What will the retail landscape look like when the COVID-19 (coronavirus) pandemic is over and life returns to normal, whatever that may be?
One of the biggest changes may be a shift in consumer spending and shopping habits.
“When this is over many consumers will have a newfound sense of thrift. Savings will be depleted; credit cards and lines of credit will be stretched, and stock portfolios and pensions will be decimated. You will see an extreme flight to value,” said Bruce Winder, Co-Founder & Partner, of Retail Advisors Network.
“Dollar chains, value grocers and used clothing stores will thrive. Many consumers will think twice before spending. They will make existing products last longer. More items will be repaired versus replaced. Those with cash will invest in the dip and make a fortune when stock markets return to some form of normal. All these factors will create a new retail landscape that further polarizes our industry and society between the wealthy and the wealth-less.”
How long will that shift last? Permanently or for just a few months?
Winder said that’s a tough question to answer but there’s going to be different types of people. A percentage of people will go through this and will never want to go through something like this again and be vulnerable to the point where they need the government to bail them out and being so close to being on the street. Some people enjoyed living a simple life during the coronavirus without having to spend a lot of money. They will continue living that way.
“There’s going to be people who say ‘I want to get out of this, this is my wakeup call to not spend as much. I need to lower my costs’,” he said.
Also with a higher unemployment rate, there will be a shift to thrift.
“What that percentage will be we don’t know whether it will be as high as what happened in the Great Depression where literally a whole generation became thrifty except for the ultra-rich or whether it’s going to be sort of a mix of that where not the whole generation but half the generation,” said Winder.
“It’s going to be a wakeup call for those who have the choice and it’s going to be a necessity for those who no longer have the choice of spending.”
Winder said retail and modern society is at a crossroads and it takes the form of the choices being made in physical distancing and government support. COVID-19 calls for us to reverse course on our individualistic ideology and do what is right for the many. Not the few.
“For the retail industry to remain healthy we need immediate government funding through loans, deferrals and grants, more than has been offered already. For many, May 1 was a key date as rents and other expenses such as insurance, GST payments, electricity, payroll and more were due. The world, the country, businesses and citizens will take a collective sh*t kicking on balance sheets but we have no choice. It must be done in order to survive,” said Winder.
“Without such support, small and medium sized retailers and suppliers will run out of cash soon if they haven’t already, and will have closed permanently. This will create an unhealthy industry where we are left with only large retailers, suppliers and service providers. Too much power will be given to the select few. This will reduce choice, reduce service and create an oligopoly where prices increase. This will also impact jobs as big retail continues to turn to automation and e-commerce to save cost. The strong will buy the weak for a song and will grow even stronger.”
However, on the bright side, retail will survive but will take a different form, added Winder. There will be a reincarnation of business as retailers and suppliers sprout up and start again from the ashes. More retailers will be built on variable cost and capital light models. More businesses will be digitally native, at least to start. We will also see a renewed sense of collectivism in our society as people help each other more and try and shop locally.
“The air will be fresh and the waters will be clear. The environment will catch its breath and begin to heal, if only for a little while,” said Winder.
When it comes time eventually to reopen stores, for the essential or non-discretionary spending retailers will be similar to what it looks now. Consumers will continue to see significant social distancing, cleanliness, and a higher mix of online shopping. Stores will set up for pickup or curbside pickup.
For discretionary spending, it will likely be different, said Winder, adding that they will probably start online and will incorporate some of the practices that grocery stores have been using in terms of letting a certain number of people in the store at once, maybe have customers come at certain times, or stores may be laid out differently to accommodate social distancing.
“There’s going to be a whole new way of doing this. But I’m suggesting more companies if they’re opening they’re going to be thinking about online,” said Winder.
“This is going to cause a permanent sort of change in our psyche’s for consumers. Not for everyone but for enough people that retailers are going to have to change the way they go to market.”