4 Examples Of What Post-COVID Retail Will Look Like

Online Sales

Online sales grew nearly 50% at the peak of the pandemic as consumers stayed home but continued to shop. E-commerce will continue to see a major boost, especially now that many have gotten used to online shopping processes. Among millions of consumers, it hadn’t been common to buy certain products (such as groceries) online. Thanks to the pandemic, many now do. Depending upon different consumer demographics, many consumers hadn’t bought products online at all – many of them now do. 

Walmart’s U.S. sales reportedly jumped 20% in March as people stocked up on essentials—further boosted by a 190% increase in monthly downloads of its online grocery app, according to data tracker App Annie. Nike kept its China business from stalling, thanks to a fitness app that helped homebound consumers do quarantine workouts. And Lululemon Athletica has even reopened a few North American stores, not to serve walk-in customers, but to use inventory to fill online orders more quickly. 

Digital sales will not only continue to grow for traditional online retail products like clothing but untraditional online retail products like groceries and fitness. Retailers need to think about what behaviors consumers have gotten used to during the pandemic. Is there a reason for consumers to get rid of those behaviors? If the answer is no, it’s time to adjust our products and services to accommodate those behaviors. 

Brick-and-mortar retail is undoubtedly shrinking with or without a pandemic. The pandemic has simply expedited outcomes. (For example, a third of American malls will close next year, according to NBC retail reporter, Lauren Thomas). 

E-commerce has a growing future, but that doesn’t mean retailers can’t complement digital shopping with other experiential marketing practices or convenient services. 

Curbside pickup

One of the biggest takeaways from the COVID pandemic was the growth of curbside pickup. Many stores had already adopted BOPIS (buy online, pickup in store), and curbside takes it to the next level. Stores ranging from grocery stores to big-box retailers and specialty stores have started offering curbside pickup, and customers appreciate the safety and convenience.

The safety component is here to stay until 2021, or whenever a vaccine is developed. (Health and safety practices topped the list of consumer concerns in terms of what retailers must do to earn customers’ trust and retention). However, the convenience aspect is here to stay indefinitely.  

Curbside orders increased 208% during the pandemic, and 59% of customers say they are more likely to continue curbside pickup after the pandemic. Now that many stores have established curbside pickup procedures and worked through the logistics, they can maintain those practices going forward. 

A number of retailers have even switched to dark stores to fulfill online orders, and the number is likely to grow.

Dark stores are traditional retail stores that have been converted to local fulfillment centers. They come in the form of grocery stores, clothing brands and home goods retailers. As stay at home orders and social distancing limit the number of customers inside physical stores, some brands are simply closing their doors to customers altogether and turning those locations into dark stores to fulfill delivery and pickup orders.

Whole Foods recently converted stores in Los Angeles and New York to dark stores. Other grocery chains like Kroger and Giant Eagle have temporarily moved some locations to dark stores, with plans that some locations could become permanent. Dark stores are most common in grocery chains, but the trend is also moving to other industries. Bed Bath & Beyond recently announced plans to transition 25% of its stores into regional fulfillment centers to make faster deliveries during the pandemic. A number of fashion brands, including jewelry company Kendra Scott, are also converting their stores to fulfillment centers to provide faster deliveries and reduce the strain on the main fulfillment hubs.

Innovation through simplicity is the oxymoronic reality that many retailers are facing. 

Bigger is not better

“It’s the first time in history when incredibly large companies don’t have to ask which stores to close, but which to open, and that’s a silver lining to a horrible situation,” says BMO Capital Markets analyst Simeon Siegel. “Large companies are finding themselves as nimble as startups, as every single aspect of their business, all their baggage…is now allowed to be reconsidered.”

In other words, large corporations are reanalyzing where their revenue is really coming from. With harsh economic conditions, high unemployment rates, and cautious consumer spending habits, many large retailers (such as J. Crew) have experienced the reality first hand, filing for bankruptcy or closing indefinitely. The question for parent companies is shifting from “which stores or subsidiary brands do we close” to “which ones do we fight to keep open.”

For years, bigger was seen as better, and for some of the sector’s winners, including Amazon.com (ticker: AMZN) and Walmart (WMT), that remains the case. But for many department stores and specialty retailers, their huge store base became a hindrance as e-commerce took off. Physical locations have high fixed costs, and debt prevented many of them from building up omnichannel platforms. Add to that a decline in mall traffic.

Many analysts point to 2015 as the watershed year when e-commerce asserted its dominance, yet four years later, in 2019, the U.S. remained so “over-stored” that more than 10,000 closings were announced, double the 2018 rate.

Now, spurred by the fallout from the pandemic, stores are starting to seize the opportunity to shrink their footprints. In its latest earnings report, Gap (GPS) said it has “undertaken a strategic review of its real estate portfolio to further advance its long-term strategic priorities that include a smaller, healthier fleet.” Not surprisingly, this seems to target its flagship Gap and Banana Republic locations, which have been the company’s worst performers.

Empathy and sensitivity are your new marketing campaigns

“42% of the interviewed expect their shopping behavior to permanently change, a third are willing to pay more for local products, a quarter for trusted brands and a quarter for ethical products. Understanding how your customers will change and what new sub-segments are expected in the coming months is key to having an appropriate response to the new shopping dynamics”, says Cristian Cârstoiu, Partner, Business Advisory Services, EY Romania.

As seen in EY’s study: their four segments reflect how consumer behavior can relate to age groups, family or employment status:

• Cut deep: These consumers are mainly more than 45 years old and have seen the biggest impact on their employment status. Almost a quarter have seen their jobs suspended, either temporarily or permanently. Seventy-eight percent of them are shopping less frequently, while 64% are only buying essentials. Thirty-three percent feel that brands are far less important to them in the current climate.
• Stay calm, carry on: These consumers do not feel directly impacted by the pandemic and are not changing their spending habits. Just 21% of them are spending more on groceries, compared with 18% that are spending less.
• Save and stockpile: This segment shows particular concern for their families and the long-term outlook. More than a third (36%) are now spending more on groceries, while most are spending less on clothing (72%) and leisure (85%).
• Hibernate and spend: Primarily aged 18-44, these consumers are most concerned about the impact of the pandemic. However, only 40% of this segment say they are shopping less frequently. And while 42% say the products they buy have changed significantly, 46% of them say brands are now more important to them.

We’ve already seen companies transition from overtly pushing products and services to every demographic imaginable to producing emotional (and in many cases altruistic “do good” ads to appeal to specific consumer personas). We live in a sensitive time and marketers have taken notice. 

Retailers (and other industries) will focus more on building relationships and “doing good” instead of merely pushing products, two different strategies aimed at the same goal – attracting the right consumers. With an impending recession and historic unemployment rates, consumers have been more thoughtful about which brands they’re associating themselves with (or spending their money on), which means companies will focus on creating messages that emotionally appeal to customers’ interests and values instead of tone-deaf marketing.

No one’s safe from the behavioral economic consequences brought upon by the coronavirus. But adapting to the right CX strategies and consumer behavior trends will give you the best chance at being on the favorable side of financial Darwinism. 

For media coverage, lead gen, and digital marketing inquiries, contact matt.wujciak@customermanagementpractice.com.