The term “New Normal” should be the first entry in our COVID-19 new normal dictionary.
Retail industry and retailers, have seen the maximum upheaval since the outbreak of the pandemic. A fact widely accepted is, until the world sees a vaccine, we are to live with the limitations. As the world emerges from the restrictions and lockdowns over the next few weeks and months, shoppers and retailers both alike will be looking at “Shop – Z”, new-age retail that will redefine how you, me, and all of us are going to buy henceforth.
Globally, we have seen a shift towards increased spending on “Essentials” in the past few months. But how universal is this behavior? EY’s recent study indicates the emergence of four sets of consumer segments – “Save and Stockpile” (35%), “Cut Deep” (27%), “Stay Calm, Carry On” (26%) and “Hibernate and Spend” (11%). They are likely to transition to similar segments of spending behavior once the crisis subsides.
The once reluctant Baby Boomers are moving online increasingly, people are reassessing the value of products (Do I need corporate apparel if I WFH permanently?) and want to build a no-wastage sustainable way to buy. Luxury sales are driven by a self and financial “feel good” factor which would crawl back in, at snail’s pace. There is also an increased focus on health and wellness – hygiene, immunity boosters, plant-based and self-made foods (aah, the food, cooking, and workout posts on social media!!). Perhaps time for lifestyle-based branding?
Have Grocery and Food retail gained from the crisis?
Being the most essential, grocers no doubt saw a rise in sales, especially with the online channel seeing double-digit growth for most brands. But with this came in a hoard of challenges for all the players involved. Regular stockouts were witnessed, closure of food manufacturing and processing plants, and reduced distribution capacity added to fulfillment pressures. Costs rose exponentially, and the retailers were walking a thin margin line while playing catch up in terms of their supply chain and operational maturity.
But probably what the past decades couldn’t achieve, a virus might. Investments in e-commerce and digital capabilities have accelerated. This is the time to gain all the online consumers possible since all the shifts that could happen would have happened by the time normalcy returns. Depending on the actual path to recovery, in terms of the vaccine readiness, the stabilization and normalization of the category can take a couple of years or more.
Will the store I visited survive? If it does reopen, will I go in person to buy?
UBS predicts 100,000 permanent store closures in the US, between now and 2025. The closures are not probably a new phenomenon, and COVID-19 may not be the only reason, but it has certainly accelerated it. The report also adds on to the “Big getting Bigger” from these closures, indicating a positive trend for the likes of the Costcos, Walmarts and the Targets.
While few retailers are on a wait and watch mode on reopening their stores, few brands have started taking the plunge with their “selected” store openings. Few things on how our “new normal stores” would function –
1. Safety protocols and hygiene – With anxiety on the radar, all brands have spelt out measures to ensure safety for their employees and customers. GAP, for example, is reopening with reduced hours of operations, rigorous cleaning routines, safety gears for store associates, sanitization after every product handling, plexiglass partitions, etc.
Thermal scanning (even with public health experts doubting its efficacy), AI cameras to monitor and maintain social distance within stores, cameras at store entrances to control in-store crowd, etc. are seeing investments.
2. Temporary suspensions – Services like fitting rooms, beauty testers, contact-based consultations, etc. are suspended. They have been replaced by –
a. Virtual Try-On’s
b. Virtual consultations
c. Appointment based no-contact store consultations
d. Single-use disposable test products
3. Repurposed stores and delivery formats – Retailers are expanding on their BOPIS (Buy Online, Pick-Up in Store) capability and Curbside pickup (A McKinsey survey says BOPIS has seen a 38% growth in the last six weeks). Stores are getting converted to “dark stores,” and parking spaces are being dedicated for returns.
4. Contactless everything
a. Contactless checkout has risen by more than 9% over the last six weeks, with the highest intent amongst consumers to continue to use contactless payments. Can we make the store go cashless?
b. Contactless interactions to keep the online customer engagement high – Adobe terms it as “Digital Clienteling” especially in the beauty and fashion categories.
Perhaps it’s time for “David” business models to beat the “Goliaths”.
1.Subscription retail, breaking away from the rest of retail, has seen a boom in numbers. The stay-at-home economy, consumers, looking at new experiences to avoid product stockouts while being locked in, has accelerated growth here. Subscription + rental model, for some of the expensive items, needing loans in case of purchase otherwise, makes this a very attractive model in uncertain times. Retailers in this space have seen an easier customer acquisition during COVID-19, which was otherwise a big hurdle in getting consumers to experience a new way of buying. Experience shows that once I get used to that meal box or that perfume coming to me every month (possibly a new fragrance every time?), then the retailer is more successful in creating consumer stickiness. It’s a win-win, helping retailers also gain predictability from the recurring revenue.
2.’e’ to ‘Social’ to ‘Re’ Commerce, a C2C/P2P economy, was driven by the growing consciousness around sustainable retailing and eco-friendly consumption. Social influencers and peer suggestions were the catalysts amongst Gen-Z and millennials in the P2P economy. (Facebook IQ report says, the number of resellers had quadrupled, and more than 1 in 3 Gen-Z’ers bought second hand in 2019). Now, with more business moving online coupled with the spend conscious consumer and unavailability of non-essentials, C2C is the perfect platform that caters to this need-gap. Enter the re-commerce model for retailers. That elusive 1950s bestseller book you are looking for or that unavailable game to keep your child busy – all are getting enabled by re-commerce. Except for probably a few hygiene sensitive fashion segments in the near term, re-commerce is here to stay, COVID or no-COVID.
As retailers traverse this dichotomy of distressing and interesting times ahead, one certain thing to remember is that “These Days that Are” will only remain as “Those Days that Were” in a few months from now.