
Fastest Growing Global Retail Brands 2019-2020 (Kantar BrandZ 2020 Report)
The Future of Retail
A big shift that retailers need to focus on is investment and growth of their digital capabilities. This might be analytics, customer insights, design, IT capabilities, marketing, channel expansion, productivity, service, automation, and general cost structures. While decisions about where to source, lead times, inventory and forecasting were critical before, in the new retail landscape they are even more important.
Retailers that succeeded through this pandemic have proven themselves as flexible, adaptable, customer service oriented and willing to experiment with new product development, logistics, marketing, supplier management, inventory management, supply chain and their entire operations to meet the shifting needs of consumers. In this new retail reality, retailers that hope to be around in a few years will need to serve their consumers a value-based product, faster and more efficiently than ever before. Retail Supply Chain Management Software has allowed companies to thrive and continue to innovate and grow through these trying times. Those who are unwilling to adapt and update their current processes will be left behind by the fast moving competition.
All these issues and more are covered in the most recent CBX Q3 2020 Sourcing Report. To learn more about how to address some of these concerns with the CBX platform, feel free to contact us directly.
Written by Russel Beron Aug, 7th 2020