Food retail improvisations could shape some post-pandemic commerce trends
As some economies start to reopen and everyone wonders about the post-pandemic world, tentative hopes for retail keep running into sobering realism. Indeed, a new analysis anticipates that demand for retail products such as clothes and shoes might suffer a significant and permanent hit — damage that only the holiday shopping season would have a chance of partly repairing.
A Wells Fargo note to clients on Wednesday warned that “5% to 10% of pre-COVID-19 demand could be decimated permanently, as ‘lost store volume can’t entirely be made up online,’” according to a CNBC account.
Wells Fargo could not immediately provide a copy of that note, from retail analysts such as Boruchow, before deadline. According to CNBC, retail sales levels might take nine months to reach what Boruchow called “the new normal.” If so, that means the 2020 holiday shopping season will take on even greater importance than would normally be the case, putting retailers under even greater pressure between Thanksgiving and New Years Day as they struggle to survive the pandemic without resorting to more store closings and bankruptcy.
The message of this new research note was shaped by a survey of 1,000 U.S. consumers. Boruchow reportedly cautioned that those surveys were taken during what he called “peak fear” — that is, when the outbreak was quickly spreading and many consumers were in panic-buying mode and otherwise unsure how to respond to the COVID-19 dangers — but even with in the mind, the findings are severe.
It’s not hard to descend into pessimism when thinking of how much damage the pandemic is doing to retail, especially for certain chains and products. According to that Wells Fargo research note, “the pandemic has likely impaired consumer demand for apparel and footwear longer-term,” CNBC reported. Those two product categories typically provide some of the best and most reliable fuel for retail revenue engines, and any serious dropoffs would not augur well for the retail world at large.
Of course, much of retail was already in an existential funk well before the outbreak because of the rise of online and mobile commerce, other shifts in consumer habits, and Amazon’s take-no-prisoners march to commerce, logistical and technological dominance. The pandemic has shaken the remaining foundations of many retailers that could not keep up over the past decade or so.
By contrast, the food retail industry, for obvious reasons, has benefited financially during this pandemic, at least according to first quarter financial reports over the past two weeks or so. Grocery stores, supermarkets and similar merchants seem very likely to emerge from the pandemic not only with better reputations, but with deeper expertise about how to handle online ordering, touchless payments deliveries and similar tools, along with supply chain processes. Those technologies and associated programs were evolving relatively slowly in the food retail world before the outbreak. But COVID-19 offered what amounts to an e-commerce, supply chain and labor management baptism by fire for store operators. Further investment and experimentation in those areas are sure to follow in the coming months and well into 2021 as food retailers get a more precise view of what really works for their customers.
Indeed, an odd situation could potentially develop thanks to the improvisation happening in food retail over the past couple of months. No doubt many consumer habits formed during these tense times will end up sticking for good —— that usually happens during widespread crises, historians say, with the Great Depression of the 1930s serving as a prime example. Taking that into account, it’s reasonable to expect that more and more consumers will increasingly use online and mobile channels for grocery shopping, a trend that could be reinforced by the rise of voice-assisted devices that enable automatic and other types of ordering from consumer homes. If so, that could mean that food retail, a longtime laggard on e-commerce and other newer technologies, could end up providing case studies and other lessons to other parts of the retail world about how to better respond to different (and younger) consumer segments. That’s just speculation at this point, of course, but it’s not difficult to imagine that happening in some form.
Even so, the broader world of retail faces stiff challenges, as that new Wells Fargo research note starkly indicates. Mall operators, for instance, are trying to open their properties back up with pandemic protections in place, and even prop up struggling retail tenants via big investment efforts. But malls, some of them anyway, were already somewhat distressed well before the COVID-19 outbreak. With some venerable mall-based retailers facing financial challenges, there is much cause for concern when it comes to traditional shopping centers.
There is also another factor to consider: Consumers don’t seem at all ready to return to physical stores. A Deloitte survey report from late April, for example, found that a mere 34% of U.S. consumers feel safe enough to shop inside stores. And the new Wells Fargo research note reportedly offers a similar and more specific view. “More than 40% of people say it will take up to three months after the end of living in a lockdown scenario to go back to stores to shop for apparel,” according to CNBC. “Nearly 20% of people say it will take more than three months. About 11% of people say they will not go back to a clothing or shoe store until there is a vaccine or cure for the virus.”
No matter what, however, more people will eventually buy more retail goods, and even those consumers suffering through job losses or reduced incomes usually do what they can to buy gifts during the holidays. Everything bounces back, even commerce, at least to a point. Sure, the Wells Forgo research note demonstrates that the retail outlook is getting dimmer as the pandemic drags on and its damage comes into sharper focus. But as dim as it is for retail, one can spot at least a few sparks of innovation and revival, a few areas that warrant a cautious form of hope. And you can bet that retail operators, observers and investors will be seeking even more.