How is COVID-19 Impacting the Future of Retail?
It’s not like retail businesses could have anticipated the arrival and spread of COVID-19. Nor could it have been predicted that a pandemic might be the force that drives people online like never before. Yet, it is happening - especially in categories such as purchasing groceries online, which, up until now, has been slower to gain traction in certain markets.
According to Nielsen, just 4% of grocery sales in the United States were made online in 2019. What will the future of retail and eCommerce look like post-pandemic? No one really knows, but we can ponder the possibilities based on what we’ve observed.
For years, First Line Software has been helping retail clients make their operational transitions to digital sales and marketing. But, like so many other businesses, we too face the reality of addressing the fact that retail, specifically eCommerce, has been disrupted over these past weeks and months.
Our team is actively monitoring trends and analyzing consumer behavior to understand how retail and eCommerce are changing due to COVID-19. We are also discussing how it is likely to continue its evolution short-term and into the future. As we arrive at our own conclusions, we are helping our customers address these challenges and opportunities through innovation.
We share our observations here in this post about what we expect to see happen in eCommerce and the brick and mortar retail industry. These businesses may find it necessary to change the course of their digital transformation journey as a result of the disrupting factors of the COVID-19 pandemic. And First Line stands ready to provide guidance about how retailers can prepare for the new realities of a post-pandemic world.
What’s happening now?
Digital grocery and general merchandise has been exploding with high demand while other purchases have dropped dramatically. Online sales for apparel and footwear retailers fell 37% on March 11 alone, according to Rakuten Intelligence. Foot traffic to U.S. stores fell 58.4% in the third week of March, according to ShopperTrak.
The fly in the ointment here is the fact that high demand is negatively impacting the digital grocery experience. Delivery slots are days away, not hours. Product inventory ranges from stocked shelves to quantity limits per shopper. Shoppers are either having to cancel orders for specific brands or agree to “other” brands. To top it off, this high demand and scarcity of inventory are, in fact, causing consumers to pursue purchases with somewhat of an obsession.
It remains to be seen exactly how these factors will impact the post-pandemic grocery consumer, but what’s certain is that the COVID-19 pandemic has dramatically accelerated the digital disruption of grocery.
Yet, digital grocery sales produce lower profits with the added costs of employing “shoppers” and making deliveries. Grocers need to find ways to influence impulse buying throughout the online shopping process. They also need to come up with creative ways to promote immediate consumption purchases versus stockpiling, which will prolong additional purchases.
Safety may become a decisive factor
In addition to the convenience factor, there is the safety aspect. People may become increasingly wary of shopping at physical retail locations now and into the future. Placing orders online may eliminate their discomfort of shopping at physical locations where they face the potential exposure to illnesses or disease. Touchless, curbside pickup and home delivery are likely to seal the deal of digital shopping.
The “trust factor” will also be a key differentiator. “Over the coming weeks and months, consumers will be seeking greater assurance that the products they buy are free of risk and of the highest quality when it comes to safety standards and efficacy, particularly with respect to cleaning products, antiseptics, and food items.”
A similar historical event on a smaller scale
While on a significantly smaller scale, the 2003 SARS epidemic was what drove the expansion of digital shopping in China. What is similar is the fact that city streets in China were empty due to the fact that schools, factories, and shops were closed. Digital shopping became the preferred option out of necessity. Companies like Alibaba and Jing Dong Trading capitalized on this opportunity and eventually grew to become two of the largest e-commerce companies in the world.
What might the future of retail look like after the COVID-19 pandemic subsides? It depends on the answers to several questions:
- How severe of an economic set-back will there be and how long will it last?
- Will consumers embrace their short-term behavior of purchasing groceries and other general merchandise online?
- Will brand loyalty survive or will price and availability drive product selection?
- Finally, what about new behaviors that are being adopted by necessity?
- Will consumers revert to eating out even after learning to cook while quarantined at home?
- Will loyal Starbucks fans who had to abandon their daily habit now settle for home-brew?
- Will many newly-remote employees continue to work from home?
- Finally, will households that now rely upon curbside pickup or home delivery continue to use those services once it’s over?
Preparing for the future of digital retail
Whether or not consumers remain loyal to brands or become brand agnostic, retailers must prepare now for the new world of post-pandemic retail shopping. The competition is likely to be fierce in a recession. Building a solid digital foundation while innovating will be key factors for success.
Foundational aspects of digital retail include:
- Engaging digital content
- Product search and selection
- Real-time service with chat and chatbots
- Intuitive purchase process
- Seamless shipping and delivery
- Digital Marketing - Email, SMS, SEO, ASO, Targeted offers
- Engaging and rewarding loyalty programs
Fortunately, there are a plethora of technology platforms and tools available to equip online retailers as they prepare to attract and engage consumers in a new world. What they often require is the customization of features and functionality as well as integration with back-office systems to optimize workflows and connect data.
Retail clients and commerce technology platform implementation partners around the globe rely on the First Line Software team to customize their commerce platforms and integrate their enterprise applications.
Regardless of how the world of digital retail evolves post-COVID-19, now is the time to start preparing to capture your share of online retail spend and build up brand loyalty. Contact us today to learn more about how First Line Software partners with clients to deliver exceptional digital retail solutions.