Retail, The Next Phase

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After a few of the most volatile months in American history, s­helter-in-place rules are beginning to ease up. More people are venturing out of their homes, and slowly gaining the confidence to resume something approaching business-as-usual. Though the full extent of the economic damage is yet to be known, the numbers we do have are staggering. Over 36 million unemployed. Record retail losses, including one of America’s oldest brick and mortar retailers, JCPenney. After a once-in-a-century pandemic, the future of retail may actually be in doubt.

As the smoke begins to clear, what does the next phase look like on the retail front? Let’s survey the landscape and try to figure out where retail goes from here.

The Big Questions

It’s safe to say that going forward, all American economic activity will be viewed through the lens of Before COVID, and After COVID. For retailers, there are several large and looming questions:

What will happen to furloughed employees when stores if customers don’t return?

Right now, it appears that the majority of retailers deemed nonessential have enacted furloughs across their workforce as opposed to mass layoffs. According to a study from Retail Dive tracking 144 retailers during the pandemic, 80 have announced furloughs compared with 64 that have not. Fortunately, layoffs have been significantly rarer. Only 19 retailers have announced permanent layoffs, as opposed to 125 that have not.

However, if customers don’t feel safe, it will be inherently difficult to return to anything resembling the retail shopping experience of the past. In that scenario, it’s easy to envision significant increases in layoffs.

Will increased safety precautions keep consumers online, or will they return to brick and mortar?

Though it’s too early to know for certain, there are already some very interesting emerging trends. For starters, it’s a good time to be an “essential retailer.” The biggest beneficiary appears to be Walmart. The retail giant’s ecommerce sales grew by an eye-popping 74% in Q1 this year. During that time, they also hired more than 235,000 new sales associates, and posted $134.6 billion in total quarterly revenue, a year-over-year increase of 8.6%.

Overall, the lockdown has hastened the shift from in-store purchases to online. But the numbers aren’t as clear-cut as one might imagine. Pet retailers have seen a bump , with Petco and PetSmart seeing foot traffic increases of 8% and 6% respectively. And with millions of Americans stuck at home for weeks at a time, people are focusing on those much-needed home improvements. April 2020 saw record-breaking app downloads for retailers such as Home Depot, Lowe’s and Menards.

Though it’s too early to know what all of this will mean for “nonessential” retailers once they’re safe to open, we can say with relative certainty that there will be a new premium placed on safety over convenience. Look for plenty of hand-sanitizer stations, and payment options that don’t involve touchscreens or cash. Going forward, the future of retail belongs to those who fare best at adapting to the new norms of social distancing. Which, as we’ll see, is already manifesting itself in new and innovative ways.

How could retail adapt to customers’ concerns?

Though they have yet to be distributed in the United States, health passports could play a large role in retail’s immediate future. The electronic devices use a color-coded system of green, yellow or red lights to show whether or not a person has tested positive for COVID-19, and has an antibody to the virus. Will consumers be eager to take up this technology in exchange for shopping under circumstances resembling the “old days”? Or will they reject it out of hand?

Other ideas—while ingenious—may have a hard time getting adopted in the United States. In Amsterdam, one restaurant is offering meals to customers while they sit in their own personal quarantined greenhouse. Your own personal pop-up tent is another idea that seems more like a fad than a solution.

More promising could be contactless credit card readers. The cards work by hovering them over an electronic reader—with no swiping or keying in needed. Going forward, eliminating as much physical contact as possible in retail spaces seems to be a popular solution, giving consumers more confidence that the stores place a premium on keeping them safe.

If you want to see a more realistic look at what retail in the COVID age could look like, take a look at what Apple is doing. Maintaining strict distancing guidelines of six feet, a mandatory face covering policy, and making customers consent to temperature checks are all part of their policy for the foreseeable future. Contactless temperature checks are also being implemented at the Chumash Casino Resort in Santa Ynez, California. Would-be gamblers would need a temperature lower than 100.4 degrees to be allowed inside. Those with higher temperatures will be urged to seek medical assistance.

If this all seems a bit sci-fi, it’s nothing compared to what could happen if the future of retail means a switch to eCommerce.

How could widespread eCommerce change the way we all shop?

What if eCommerce becomes representative of more than 50% of all retail sales across all categories? Amazon already has a drone program in place, Amazon Air. Its goal is delivery of packages weighing five pounds or less, in up to 30 minutes from the time of order. On their website, it says that Prime Air is “working with regulators and industry to design an air traffic management system that will recognize who is flying what drone, where they are flying, and whether they are adhering to operating requirements.”

Other eCommerce innovations that don’t require air traffic controllers are also in the works, or already happening. Target recently acquired back-end technology to facilitate same-day delivery service. Walmart—who has a history of technological innovation at a grand scale—recently announced a new service that promises home delivery in two hours or less with just a $10 flat fee for Walmart Delivery Unlimited Customers, a subscription service costing $98 per year.

What does this mean for your local retailers? It means that home delivery is here to stay. But while delivery makes inroads with groceries, consumer packaged goods and items like pet food, one of the mainstays of American retail—long on the ropes—is adopting an interesting strategy for the future.

How will shopping malls adapt?

Shopping malls have seen declining traffic for decades. But more and more of them are reinventing themselves as entertainment destinations. With indoor mini golf courses, go-karts, arcade games and rides, they offer far more than the traditional shoe stores and food courts.

This strategy seems promising, especially as large retailers like Sears are on the brink of going out of business for good. In New Jersey, the American Dream Mall recently opened (only to close again after COVID-19) with an equal split of retail and entertainment options, including an indoor water park, ski slope and the Nickelodeon Universe. Will these pricey attractions draw customers in the age of COVID-19? It remains to be seen. But it’s an interesting idea, one we’ll be keeping a close eye on.

In Conclusion

After more than two months of sheltering in place, people are ready to venture beyond the four walls of their home. Can retail attract customers now? Yes, but with caveats. Consumers are going to need to feel safe and protected. Touchless pay options and enforced social distancing policies send the right message—that the retailer cares about your health as much as they care about your business.

Looking at the future of retail, that seems to be the way forward. What do you think?