COVID-19 is likely to result in a delayed “rebound” following a relaxation of restrictions. Retailers need to make preparations for this eventuality across several areas including staff training, ecommerce infrastructure, and in store activities such as cleaning.
As COVID-19 continues to disrupt businesses and economies around the world, many countries are several months into their various levels of physical and economic lockdown. Retailers are now grappling with the uncertainty around economies reopening for business, and how best to navigate those waters when they do. Many executives and economic pundits are looking to China as a way of peering into the future to understand what life might be like as cities and countries do relax social distancing restrictions, and the data is suggesting a delayed rebound. This blog lays out the case for a delayed retail rebound, and how businesses can position themselves to respond if this is the case.
Delayed Retail Rebound in China
China began relaxing its restrictions in April 2020, with people heading back to work in an effort to restart the economy following an apparent flattening of the COVID-19 curve. The figure below provided by TomTom gives an indication of traffic congestion in the last 7 days (red line) compared with the average congestion for the same time in 2019 (dotted blue line). There is no doubt that activity has restarted during the week, and it is fascinating to note that the activity at the weekends and public holidays (Monday and Tuesday of the week shown fall on labour day holidays in China) is still significantly down on 2019.
What does the above tell us about the activities of consumers upon restrictions being lifted? It appears to be saying that consumers in China are not yet interested in being out and about during their free time, indicating a strong and potentially worrisome shift in consumer behaviour.
Is this a harbinger for consumer behaviour in the western world? With no way to know for sure, we suggest that retailers put some time into the following areas in preparation.
Prepare for Sustained High Ecommerce Traffic
A corollary to a delayed retail rebound is a sustained increase in ecommerce traffic. This makes sense if we assume that consumer behaviour is changed for at least the short to medium term. Businesses with the luxury of shifting resources to their ecommerce channel following store closures have no doubt already done so, and we think that these resources should remain in place and then some.
McKinsey and Company released some intriguing retail survey results indicating the same, with respondents across all surveyed areas expecting a sustained 6-13% increase in ecommerce levels (compared to pre-COVID-19).
Our recommendations for retailers to prepare for this are:
Prepare for a Change in Operating Model
COVID-19 and the various government responses have had a profound impact on consumer behaviour. This is likely to affect the way they interact with a retail store once they again have the option to.
One thing is for sure, cleanliness will be front and centre. The unprecedented demand for soap, hand sanitiser, and cleaning products aside, the transmissibility of COVID-19 we have witnessed is a strong indication that consumers will be unwilling to touch anything in public that has not been thoroughly cleaned.
Our recommendation: retailers should prepare for increased cleaning in stores, as well as PPE for staff.
Social distancing restrictions vary country by country, though the general idea is the same, reducing the contact between people reduces spread of COVID-19. Managing this in-store will present significant challenges and retailers need to consider some or all of the following:
Reduced store hours
Reduced staff on the floor (with more support out of hours)
Redesign stores to accommodate wider aisles and entrances
Reducing the chances of a customer passing the virus to a staff member is a key consideration and retailers should consider:
Mandatory personal protective equipment (PPE) for staff
Mandatory hand sanitizer for customers
Limited or banned product returns
Delay New Store Openings:
Given the uncertainty around COVID-19 many retailers are understandably reviewing any new store strategy. There are two schools of thought in this domain:
Defensive: delay all new store openings to save the capital costs and associated risks
Aggressive: Proceed with all planned openings (government restrictions permitting), allowing the business to capitalise on the opportunity left by any competitors who may have adopted a more defensive approach
There is unlikely to be a hard and fast rule here, with success able to be found using both strategies. Our advice is to ensure that any decisions made in this domain are done so in the context of the entire business e.g. a business that’s looking to reduce their physical footprint prior to COVID-19 shouldn’t adopt an aggressive new store strategy merely because their competitors have left an opening (we don’t need to tell you that but don’t want to be liable for a “Remi made me do it” attack).
Don’t forget about your greatest asset
We don’t need to tell you that one of your most important aspects as a retailer is your fantastic staff. They are feeling the pressure during this volatile period, whether it be from a drop in hours through store closures, or the stress of overtime to keep up with extreme demand, on top of the anxiety induced on all by the ambiguity of society at large.
The wellbeing of your staff is paramount, in the context of being an ethical human, but also in the view of your business moving forward. Those businesses that treat their staff poorly during this time can expect lingering resentment moving forwards, and this may be expressed not just internally but also in the public sphere.
Prepare your staff for the ‘new normal’ for retail via training and development in areas such as PPE, cleanliness, dealing with irate customers, as well as any new technology that may be used in the business in the near future. Your staff will be more important than ever as you look to recover from this volatile period.
The beginning of 2020 has no doubt been a shock to most, and retailers could be forgiven for assuming that consumption levels will rebound in a post COVID-19 world. We make the case here that the recovery is likely to happen far more slowly, and that retailers can prepare accordingly by investing in ecommerce experience and infrastructure, aligning store operations with expected norms around cleanliness, and retraining staff to perform strongly in a post COVID-19 world.
About the Author(s)
Eamonn Barrett is a partner at Remi AI and works out of the Sydney office.