How will COVID-19 affect the retail industry?

The coronavirus epidemic has completely changed the way we live. Non-essential services and many retail stores had to temporarily shut their doors or move online, and many of them were unfortunately unable to adapt to the new reality. But when the restrictions are lifted, will the retail reality be very far from the one we knew by the beginning of this year? 

How customer behaviour and shopping experience changes? 

The first stages of defrosting economies in many countries have already shown that shop space had to be adapted to new, often rigorous guidelines. Shops can now handle only a reduced number of customers at a time, and there are warnings on the floors to keep a distance. 

The same applies to shopping malls. Unofficially, there is also talk of the widespread use of thermal imaging cameras to check our temperature and find people who may be a threat. 

However, those restrictions are making the shopping experience, which is very important in the fashion industry, much more complicated. Customers are also advised to shorten their shopping excursions to reduce the time they spend in the shops. This means that we are focusing on the more practical side of shopping: we come to shops and shopping malls for specific products without looking for additional inspiration. 

For the retail industry, this means reducing potential touchpoints with the customer and making them more resistant to shaping their shopping decisions, thus making them shop more economically. Customers buy in a functional way and stores must comply with the imposed regulations. 

New rules have been applied in shops and shopping malls

Examples of efficient adaptation to the new situation 

Many retailers have decided to introduce solutions to make it easier for customers to shop again. In addition to encouraging contactless payments, many stores have adopted the curbside pickup method, allowing customers to pick up their purchases near the store. Many have also used the BOPIS model (Buy Online, Pick-Up in Store), e.g. Lidl has decided to allow the method of booking products and then collect and pay for them in the store.  

Another great example of opening up to customers’ needs is IKEA, which has decided to introduce its own parcel machines. Soon, customers will be able to order not only smaller purchases but also furniture. 

What to prepare for in the era of technological progress caused by the pandemic 

In the era of pandemic, e-commerce has become a new shopping reality for us. Moreover, many people who hadn’t been convinced to shop online so far quickly realized the convenience of this solution. The trend will probably stay with us for a longer time – many people will certainly like the possibility of ordering online with a pick-up at the store to the extent that they will want to maintain the trend for longer. 

For grocery stores and the FMCG industry, this means that business models need to be adapted to new customer requirements. DSO – Digital Shelf Optimization – should become a standard. This methodology allows brands to better understand how consumers are looking for products and ensure that their products are as accessible online as possible. 

Supermarkets have also responded quickly to the difficulties associated with the pandemic and have introduced the possibility of ordering goods online with home delivery. This trend should continue as the lockdowns continue and customers get used to the convenience of this solution. It will therefore become crucial to integrate shopping platforms with information about current stock levels, and this means new technological challenges for both the bigger and smaller retailers. 

Warehouses must face new standards

How will reality change for the average customer? 

Due to the pandemic, many people lost their jobs and others found out that they may successfully reduce buying many non-essential products. Especially the first months after the crisis may therefore be crucial in terms of reducing customers’ purchasing needs. 

At the same time, there will be a major opening up to new purchasing technologies. Customers may be more willing to accept solutions such as an augmented reality. There will potentially be more mobile applications and platforms that will allow us to shop online without losing the shopping experience. 

However, we shouldn’t worry about being completely excluded from the full shopping experience. Shopping malls and large-format stores should survive because they give us the opportunity to interact with our favorite brands and at least partially compensate the full freedom to shop, make returns, etc. 

Nevertheless, we can expect a significant change in the urban landscape, which has so far been shaped to a large extent by retail stores. Since many of them collapsed, the spatial arrangement and cityscapes can change radically. 

The pandemic has exposed another major problem for retailers… 

At the beginning of the pandemic, many tenants informed their landlords that they would not be able to pay their rent for some time. The situation became even more serious when the pandemic started to intensify, and the understanding of owners obliged by banking loans could not last forever. 

Even one of the largest clothing brands in Poland, LPP, announced that it would terminate a quarter of lease agreements for its stores in search of savings, although many see it as an attempt to force shopping centre owners to lower their rents. 

However, the transformation of its business models into e-commerce did not help all the retailers – some of them collapsed before any financial security from the state was introduced. 

The pandemic has therefore verified: 

1) who can adapt their business to online environments  

2) who sells first-needed goods, and who sells the rest 

Now, one of the most important demands is the suspension of lease payments for retailers, as well as loan reliefs for apartment owners. The pandemic will certainly make us learn valuable lessons from this difficult experience – tenants will demand that force majeure clauses to be included in lease agreements and landlords will have to insure themselves against this risk. 

Our shopping habits have moved to the internet more quickly than ever

What should we embrace as the new normal? 

With the lifting of the restrictions, retail should regain strength. However, this will be accompanied by at least a slight change in consumer behavior. There will be many technological improvements, and the area of e-commerce, which until now has faced a high threshold for online access, will now have to consider this as the new standard. The retail sector should therefore quickly rebound and open new perspectives for shopping. 

For retailers and related businesses, this means that they need to adapt their business models to the new situation and take account of the large scale digitisation, especially if this has been neglected by them up to now.

It should also be kept in mind that for the consumer in the COVID era, every product can be a key product, so it is not reccomended to divide products into essentials and non-essentials. The sooner we offer our customers full access to our online product catalogues, the sooner we can expect return of our investment in the digitisation of stock. Increased online revenue will then mean a return to a new normality.