Much of everything connected with COVID-19 has been surprising. Take for example the V-shaped recovery, the astoundingly small time it has taken to get back to the previous market highs, or even the economic doldrums of today that many companies have breached their all-time highs. That makes it harder to accurately predict what is next for retail after COVID-19, if there is going to be such a time.
However, there is consensus that the retailers that are going to survive the pandemic crisis are going to be those that look at COVID-19 as an opportunity. They would have to fundamentally change the way that they run their business, focusing on raw data, converting it into information, and using cutting-edge technology to do so. The pandemic is going to test retailers on three main aspects:
1. Business continuity
2. Supply-chain flexibility
3. Elasticity and comprehensiveness of their digital ecosystems
COVID-19 Affects Supply and Demand
This coronavirus is hitting on both ends: supply and demand. While the Western Hemisphere is witnessing changes in the demand curve, we are seeing supply-side fluctuations in South East Asia and other manufacturing regions in the world. Therefore, in the United States and Western Europe, retailers do not expect the significant decline in sales and footfalls to be compensated after lockdowns and social distancing norms are relaxed.
Industry experts think that about 10% of retail demand is simply lost. It is not that the populations are going to arbitrarily reduce consumption. The problem is that retailers are not in a position to incentivize anything anytime soon. If your business is preparing to reopen its doors, you must figure out how to keep staff and customers safe.
On the other hand, certain transactions have just moved online and will never be getting back to brick and mortar stores. It’s like the kaizen philosophy: once a habit is created, it shall not be rolled back – at least not in the absence of a very big incentive.
Six months into the pandemic, we are witnessing long-term disruption. But the kicker is that no one knows when the situation is going to get back to normal. Retailers are looking at about 32 weeks of tepid store traffic, even if the vaccine candidate out of Moderna or Oxford is approved and deployed. Did you know retail revenue was almost 80% of all sales for almost all companies? Even still, the individual sub-sectors will determine precisely what happens recovery-wise.
Groceries and FMCG
Just by nature of the product, this sub-sector was the least impacted, because people cannot stop eating or living. Although, we did witness a significant uptick in digital transition, particularly during the stay-at-home phase of the pandemic. After COVID-19, it can be expected that a significant proportion of earlier traffic will return.
However, there is a portion of consumers that have gone digital and are not likely to go back to retail. This trend shall particularly hold true for the younger shoppers, who may not have been as habitual in traditional retail shopping.
Apparel and Speciality Goods
On one hand, this sub-sector, for the most part, falls under the nonessential retail pedigree and was largely shut down; on the other, the focus of the consumer has shifted to essential items. Nearly 4 out of 5 dollars have disappeared in revenue for these retailers. Any recovery is understood to be slow and partial.
For the sector to come back, these retailers need discretionary income in the consumer’s pocket. At this time, it looks like that may not happen immediately or even in the near future. Eventually, the sector will recover despite the digital transition because people like to be hands-on with apparel and specialty goods.
In this sub-sector, given their large sizes and established brand names, big-box retailers were able to improve upon the revenue number in the initial weeks of the pandemic. This, of course, had to do with the monopolistic situation and being allowed to stay open on emergency terms. But just as Whole Foods had to find an Amazon, likewise, every such store will have to integrate marketplace models for sustainable growth.
Strategy is Essential
As talked about earlier, if retailers were to look at COVID-19 as an opportunity, they should be able to promulgate off-line and online strategies that complement one another, not only making the acquisition of the product easy but making the product itself accessible. This is especially important for those in need. The social responsibility prerogative would figure very high when it comes to retail survival in the post-COVID-19 world because of all the death and destruction.
Shifting Sales Patterns
If I were a retailer, I would get ready for a monumental shift in sales patterns and quickly start investing in digital channels. I would also make efforts to use the digital channel as the primary modus operandi of securing, processing, and delivering orders. As digital revenue grows, retailers need to focus on IT contingency planning.
Accelerating digital sales are also likely to add strain on the supply chain. I would focus on the degree of flexibility in the supply chain and the amount of redundancy allowed. This way, the most common problems including product delays, inventory shortages, and declining consumer confidence are addressed. Investing in machine learning and artificial intelligence-based supply and demand planning algorithms to understand spikes in demand, can help retailers better predict numbers and hedge supply issues.
The COVID-19 pandemic has hit the retail industry hard. There are some areas of the industry that will never go back to the way they were before the pandemic. However, it doesn’t mean that all is lost. Instead, retailers need to remember that COVID-19 is actually an opportunity to separate themselves from the competition.
The fact of the matter is that only the strongest retailers will survive and looking at this pandemic as an opportunity can help give retailers the competitive edge they need to make it through.