Coronavirus brought the world to a grinding halt. People were directed to shelter in place, work from home and non-essential businesses closed. Grocery retailers and other ‘essential’ businesses were able to remain open with their teams at the forefront to serve the public. At the same time, nearly every market experienced an e-commerce explosion as fears of the spread of disease grew. Now that non-essential designated retailers have started to re-open their brick and mortar stores for business, there is much conjecture on what the world of retail holds going forward. Many of these retailers may also shed new light on what the post-COVID economy will look like for retail in general, as they have had the opportunity to reflect on the future during long months of shutdown.
Over the past several weeks, headlines reported that multitudes of brick and mortar stores will close their doors over the next several years. For example, Starbucks plans to close 400 of their stores over the next 18 months and GNC has already closed roughly 300 of its health food stores. J. Crew and JCPenney, as well as other big-name retailers, announced store closings as their businesses dissolve. While some of this activity reflects the demise of struggling brands prior to the pandemic, it also depicts a drastic shift that will certainly change the retail landscape for big brands as well as ‘mom and pop’ shops into the future. Coresight Research predicts between 20-25,000 US brick and mortar stores will close in 2020 alone. For Canada, that could mean several thousand closures. Additionally, eMarketer reports that retail sales will decline by over 10% in 2020 yet calls for an 18% increase in e-commerce during the same period.
Another flurry of news indicates that big name chains announce the opening of new brick and mortar stores within the wake of COVID. Dollarama, a Canadian discounter, announced that their brick and mortar business is stronger than ever and says they will build more stores in Canada and in Latin America under the ‘Dollarcity’ banner that they have an ownership in. Amazon will continue its trend to open brick and mortar stores in 13 states across the US. Ulta Beauty also plans brick and mortar expansion with plans to open 400 stores within the next 10 years.
So, what is the public to make of this dichotomy and how it will play out? Will brick and mortar retailers eventually become relics of the past? Will e-commerce catch up to brick and mortar as the leading point of sale and delivery vehicle in the post-COVID economy? What of the retailers that continue to open stores in the wake of the e-commerce boom? To better understand these questions requires a peeling away of the layers in the complex and rapidly changing economic environment that we are in.
Reinvent Your Business to Stay Relevant
China and Southeast Asian markets were some of the first to open after lockdown. The initial view from these markets shows that for retailers to stay relevant, they will need to adapt in the post-Covid world. Asian retailers have seen a surge in consumers starved to shop. Dubbed ‘revenge spending,’ brands have seen a boost that has helped to jumpstart foot traffic in their stores after lockdown. However, as retailers and brands have been bolstering their on-line presence during the pandemic, there is a recognition that they also must invest in digital offerings to stay on track with consumer demands. E-commerce purchase and delivery options, social media and live streaming have become the norm during the pandemic and consumers will expect the same in the aftermath. For example, Benefit Cosmetics, an LVMH brand has launched an eyebrow try-on program via the popular social sharing app WeChat, which allows consumers to virtually try-on a brow product prior to making an appointment to come into a store for purchase. Sephora has entered a partnership with Chinese online giant TMall to open an e-commerce store on-line.
Kohl’s Corp. CEO, Michelle Gass believes that the pandemic shutdown should be viewed as a reset for brick and mortar retailers. She encourages business leaders to reboot ideas and innovations that were on a ‘back burner’ to affect change and to improve the level of service for consumers who relied on digital means during lockdown. She echoes the need for retailers to heighten the in-store experience for shoppers in her quote from a Bloomberg article last week saying: “The bar is raised on what experience you’re creating inside that brick-and-mortar. This period has heightened and accelerated all of these things for consumers and for businesses like us, both small and large.”
Brick and Mortar are Here to Stay
As difficult as it has been for brick and mortar retailers during the pandemic, e-commerce pales in comparison when it comes to facilitating impulse purchases and a positive purchase experience surrounding many other non-essential goods (e.g. fashion, cosmetics). Product categories that require touch and fit, and promote immediate satisfaction rely on the presence of physical stores. According to Credit Suisse analyst, Michael Binetti, “Eighty percent of people still set aside time to get in a car and go to a store to purchase something that they could have gotten online.” This is where we see the Warby Parkers (online eyeglasses retailer) and Amazons of the world making a shift to physical stores so they can satisfy consumer desires for a personal experience. People want to see, try-on and experience some items before buying, not to mention the urge for an occasional impulse purchase of Reese’s Peanut Butter Cups or package of M&Ms. At the end of the day, people buy from people and this is a part of what is lost in a fully online experience.
