Long-term implications of Covid19: Where retail will be at the end of 2020?


As the whole world is still in some form of lockdown, consumers and retailers are scrambling to adapt to the evolving situation. One thing that is consistent is the response to the novel Covid19 pandemic which will have without doubts a significant impact on business and consumer behaviour. The situation is evolving daily and varies between geographies with no clear understanding of future landscape and impact.

So far, the focus of business leaders and others has been on immediate responses and short-term horizons. This is for good reason. However, there are initial signs of how this pandemic may be shaping longer-term assumptions about business and its context.

Retailers recognize that Covid19 will have a significant impact on their business and it’s time to think through the longer-term implications.

Covid19 has already transformed large swathes of the economy in remarkable and generally not very positive ways. Nearly every sector has to do things differently, from remote working, to social distancing, disrupted supply chains and the de/increase in demand. However, few areas of the economy are experiencing bigger levels of shock and upset than retail.

When things will return to a new normal, there are a number of ways in which retail will very likely be changed forever.

Growing operating costs such as rent, rates, insurance and staffing, the threat from online retailers, many of whom are based outside the country, and changing shopping and consumer habits are putting high pressure on traditional retailers’ models.

Without additional government support many businesses that are closed temporarily will not be in the position to reopen and consequently thousands of jobs might be lost. However, even if there will be further support for retailers, when the crisis is over many outlets simply won’t re-emerge, and large numbers of jobs across the sector will be gone.


Post-Covid19, there are five key areas where retailers should be focusing their attention in today’s highly-fluid social, economic and health environment:


    1. Long-term supply challenges 

While some retailers are seeing demand fall away and customers shift channels, others are facing unprecedented spikes in demand. Grocery retailers, in particular, are dealing with significant out-of-stock situations due to consumer panic buy on many key products as consumers hoover up supplies perceived to be essential.

The ability to predict and manage demand has never been more important. Drops in demand coupled with long lead-times and inventory warehousing means that short-term supply is generally not a problem.

However, as the situation evolves, we expect to see significant variations in the magnitude and timing of supply chain disruptions across geographies and subsectors. Retailers should be talking to their key suppliers to assess their risks, identify any indirect exposures and create contingency plans. Retailers should also have a contingency plan, offering different delivery options, or having multiple carriers available so they can flex carriers quickly and easily if needed.

Companies that rely on manufacturing solely in China may start to rethink their supply chain strategy in the case of another pandemic. It will be likely that brands will expand their manufacturing efforts to places such as Indonesia and India in order to ensure supply lines can continue to meet demands.


2. Ethical retailing will be growing

Sustainable brands and social enterprises will continue to grow massively over the next years. Also, generational shifts will play a more important role in setting behavior than socio-economic differences do. Especially with generation Z coming through and expecting more from brands, aligning them with their own personal values. Young people have become a potent influence on people of all ages and incomes, as well as on the way those people consume and relate to brands.


3. Collaborations are the new way of the future

Rent-sharing, cost-sharing, staff-sharing and mixed product offerings and services are only a few keywords. Knowing how volatile retail is and how tough the industry has had it for the last two years, it calls for innovation.

Smaller retail footprints will be on the rise. This trend was already appearing before the wake of Covid19, but this pandemic will springboard this into the reality of what we see today. In the coming year, we would think many “very-large-format, high-end” department stores will disappear and be replaced by smaller retailers.

In the future, retailers will be open to collaborate with brands, influencers and experiential-type companies in order to provide their customers a different, better retail experience. We expect to see retailers partnering with top baristas, bakers, authors, artists and other brands to collaborate in bringing a mixed service and retail experience to life. Retailers will need to think out of the box more than ever to bring people into their spaces.


4. Communications

How will you maintain trust in your brand and your products and services? How will you reset expectations for today? And how will you recover the customer experience in the future? Regular communication with customers is the absolute key.


5. Managing crises responsibly

The Covid19 crisis is in many ways unique. However, it is also part of a broader pattern of increasingly frequent crises, as we push beyond planetary boundaries. In South Africa, businesses were just recovering from a record-breaking drought when the crisis hit. In Australia, people were still reeling from disastrous fires.

Retailers and business leaders will need to recognise that crises will become less exceptional and their actions and responses need to be better prepared, more proactive and more responsible. They must respond to both the synergies and tensions between business and community resilience.

Often, ensuring business continuity is a vital contribution that business leaders can make to the communities in which they operate. In many countries pharmacies and grocery retail shops still have products in store. This is the result of highly sophisticated responses that have started back before January. Also, there has been some impressive effort by companies to repurpose their production facilities and to make products and services available to medical workers.

In the years to come, retailers will need to distinguish themselves by showing strong crisis management capabilities in maintaining business continuity and by contributing more clearly to societal resilience.



So where will retail be when we come out of this pandemic?

When this is over, there will be an expectation for authenticity. Consumers will reward those brands that “do the right thing” during this challenging time. That means telling the truth, valuing people over profits and using resources for the greater good. What happens to brands after this crisis will be strongly influenced by what they did during it. In short, consumers tend to reward good corporate leadership.

There will be a demand for new experiences. After being in isolation for weeks and months, consumers will want to make themselves feel better and start fresh, which usually means buying new things.

Once we come out of this, consumers will have a heightened sensitivity to our mutual vulnerability. Environments will have an ongoing expectation to be clean and we might have a different sense of our personal space. Cocid19 will probably have an impact on how we feel about crowds and tight spaces. Social distancing will drive more consumers to digital platforms and will continue to accelerate online shopping massively.

People who have never shopped online before, will adopt new behaviors during this time and will probably keep them up after this pandemic is over. Retailers and restaurants will need to adjust their operations and financials for a new reality.

While these gradual behavior changes weren’t unexpected, the timeline will be ramped up by years.

The takeaway for retailers? Your customers will still be there on the other side of this pandemic. They’ll be eager to reconnect, however likely in a different way.