As the world once again grinds to a near-halt, aspects of our lives that we may or may not have taken for granted are beginning to change more and more. In the wake of the second wave of Coronavirus, we are catching up with unprecedented uncertainties and changes that have been forced upon companies, operations, and businesses from all over the world.
A broad range of businesses now find themselves in a “sink or swim” situation, but this could also be interpreted as “survival of the fittest”. Retail has been one of the industries that have been hit hardest by the pandemic and that find themselves embroiled in a period of unprecedented change. In this article, we’ll take a look at what changes the Coronavirus pandemic brought to retail in 2020, as well as what the future might hold.
World in transition
Before the Coronavirus pandemic, the majority of customers were used to doing their shopping in physical stores, browsing through thousands of different items, strolling through long halls of shopping centers, window-shopping as a way to pass the time. Then came Coronavirus. The pandemic forced retail businesses to close stores worldwide, not only to keep their employees safe but also their customers.
The closing of shops was only the first of many changes and challenges the retail businesses had to meet during the pandemic. On the surface, the simple closing of shops might not seem like a dramatic change, but it caused a huge spike in unemployment in the industry. The recent data in the US shows the market slowly recovering, but the situation is still dire after the unemployment spike that amounted to 1.9 million store-based retail workers in October, in the US alone.
A wounded industry
The Coronavirus pandemic has had a huge impact on the supply chains of retailers from three different angles; obstructed logistics, constrained or shut down suppliers, and disrupted demands. On the subject of obstructed logistics, Coronavirus made the basic transportation of goods doubly difficult, especially for those goods moving over long distances or internationally, with border closures (increased traffic and long waits) and the total shut down of logistics hubs (e.g. harbors, airports).
Coronavirus also led to the total shutdown of many suppliers, causing a change in supplier reliability as a result of short-time work, an unwell workforce, or factories being closed entirely. Furthermore, the demand was largely disrupted as a result of the priority shift of customers, due to spikes in demand for certain products such as sanitizers, protective face masks, long-lasting staple foods, and fitness gear, while on the other hand, retailers reported a huge drop in demand for products like travel accessories and clothing.
Many of the biggest U.S. retail companies, trusted names like Neiman Marcus, True Religion Apparel, Sears Holding, Pier 1, JCPenny, and J.Crew, have filed for bankruptcy. The consequences of the pandemic are a very real threat to huge retail companies and brands, names such as Express and L Brands. It is no secret that physical or so-called traditional stores have been in decline thanks to the meteoric rise of online shopping, with big players like Amazon, Alibaba, eBay and others growing increasingly dominant. International retail companies and brands such as Adidas, Nike, Guess and Zara all reported huge losses, despite having functioning and popular online stores and shopping apps. The crisis hit Adidas with declining sales in the first quarter of 2020. It was also recently announced that the board of directors at Adidas is considering selling Reebok amid a further decline in sales, since the brand’s acquisition more than a decade ago. Zara’s owner Inditex is also speculated to close around 1,200 stores worldwide over the next two years. It was reported in June that the company’s sales have been down 44% in comparison to the previous year.
An overall drop of 11.4% in retail sales was reported in China in the first half of 2020, stating a decline in a variety of categories such as apparel and footwear, which dropped by a staggering 41%, or health and beauty products dropping by 39%. On the other hand, food and grocery shopping recorded a 49% increase in sales.
With huge quarterly losses seemingly the norm, retail companies all over the world were and still are forced to rethink their strategies, especially those with a focus and dependency on physical stores and in-person shopping. Amid the Coronavirus pandemic, retail companies such as Zara and Nike are increasingly investing in their digital presence, which has proven to be more than successful, as Nike reported an 82% increase in online sales compared to the same time last year.
Despite the ongoing crisis caused by Coronavirus and the subsequent decline in overall sales, it is expected that the total value of global retail eCommerce in 2020 might pass $4 trillion. Therefore, it comes as no surprise that many retail companies and businesses will be changing their strategies further. The push towards innovative products, developing unique and personalized experiences for a new generation of customers that prefer shopping online versus visiting physical stores with an emphasis on investing in digital transformation was sorely overlooked and ignored by many retail companies as it was seen as somewhat unnecessary. All that must change now.
This push isn’t entirely new, it isn’t entirely the result of a global pandemic, but it is undeniable that the process was accelerated in the face of Coronavirus. E-Commerce and digital sales development is no longer the future — it is very much the now.
The retail industry and business are changing for good, and our definition of ‘normal’ will almost certainly have to change. Nevertheless, not everything is as dark as it may seem at first glance. Every crisis is also an opportunity (with potential for economic recovery). For retail companies, the goal should not be to return to the “old normal” or to what it was before the Coronavirus pandemic began. Retail companies should strive further to create a new retail reality for themselves and their customers alike as change is the only constant in the modern business world.
As the world emerges from the crisis, its ramifications will continue to boost eCommerce as consumers stay with the convenience of doing things online. By investing in innovation and development, retail companies and businesses will have a much better chance of surviving the impact of Coronavirus.
Coronavirus has brought about a change in how we shop. It is time to see Retail Reloaded.