The Ripple Effects of COVID-19 on Retail — And How Brands Should Plan for the Future

September 9, 2020

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As a surprise to no one, the impact of COVID-19 has been swift and dramatic when it comes to brick-and-mortar retailers

In "Virus Alters Where People Open Their Wallets, Hinting at a Halting Recovery,” reporters at The New York Times analyzed data from Cuebiq, a retail intelligence company. The analysis, published in August, showed that consumer habits were slow to recover since the initial plunge this past spring.

While overall visits to businesses were up 1% in comparison to the same period last year on March 7 2020, visits dropped dramatically mere days later as the first shelter-in-place mandates went into effect. 

visits to businesses in 2020 vs. 2019
Image source: The New York Times, "Virus Alters Where People Open Their Wallets, Hinting at a Halting Recovery,” Aug. 19, 2020

Over the following months, the return to pre-virus foot traffic has lagged.

People sought out safer alternatives and contactless ways to shop rather than visit stores in person. And as of August 15, visits to physical retail stores were still down — about 24% on average — compared to that time last year. 

So, what does this mean for retailers? And what steps can they take to plan for these far-reaching changes to consumer shopping behaviors?

Shifting Shopping Behaviors

Retailers deemed non-essential had to close their doors in March. But consumers didn’t stop shopping — they just opted to do so online. 

After a quick dip in February and March, the data shows that retail spending then rebounded, with categories like clothing and accessories seeing a nearly 177% increase in monthly sales during April and May. This trend continued into June 2020 when online sales jumped 76% year over year, according to Digital Commerce 360.

month over month retail sales development in 2020
Image source: Statista

In response, some retailers wisely pivoted, leaning into the ecommerce arms of their operations to appeal to shoppers browsing and buying from home. This also put digitally native and direct to consumer brands in a unique position to push ahead, as online sales were already their core competency.

However, shelter-in-place mandates couldn’t last forever. As time went on and stores began to reopen, omnichannel retail — a blend of both online and offline retail —began to resurface. Many brands continued to accommodate shoppers by offering the following blended retail options:

  • Buy online, pick up in-store (BOPIS)
  • Curbside delivery
  • Virtual shopping appointments
  • Contactless payment

In fact, data shows that more than two-thirds of customers have made their first ever online purchase to take advantage of BOPIS options, while 70% of shoppers have now made multiple purchases using “order online, pick up curbside” offerings.

Future-Facing Implications 

So what does all of this mean for the future of retail, both online and off?

If you ask Michelle Grant, senior management of strategy and insights/retail and consumer goods at Salesforce, she believes that COVID-19 accelerated the structural decline in footfall to physical stores.

“The retailers in a position to survive will need to rethink their location strategy to be closer to a decentralized population, reinvent their physical layouts to be truly omnichannel and restructure their lease agreements to be more flexible,” she said.

Deloitte’s State of the Consumer Tracker also indicates that health concerns related to the pandemic are still weighing on consumers, and will continue to influence how and where they shop.

Deloitte’s State of the Consumer Tracker
Image source: Deloitte

“These concerns have accelerated consumers’ digital engagement with retailers as they seek out contactless shopping experiences,” said Rod Sides, vice chairman and U.S. retail/wholesale and distribution leader at Deloitte LLP.

“Customers have come to expect omnichannel conveniences, so it will be imperative for retailers to invest in their digital capabilities and consider new ways to expand frictionless commerce. Retailers should look to innovate around contactless returns, virtual stylists, shoppable video and last mile delivery options in order to address consumers’ changing needs,” he added.

Jaime Schmidt, founder of Schmidt’s Naturals, echoed and built upon this sentiment.

"In addition to a strong digital strategy, retail stores must look at creative approaches to ensuring recurring revenues and high lifetime value of every customer,” she said. “Nurturing the buyer-brand relationship will be more important than ever and key for stores' agility in responding to changing customer preferences.”

With this in mind, it’s clear that the 2020 holiday shopping season — including Black Friday and Cyber Monday — will be impacted by this increasing shift to online shopping as well. 

Major retailers like Walmart and Target are already planning to close physical stores on Thanksgiving, which will divert deal-seeking shoppers to their ecommerce operations. As such, retailers of all sizes will need to consider how they’ll handle a potential spike in traffic from online shoppers during the final two months of 2020, as we can expect far less physical retail shopping this holiday season.

Taking Action: 3 Steps for Retailers to Consider

These insights point to a recurring theme: Brands need to plan and act on the rapid shifts happening in the realm of consumer behaviors. Here are three options for retailers to consider.

1. Introduce or Leverage Subscription Models

A subscription model means recurring revenue that’s both more dependable and predictable — an added element of stability during these uncertain times.

Whether it’s a subscribe-and-save model for products that frequently need to be refilled or quarterly themed packages, the options for subscriptions present appealing benefits for both consumers and brands. Schmidt’s does this by offering customers an option to subscribe to its daily-use products.

2. Partner for Exclusive Offerings

Exclusivity is a powerful differentiator. And two audiences are better than one.

Brands should consider teaming up with relevant partners to launch exclusive, limited-quantity product offerings to create a sense of urgency and scarcity — both of which are known to drive purchases. Aperitif brand Haus, for example, created The Restaurant Project wherein they partnered with various restaurants for limited-time, exclusive flavors.

3. Create Digital Experiences

Community-building online is a whole new world for retailers rooted in physical, face-to-face experiences. But launching unique online experiences and engaging with customers virtually can be a powerful way to keep customers locked in. Tracksmith has done this well by pivoting its in-person run club to a virtual context. 

For retailers that still don’t have a digital presence or an online storefront, now is the time to get that set up. With a tool like Shogun, launching an online store has never been easier

For Retailers, Evolution is Required

No one can predict what the future holds. But one thing’s for sure: Retail and the way people shop have undergone a dramatic, rapid shift in recent months… and the implications of that will ripple far into the coming months.

Brands that want to survive this will have to evolve accordingly.

The first step toward progress is going to customers and asking what they want. From there, it’ll be up to retailers to take action on that feedback and to find new ways to serve their audience of shoppers — both online and off. 

Kaleigh Moore

Kaleigh Moore is a freelance writer specializing in ecommerce content. She also contributes to publications like Forbes and Vogue Business on topics around fashion and retail.

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