Examining How Covid-19 Affected the Retail Industry



Can things look better in post-COVID Retail World?

The coronavirus caused COVID-19 has created great havoc across different industries. While it brought sectors like travel and tourism, logistics to stand still, it proved as an enabler for the healthcare industry and brought work culture transformation for IT companies through work from home. But as the lockdown measures were lifted, some of the industries reverted to normalcy. However, retail is caught in the hooks of irrecoverable losses. Only the ones with a transparent policy have managed to retain their customers’ trust and the market. According to mobile-device location data from foot-traffic analytics firm Placer.ai, Weekly foot traffic from July until the second week of September is down by an average of 14% compared to the same period in the previous year.

While retail is still struggling with recovery, the e-commerce sector is making rapid strides as consumers are still choosing to stay at home. And by consumers, it not only implies millennials who preferred cashless point-of-sale, online or mobile checkouts but also non-tech savvy persons too. This is why retail footfall remains below pre-pandemic levels in most countries globally, and consumer confidence is low. As a result, online transactions with credit and debit cards have surged with an average of 88% each month since the beginning of April, according to weekly transactions collected by financial-data firm Facteus. Further, due to the fear of coming in contact with the coronavirus and minimal transportation due to lockdown, people turned to local produce for their daily needs. Accenture reports that 56% of consumers are shopping in neighborhood stores or buying more locally sourced products, with 79% and 84% respectively planning to continue with this behavior into the longer term. So, it is safe to say that COVID-19 has led to a major change in this industry.

Meanwhile, investment bank Barclays Capital says that the pandemic is also helping to clean out the excess retail capacity. In its 46-page report titled “The Long-Awaited Reckoning for Retail,” it says that nearly 15% to 17% of U.S. malls may no longer be viable as shopping centers and may to be redeveloped for other uses. The study found that the percentage of malls with a vacancy rate of more than 20%, which lands them in the “non-viability danger zone,” jumped to 28% in September, from only 8% last year. This comes surprising in addition to the fact that COVID-19 has forced many retail outlets to offer heavy discounts to lure customers. Plus, many esteemed retailers like J.C. Penney Co., Lord & Taylor, Neiman Marcus Group Inc., GNC Holdings Inc., and Brooks Brothers Inc. filed for bankruptcy protection, and collectively they have closed hundreds of stores. Consequently, this also directly impacts employment as many people have lost their source of income with shutdowns.

However, with stores opening across borders, there is still a faint hope of recovery even if it is slow. Barclays analyst Adrienne Yih notes that COVID-19 is instead, bringing a positive trend. In fact, according to her, next year, we may witness a return to bricks-and-mortar sales growth and lean inventory supporting EBIT (earnings before interest and taxes) margin expansion. She believes that the Retail Deleverage or ‘Death Curve’ will become the Retail Leverage or ‘Life Curve.’ This looks promising than the fact that earlier oversupply of bricks-and-mortar locations and product, along with the margin headwinds that often come with the shift to e-commerce, have been driving profits towards zero.

Other than that, retailers are now investing more in omnichannel than having fractured conversations in the digital and social networking world. Moreover, while earlier retail outlets and e-commerce sites employed ‘sales’ gambit to boost their revenue and attract customers; at present, they must experiment with brand’s inclusivity programs, fair hiring practices, and other CSR initiatives for finding ways to keep customers engaged.