North American retailer Ulta Beauty has full confidence in their ability to sustain their brick and mortar business. Their core model relies on the belief that shoppers want to see, touch and try-on before purchase and they are determined to take-on other brick and mortar retailers and compete with Amazon and other e-commerce platforms. Their foundational strategy has pushed other retail giants like Target, Walmart, and CVS to invest heavily in their own cosmetics departments with better lighting, upgraded fixtures and more open spaces.
Localization has also become a buzz word during Coronavirus. Consumers, suppliers, and retailers found that staying close to home offers unique benefits that cater to local needs. For example, shopping in stores close to home provides a feeling of safety and personal connection as well as the sense that one is supporting their communities and neighbors. Identifying with community and managing supply chain using local suppliers and assets has led to efficiencies and has minimized complexity and risk in obtaining the goods and services required to keep them flowing to shoppers.
Integrating Online and Offline for Maximum Reach
The single most important learning for businesses post shutdown is the imperative to integrate the shopper experience from online to offline seamlessly. This is a warning signal not only for retailers returning to business, but for grocery retailers and suppliers whose businesses boomed over the past several months. Consumers have become increasingly savvy in the e-commerce and digital space. In fact, they are light years ahead of where they were before because they were forced online during the pandemic. While e-commerce exploded to new heights during the pandemic, the focus is now on omnichannel retail. A true omnichannel structure transcends the online-only experience. Omnichannel is the way to create interactions with the consumer in the ways that they dictate through the mediums that they want to use. Businesses enabled by omnichannel retail have the power to reach consumers and shoppers in many more ways than ever before spanning a combination of on and offline channels.
Starbucks made a recent statement that it will accelerate its strategy to integrate physical stores with digital coffee experiences. The transformation combines store closings with an increase in online purchase options as well as the addition of new store types. They will focus their efforts on Starbucks Pickup-Only stores in high density markets as well as build out other convenience-based solutions to increase the level of shopper satisfaction so patrons may drive-up, drive-thru, or walk-up to grab their beverage of choice. Starbucks CEO, Kevin Johnson says in a recent New York Daily News segment, “As we navigate through the COVID-19 crisis, we are accelerating our store transformation plans to address the realities of the current situation, while still providing a safe, familiar and convenient experience for our customers.”
Amazon is taking full advantage in their ability to bridge the online and offline divide by leveraging Whole Foods’ footprint, distribution networks and local communities. And while Ulta Beauty’s model is in favor of investing in their stores and upgrading the instore experience, they are undergirding their network of physical stores by building an online presence to empower consumers with more choices in the way they shop.
Automation to fuse online and offline vehicles enables consumers to interact with brands more seamlessly. From efficient inventory customer management tools, and digital marketing, investing in technology and software can impact retailers’ and suppliers’ abilities to streamline. In Dubai, InstaShop is helping to modernize the brick and mortar sector by offering an online marketplace for on-demand delivery. They have onboarded more than 500 local outlets since the onset of Coronavirus, so retailers can improve their ability to meet consumer needs in a unique way and allows them to transcend into the ‘new normal’.
Advantage Perspective
Over these interesting and incomprehensible last few months, we have experienced shifts in consumer behaviour as shoppers have been forced online to buy and pick up both essential and non-essential items. It is important to remember that retail is a people business. Shoppers seek people to help them find the products they are looking for and to fit and test items that they are intent to buy. Retailers and suppliers will continue to be reminded that the “people principle” will never fully go away. Working together today to better manage the shopper experience whether instore, online or a combination of both will require sharing, transparency, cross-functional teams, strong future-focused business plans and teams that are fit for the future.
Sources
- Bricks to clicks: Will traditional retail survive COVID-19?
- Dollarama’s plan for post-COVID world: Build more stores
- Kohl’s CEO Says Shutdown Raises Bar for Brick-and-Mortar Stores
- Why Ulta Beauty isn’t going down with the rest of brick-and-mortar retail
- 25,000 stores are predicted to close in 2020, as the coronavirus pandemic accelerates industry upheaval
- At a turning point: China beauty brick-and-mortar stores will recover if retailers reinvent themselves
- Baby Boomers and Gen Z to Lead Rebound in Foot Traffic to Brick-and-Mortar Businesses Post-COVID-19 New Survey Finds
- Amazon to open more brick and mortar stores in 13 states
- Starbucks to close 400 stores, expand pick-up options ‘to meet changing customers behaviors’
- Covid-19: Nearly 500 brick and mortar retailers make the switch to digital by joining InstaShop
- Brick and mortar’s next chapter
- As 2020 retail closures accumulate, thousands more expected
- How the Coronavirus is Impacting Ecommerce & What it Means for Retail
