Retail in a COVID-19 world

“Closed, due to Coronavirus” read the sign on the door of my local bike shop. It was March 25, and this wasn’t the only public notice taped inside shop doors up and down the row. We were in lock-down and COVID-19 was ravaging the high street.

Today is the first day I no longer have to see this sign. Non-essential shops are finally re-opening across the UK. Many retailers are waiting with bated breath to judge how quickly shoppers return and, given the significant economic uncertainty that awaits, just how much they are willing to spend.

Before COVID-19 struck, the retail sector was already under pressure to reform. To say that COVID-19 accelerated a transformation is a bit of an understatement. However, it is not just retailers though who need to think and act differently. As a brand who works closely with our retail partners, Philips also needs to make adjustments for a post-COVID-19 recovery. We have spent the last three months helping our retail partners manage unprecedented interest in products that made the home the best possible place it could be. And we have also been planning carefully about how we help our retailers prepare not just for today, but also for the future. 

During lock-down, the interplay between changing consumer behaviour and how retailers responded to these changes provided vital information we will use to prepare for new business models, services and retail re-inventions that will soon emerge. Based on what we have seen and learned so far, here is a summary of trends I believe we could see in the not too distant future:

Pharmacies:

These retailers may not have had the most robust digital capabilities but many stayed open, providing the nation with medicines, assisting government with COVID-19 testing and delivering prescriptions to vulnerable households. Through this crisis pharmacies have done extremely well in engaging consumers about their medical health. Many, many people are thinking about their health right now – very acutely, and on a daily basis. This is the foundation on which pharmacies can build their future strategies. The opportunity is here not just to engage people about their medical health, but to broaden out and address someone’s wider well-being. It is not a wild stretch of the imagination for pharmacies to soon introduce new wellness services addressing the complete needs of a person and their holistic lifestyles.

Home and fashion:

During lock-down, many of the home and fashion giants experimented with virtual experiences, giving home-bound consumers escapism, entertainment and advice in equal measures. For those who may soon reduce the number of their physical stores, continuing these digital “test and learns” and engaging beyond product through online experiences will prove vital for re-engaging their loyal customer base and enticing new shoppers to their sites.

Grocers:

They kept the nation fed during an incredibly unsettling time – when people were gripped by a primal fear of lack of food in the supply chain. Even though we’re easing out of lock-down, grocers will still need to look at how to further increase their online capabilities because the rapid acceleration of online shopping shows no sign of abating. Grocers will now need to balance services and abilities for those who want to return to the weekly shop in store with those who have been converted to online food shopping and physically, won’t return as often.

Discounters:

There are many who will think that because of the economic headwinds to come, discounters will continue to be successful as people scale back on their spending. This behaviour will certainly happen. However, discounters will also continue to be successful because they have done an exceptional job at tapping into the consumer desire to choose where they most want to spend their money. There is a strong middle class contingency that will continue to work, and be just as content shopping at high-end stores as easily as discounters, choosing to buy a luxury phone one minute and store-branded groceries the next. This is because, over recent years, discounters have positioned themselves not just as low-price stores, but as places that offer good value. As these two trends coincide – the bite of a weaker economy and continued consumer interest in noticeable value – discounters are likely to have an even bigger role to play in the weekly spend of many families.

Online-only players:

While traditional retailers have struggled, these retailers have powered from strength to strength. New demographics, and I’m thinking of silver surfers here, have realised just how easy and straightforward it is to shop online. Many may continue to do so, even once regulations are fully lifted. One thing is clear: in lock-down, demand for next-day, or even next-hour delivery, has never been so strong. For many people, it almost didn’t matter what brand of hair cutter, ice cream maker or blender they purchased online, as long as it arrived in the morning. This trend in particular – convenience eclipsing brand – will be the biggest threat to the high street recovering after COVID-19.

So do I think these shifts in consumer behaviour mean we are witnessing the death of the high-street? The high street has been struggling for some time and recovery from this crisis is accelerating need for reinvention. Fundamentally, I believe that physical retailers need to understand that they cannot compete head to head with online players. If people are forced into choosing between the conveniences of online fulfilment vs opting to walk into a store, online will win nine times out of ten. Physical retailers must not draw solely from pre-COVID-19 experiences and instead fuel their metamorphosis by creating the next generation of differentiated experiences online players cannot deliver. 

Within all of these changes, what is the role of brands like ours? Is it to fulfil a retailer’s strategy, or advise which evolutionary path to take? 

For Philips, the answer lies somewhere in the middle. Two years ago, we created a retail and consumer trends team to better understand and predict how we needed to change, in order to stay relevant to customers and consumers. Many of the trends we recognised and have been planning for addressing over a five year arc have accelerated beyond recognition in the last three months: the shift to online, demand for split / flexible payment options and the importance of next/same day delivery convenience. As a result of COVID-19, these changes are now cemented in a new set of consumer behaviours and expectations.

As we look to our own future, we will continue to remain consumer obsessed whilst also supporting retailers who wish to transform as they recover out of the crisis. There are tough choices ahead on where to focus and invest. However, the decisions we take will be taken through collaboration with our retail partners, so that we can continue to remain relevant in people’s lives.