Many brands put their e-commerce efforts into overdrive amid the pandemic, as shelter-in-place orders shuttered stores and kept consumers home. With physical stores across the country reopening, you might think they can return to business as usual. Think again. Retail after COVID-19 doesn’t look like retail before the pandemic.
COVID-19 triggered a dramatic shift in consumer behavior to online channels, sending e-commerce soaring. Consumers shopped online from the safety of their homes for essentials like groceries and cleaning products, as well as home goods and fitness equipment. It’s hard to see this e-commerce trend going away anytime soon despite the reopening of physical stores.
Now that many people have become accustomed to buying more online, there’s a good chance they’ll make it a habit. And while we might assume people are eager to get back out into the world and into stores after months of being sequestered at home, that’s not necessarily the case.
E-commerce will still dominate retail after COVID-19
The massive growth in e-commerce that started in March during the early days of the COVID-19 lockdown has slowed, but doesn’t show signs of reversing.
An online tracker produced by Emarys and GoodData indicates that online retail continues to grow worldwide:
- In the US, retailers that are primarily brick-and-mortar saw online orders grow 24% between May 31 and June 7 compared to the same period last year.
- Pureplay online retailers saw online orders grow 5% during that same period compared to 2019.
In Europe, retailers have seen their revenue from online orders steadily increasing since the start of the year except for a huge spike in April, according to the Emarys/GoodData tracker.
While grocery stores remained open during the government-ordered quarantine, contagion fears drove many to avoid physical stores and buy their groceries online. Online grocery sales in the US soared in March, and continue to grow at a rapid pace. Research from Brick Meets Click, a grocery retail consulting firm, showed that US online grocery sales set a record in May, reaching $6.6 billion, a 24% jump from April.
Brick-and-mortar giant Walmart, which had been ramping up its ecommerce operations before the pandemic, saw online revenue soar 74% in its first quarter ended May 1 with its grocery delivery and pickup services in high demand.
Consumer anxiety and retail
As physical stores reopen, it’s hard to guess how many customers will venture out to them to shop. Despite an initial report from Macy’s about better-than-expected performance in its reopened stores, many consumers remain leery, especially as health experts warn of the potential for a virus resurgence.
Deloitte has been polling consumers regularly over the past few weeks in an effort to gauge their mindset and the level of consumer confidence. There are some signs that people generally feel safer going out in public – for example, nearly half of respondents across the countries surveyed said they feel safe going to the store now, up from 35% a month earlier, Deloitte reported. Retailers’ new in-store safety measures may have helped influence that, analysts said.
However, when it comes to retail after COVID, a lot of people are still anxious about going to the store, especially in countries like Mexico, where there was an increase in COVID-19 cases in early May, Deloitte noted.
“As economies attempt to reopen, it’s likely not until the public feels safe that consumers will return to behaviors that we only recently took for granted,” Deloitte analysts wrote.
Successive surveys of US residents by PYMNTS found that a growing number are interested in venturing outside their homes (36% on May 23 compared to 28% on April 27). However, consumers who have embraced digital channels to buy groceries and other essentials remain concerned about getting sick and are less interested than others, the studies showed.
A McKinsey & Company report said we should expect the shift to e-commerce to continue to some degree.
“Early lessons from China suggest that three to six percentage points of online market share will be ‘sticky,’ driven by older generations newly comfortable with digital channels… Also, in the medium term, we expect shoppers to prefer the ‘safe’ experience of shopping online to the prospect of shopping in crowded stores,” according to the report.
Retail after COVID-19: Pandemic reshapes the landscape
As the pandemic accelerates the shift of consumer buying patterns to online, it’s also hastening the decline of brick-and-mortar. Traditional retail has struggled for several years during the rise of e-commerce, and some view COVID-19 as the nail in the coffin.
JC Penney, J. Crew, Neiman Marcus, and Pier 1 Imports are among those that have announced plans to close stores permanently and/or have declared bankruptcy, citing losses caused by the pandemic.
Some traditional retailers are responding to changing consumer behavior by shifting their resources to online. For example:
- Spanish retailer Inditex and its flagship Zara clothing brand, announced plans to invest more than $1 billion on its digital operations while closing 1,200 physical stores.
- Others retail chains are adding new services to accommodate consumer demand for more shopping options, such as curbside pickup and buy online, pick up in store (BOPIS).
- Target has been building up its BOPIS capabilities for a few years now while other retailers have scrambled to provide the option as consumers avoided the risk of physical stores during the pandemic.
- Bed Bath & Beyond said it’s converting a quarter of its stores in the US and Canada into regional fulfillment centers to support its growing digital operation.
- With consumers anxious about what they touch in public, contactless payment also is growing as retailers give customers more options for payment via apps like Apple Pay, Venmo, and tap-to-pay registers.
While it remains to be seen how consumers will respond as physical stores and other public places open, it’s clear that e-commerce must remain a priority for brands for the foreseeable future.\
