Retail - Redefined Post COVID Trends

Retailers' relative performance in capital markets is a sign of an industry transformation driven by pandemics. This means those who wish to remain competitive must accelerate.

The COVID-19 pandemic has had ripple effects throughout the world, and the retail industry?is no exception. At both a personal and macro level, the pandemic caused widespread concern about health, job security, quality of life, and financial stability. Because of this fear, spending has slowed, which has directly affected the income of others - changing consumer behavior both short and long term.

In contrast to previous disruptions like SARS and Fukushima over the past two decades, the Coronavirus disruption is having an impact on both supply and demand. Asia has been hit particularly hard in terms of supply. Due to the prolonged public health crisis, demand patterns in Europe and the United States are changing, with retail sub-segments experiencing different shifts and outcomes.

It's still unclear what the world will look like after COVID19. There has been a V-shaped recovery in the past, but many questions remain about this one, and the economic outlook has been cautious at best. Currently, customers are trapped in their homes, ordering food and services to be delivered, reviewing their choices, and worrying about getting sick. These experiences are likely to affect behavior even after the end of the quarantine. It is safe to assume that store traffic will be slow to return to pre-crisis levels, influenced by vaccine timelines, customer confidence, and financial concerns. Some changes we can expect to see in retail customer behavior:

• Shift in purchase location from stores to online/curbside
• Long-term change in spending habits from ownership to lease/rent
• Aversion to trying on apparel/footwear in stores - leading to more returns
• Change in payment and POS went “touchless”
• Shift towards value/off-price retailers as spending becomes a concern

While it is challenging to be positive, there are a variety of positive trends which have been ignited by the COVID-19 pandemic. One of them is the opportunity for innovation that has emerged as retail organizations adapted to the rapid demand for basic-goods, sanitation supplies and PPE. In addition,as the recovery cycle commences, it’s an opportunity for retailers to re-evaluate their operations and go-to-market strategy. As businesses resume operations, experts are predicting?four different paths?for an economic recovery.:?

• The first and best scenario, is the?V-shaped recovery?where the economy recovers and resumes the same pace of growth after a period of recession.?
• The second scenario is the?U-shaped recovery?where the economy bounces back into a lower growth slope than the previous one.?
• The third scenario is the?W-shaped recovery?where the economy bounces back, goes into a slump and then comes back up again – leading to multiple waves of recovery before stable growth.
• The fourth, and worst, scenario, is the?L-shaped recovery?where the growth is completely lost and the economy remains in a stasis for a very long period of time.

Data Source:?Arthur D. Little Analysis

Post-COVID Retail Innovation Trends

E-Commerce

Since the pandemic started,?online sales in the U.S. jumped 49%?in comparison to last year. Customer shifted from store visits to ordering from home. This trend will likely continue post-COVID, as most customers realized its convenience while also minimizing their health concerns. According to a World Economic Forum article,?department stores are expected to decline by over 60%, and e-commerce is expected to grow by nearly 20% in 2020.?Retail giants like Walmart, Target, CVS, and Kohl’s have embraced their omnichannel fulfillment methods to successfully address this shift; other organizations are beefing up their e-commerce strategy as an immediate measure.

In-Store Digitization

As countries are opening up, so are the stores and malls. However, the important thing to notice is how many customers will come back and how much time they are willing to spend in the stores. Hence, it is imperative for stores to make themselves digital-friendly, such as offering product information sharing, real-time inventory information, and customer loyalty management using fewer associates in coherence with their customers’ omnichannel activities.

Touchless Experience

The stigma of this pandemic has made customers realize they would prefer touchless interaction in a store to complete their buying process. In fact,?curbside orders increased 208% during the pandemic.?We will see a lot more adoption of BOPIS (buy online, pick up in store) with curbside pickup, touchless payments, book appointments for pickup, etc. for years to come.

Inventory Management/Fulfilment

This is a major concern faced by almost every retailer; there was either a crunch of essential supplies or a stockpile of non-essential goods. To address this inventory automation and fulfillment, digitization became critical. Retailers started adopting inventory digitization to have minimal human intervention, and closed stores were converted into dark fulfillment stores for delivery and inventory stock-up. These measures enabled retailers to get back to a normal supply chain.

AR/VR Adoption

A Coresight Research report estimated that?the AR/VR market is forecasted to reach $18.8 billion in 2020, citing pre-COVID-19 projections from Statista.?Customers can now experience products virtually through various AR/VR options like virtual try-on, virtual malls, product visualization, access to product information, etc. This technology provides customers with viable options to engage with a product before buying it. We expect to see a lot more focus and investment in this segment.