Calling on a retail evolution
Pandemic has begun to reshape shoppers and the industry,
You don’t need experts to see that any business serving the public is in trouble. By the end of 2019, many retail analysts and consultants were already speculating which retailers would fail next, especially given their already weakened positions from growing shifts in consumer behaviour favouring e-commerce for greater selection, convenience and pricing. Then the COVID-19 shutdown hit Canada, and it became clear the coronavirus and e-commerce would begin to reshape the industry and consumers.
That transformation didn’t take long, coupled with the fear of catching the virus, consumer behaviours have been reshaped. After weeks of working at home, isolation, social distancing, a higher level of hygiene, wearing masks, and keeping up with the news on the virus, we are all sensitized.
As a result most shopping is now about necessities, and far more is being done online. Those necessities are primarily groceries and prescriptions. We are also getting used to waiting in queues to buy groceries; more of our behaviours and our free time is being redefined.
The retail story has been changed and I don’t know of anyone who believes things will go back to normal anytime soon. The only thing that hasn’t changed is that retailers need to evolve faster. But how?
Many retail stores have liquidity issues, financially most operate on a weekly or monthly basis. Even if a retailer qualified for government assistance, it may not survive. I don’t see that happening until the middle of 2021. Recently, I reviewed H&M’s financial analysis. The report highlighted the last 14-week revenue period for its operations in China. The most recent five weeks revealed that with 90 per cent of their stores reopened, sales volumes ranged downward from a -79 per cent to -23 per cent for that fiscal period. In my experience this is not the kind of rebound that will help businesses recover or survive.
Every non-essential business is in the same situation, they are closed, waiting at the same starting line for the race to begin, with zero sales and uncertainty about the future. All will be fighting for that small amount of daring customer traffic, but not all consumers will be freely shopping. That means businesses will be faced with a financial endurance test waiting for demand.
For many, breaking even would be a milestone. Just how that translates into traffic and transactions and ultimately survival will differ with each business.
There will be business failures and we will hear of bankruptcies from larger businesses as well. Clearly reopening will not be business as usual. The virus is still with us and the risk for increased infections and deaths are very real.
However there is a new normal, led by consumers who will fall into one of four categories; beginning with the “Sensible Participant” these shoppers while cautious of their health, will be excited that there is some more freedom.
Next we have the “Rational Apprehensive,” they will want more assurances about health and safety practices, and as that becomes regulated and monitored so will their confidence.
Followed by the “Irrational Apprehensive” who are sensitized by the risks associated with the virus. They will take few risks until there are proven therapeutics and vaccines.
Finally, we have the “Insensible RiskTaker” they want to see the economy reopened; and don’t care about the virus. The behaviours of this group can damage a well thought out recovery plan and create more shutdowns than we need.
The majority of these shoppers will likely continue to increase their shopping online with home delivery and curb side pickup for purchases. Sustaining social distancing and well-being is very important to them. If we couple all of this with a changing workplace, the anxious commute to work and back on transit daily, that is just risk enough for many.
Our homes become a refuge of safety. The desire to visit malls, stores, restaurants will not rebound quickly. Even a trip to a hair salon will be a nervous filled necessity. In the end the consumer will decide the future of many businesses because fear shopping is still with us.
However I believe that human need and ingenuity will create new businesses the likes of which we have never considered but need right now to keep our economy moving.
George Minakakis is the CEO of Inception Retail Group and author of “The Great Transition The Emergence of Unconventional Leadership.”