The reality of the pandemic era, however, did not play out that way.
Yes, there has been an upheaval with thousands of stores and some chains that have closed for good. A wave of retail workers have lost their jobs, some permanently, and an unknown number have fallen ill. But Covid’s shock to the system has also brought some overdue changes that will fortify the industry for years to come, including big investments in technology, creating new ways to connect with consumers, and accelerating the market. online delivery.
Despite all the human misery the coronavirus has brought, it’s not hard to argue that the pandemic will ultimately strengthen the global retailers that have survived. This is a surprising turnaround from the catastrophic forecast for the industry in mid-2020.
âThe idea that the stores are dead has turned out to be a mistake,â said Michael Baker, analyst for DA Davidson who has covered US retailers for more than two decades. âA lot of retailers come out stronger than they do. ”
The pandemic has pushed shoppers around the world to adapt quickly, forcing retailers to follow suit. Stuck at home for the first few months, then wary of visiting stores when they reopen, consumers are bursting with cash from government stimulus packages – as well as savings by not traveling or eating at home. outside – have embraced e-commerce like never before. This is why the outlook at first appeared so bleak for retailers who relied on foot traffic to physical locations.
Retail vs e-commerce
Since Amazon ushered in the era of online shopping more than two decades ago, the big question has been how do traditional retailers survive? The industry’s response eventually became âomnichannel,â a hazy buzzword on the intertwining of stores and the Internet. Retailers had invested on this front – think of innovations like online ordering with in-store pickup – but sporadically.
The pandemic created the existential threat that many needed to fully embrace this vision. They responded by disrupting their business models in unprecedented ways, from the way they handled customer service to the way they fulfilled orders (groceries ordered online being delivered in the back of an SUV in a Walmart parking a few hours later).
âIt has completely changed the way we shop,â said Greg Buzek, president of researcher IHL Group. And now, retailers are deploying the technology at a “once in a generation” rate, with a dramatic increase in the use of warehouse robotics and inventory management tools such as electronic shelf labels, a- he declared.
In China, one of the most sophisticated retail markets in the world, stores have quickly branched out into e-commerce. According to consultant Kearny, Plus embraced the use of focus groups to complete orders and stay in touch with customers who no longer wanted to visit in person. Retailers of all kinds have increased their sales through live online video streaming (like a home shopping channel in the digital age). In Wuhan, the original epicenter of the pandemic, a food delivery service has helped retailers set up contactless pickup, which has kicked off a boom in this type of execution. .
Marks & Spencer, the UK department store chain that has been trying to recover for more than a decade, has used the pandemic to accelerate its transformation by closing underperforming stores and investing in digital offerings, including the grocery store in line. The chain has raised its profit forecast twice this year – the first upgrades of this millennium – as its stock has jumped more than 60%.
With the closure of stores in the United States, retailers have embraced new ways of serving customers. Direct selling has spread from China and has become a real source of income with inexpensive and easy to use software. Chains have also pushed the traditional in-store experience further to the web. Signet Jewelers, owner of the Jared brand and other chains, added video calls with an associate from their sites, which eased resistance to making a big purchase online.
And retailers have also found ways to push more ecommerce into their locations. This included making it easy for in-store employees to help customers online by chatting and sharing photos and videos through a mobile app.
How Covid Changed Consumer Behavior
Buying habits have also changed dramatically in places where e-commerce was in the early stages of development. Retailers in markets from Mexico to Russia have been pressured to speed up delivery and create more secure payment systems. In just one example, the Mexican division of US retailer Home Depot now allows customers to purchase items online and pay for them at a store, including cash, which remains the dominant way to pay for merchandise there.
Of course, the success of many of these advances will depend on the quality of these new post-Covid consumer behaviors. Retailers are betting that services, like picking up online orders from a store, will account for a larger share of their sales. The pandemic has also erased supply chains and caused labor shortages that have pushed up wages. It remains to be seen how long these obstacles last.
The era of Covid will also be remembered by all retailers who failed to make it and employees who were infected with the virus. Pier 1 Imports in the United States and the British group Arcadia, owner of Topshop, were among the chains that have closed their stores. And many others without so much money to invest that some big players have not been able to undertake significant pivots. They still appear vulnerable, especially as pandemic-era stimulus programs run out and the emergence of the omicron variant causes an increase in Covid cases in several parts of the world.
Retail sales rebound
But for the big players who’ve done it right, 2021 has seen a remarkable rebound. In the United States, chains with more than 50 stores are expected to have added more than 4,000 locations this year, leading discount chains Dollar General and Dollar Tree. This would mark the first net increase since 2017, according to the IHL Group. The total number of closures within this group in 2021 is estimated at 3,500, a quarter of the 2020 total.
This comeback is one of the main reasons why the SPDR S&P Retail exchange-traded fund, which tracks the S&P Retail Select Industry index, has jumped 32% this year, easily outpacing the advance of the S&P 500 index. However, retail stocks in other parts of the world have not grown as well.
Even with variants of Covid hammering parts of the country, overall visits to US stores this year are only 0.8% lower than the same period in 2019, according to Placer.ai, which uses anonymous mobile phone data. to estimate pedestrian traffic. Many of the larger chains covering various categories are attracting more buyers than before the pandemic. These include Target, Lowe’s, Dick’s Sporting Goods, Ulta Beauty, and Bath & Body Works. Visits to Walmart, the world’s largest retailer, are only 2% below 2019 levels so far this year, according to data from Placer.ai.
Foot traffic is facilitated by stores filling orders online for pickup. Best Buy is among chains that have built on-the-fly curbside pickup systems during the pandemic so customers don’t have to enter stores. Target’s shopping app now allows in-car shoppers to choose exactly where bags are placed in their car.
On top of all this, physical stores are still the place to purchase the overwhelming majority of merchandise. While in China, e-commerce accounts for around 30% of total retail sales, the rate in giant markets like Japan, Mexico, and India is less than half.
Even brands born online continually show the value of physical locations by turning to them to drive growth after e-commerce dropouts. In the United States, Warby Parker, an eyewear company that has helped revive the boom in digital native brands, is increasingly betting its future on bricks and mortar. Stores can also increase profitability in a number of ways, including reducing returns – a blow to ecommerce margins.
âThe biggest changes going forward will be the relationship the consumer has with the store,â said Deborah Weinswig, senior retail analyst and founder of Coresight Research. âI have never seen a retail opportunity as big as it is now. ”
–With help from Deirdre Hipwell, Irina Anghel, Daniela Wei and Alexander McIntyre.