As the coronavirus pandemic dragged on, we all caught up with the uncertainties and changes being forced upon companies, operations, and businesses worldwide.
Many businesses find themselves in a “sink or swim” situation. Retail was hit hardest by the pandemic and finds itself in need of retail innovation to address unprecedented change. In this article, we’ll look at what changes the coronavirus pandemic brought to retail in 2020, as well as what the future might hold for the industry.
The retail transition from physical to digital
Before the pandemic, most consumers were used to shopping in physical stores. Then came COVID-19. The pandemic forced retail businesses to close stores worldwide to keep both their customers and employees safe.
The closing of brick-and-mortar stores was only the first of many changes and challenges for retail businesses during the pandemic. Simple store closings might not seem like a dramatic change, but they caused a huge spike in unemployment in the industry. Recent data in the U.S. shows the market slowly recovering, but the situation is still dire after an unemployment spike that amounted to 1.9 million unemployed store-based retail workers in the U.S. alone.
A wounded industry ripe for retail innovation
The pandemic impacted the supply chains of retailers in three different ways: obstructed logistics, constrained or shut down suppliers, and disrupted demand.
Regarding obstructed logistics, the pandemic made the basic transportation of goods increasingly difficult, especially for goods moving over long distances or internationally facing border closures (increased traffic and long waits) or the total shutdown of logistics hubs (e.g., harbors and airports).
Coronavirus also led to the shutdown of many suppliers, crippling their reliability due to short-term work arrangements, an unwell workforce, or factories being closed entirely.
In addition, the demand for certain products was disrupted by consumers’ shifting priorities. Suddenly, there was huge demand for sanitizers, protective face masks, long-lasting staple foods, and fitness gear, while at the same time, demand plummeted for products like travel accessories and clothing.
As a result, many of the biggest U.S. retail companies — Neiman Marcus, True Religion Apparel, Sears, Pier 1, JCPenney, and J. Crew — filed for bankruptcy. The consequences of the pandemic continue to be a very real threat to retail brands with physical stores that were in decline before the pandemic thanks to the dominance of Amazon, Alibaba, and eBay. But even retailers with a thriving online presence are not safe. Adidas, Nike, Guess, and Zara all reported huge losses in 2020 despite having popular online stores and shopping apps. Adidas announced that its board of directors was considering selling Reebok amid a decline in sales. Zara’s owner, Inditex, also speculated the closing of around 1,200 stores worldwide in 2021 and 2022. In 2020, the company reported in June that sales were down 44% compared 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 categories such as apparel and footwear, which dropped by a staggering 41%, and health and beauty products, which dropped by 39%. However, food and grocery shopping recorded a 49% increase in sales, which makes sense given so many people are at home in lockdown.
Brands with digital strategies are winning
With huge quarterly losses seemingly the norm, retail companies, including Zara and Nike, successfully increased investment in their digital presence, and Nike reported an 82% increase in online sales in 2020 compared to the same time in 2019.
Despite the decline in overall sales driven by the coronavirus, the total value of global retail e-commerce in 2020 is likely to pass $4 trillion. Therefore, you can expect retail companies to keep enhancing their digital strategies. The push towards developing unique and personalized digital experiences for a new generation who prefers shopping online was sorely overlooked by many retail companies as it was seen as unnecessary. All that must change.
Accelerated retail innovation
This push for retail innovation isn’t entirely new or entirely the result of a global pandemic, but it is undeniable that the process was accelerated by the pandemic. E-commerce and digital sales development is no longer the future — it is very much the now.
The retail industry has changed for good, and our definition of “normal” will have to change with it. But not everything is as dark as it may seem. Every crisis is also an opportunity. For retail companies, the goal should not be to return to the “old normal” before the pandemic, but to strive to create a new reality for themselves and their customers through retail innovation.
As the world emerges from the pandemic, its ramifications will continue to boost e-commerce as consumers stick with the convenience of making purchases online. By investing in digital retail innovation and development, retail companies will have a much better chance of surviving the impact of the coronavirus and thriving in the “new normal.”