Reading the New Retail Tea Leaves
Last year at this time, many retailers had a burning focus on back-to-school sales, after which followed the rush of the holiday shopping season. Those two periods are still in play, of course, but a broader issue looms over everything: How will retail emerge from the COVID-19 pandemic?
An increased focused on locally sourced items and consumer safety could help build revenue during these tough times, according to a new report, which notes that returns will likely have to evolve, too.
A cottage industry dedicated to reading the tea leaves about the post-pandemic world of commerce is emerging, and the latest example of that comes from Deloitte. It’s hardly news that trends that were gaining heat before the pandemic — the rise of online grocery sales, wider acceptance of contactless payments, more “omnichannel” sales and marketing efforts — are burning even hotter over the past few months of store closures and stay-at-home mandates.
Deloitte's new report, “The Retail Evolution’s Greatest Acceleration: How to Maneuver in the Pandemic-Driven Recession,” comes as government scorekeepers officially declared that the United States sank into recession in February. Getting out of it, at least for retailers, will require more focus, not only on those pre-pandemic trends, but also on winning consumer trust in ways influenced by the COVID-19 outbreak, according to the global accounting firm.
Local Store Support
For instance, Deloitte has tracked increasing desire among many consumers, including seniors, to support what the report called “local stores and workers.” That support has taken the form of using buy-online, pickup-in-store programs, along with other retail offerings — programs that are considered safer, from a health point of view, for shoppers and retail employees.
“This could lead to an acceleration of new models of retail where health and sustainability become larger drivers,” the Deloitte report noted. “For example, as populations are experiencing cleaner air because of stay-at-home orders, will they be more interested in conscious consumption? As of mid-May, 39% of consumers said they plan on buying more locally sourced items, even if it costs more — a trend that [has] increased since mid-April.”
Discounts and Returns
That hardly means that Amazon, Walmart and other retail giants have to worry about the collapse of their businesses, of course. Even so, it’s not only local merchants that could gain ground in the coming months, assuming they have played their cards right so far during the pandemic, according to the findings from Deloitte.
“We also expect discounters to continue to benefit from ongoing trends,” the report added. The most recent U.S. unemployment figures might have shown unexpected improvement and reason for cautious optimism among retailers. Despite that, many consumers still face the loss of jobs and incomes, a trend that promises to continue into the holiday shopping season. “Many consumers are going to look to cut back and save wherever possible,” the Deloitte report said. These retailers may stand to pick up customers, similar to what we saw coming out of the Great Recession.”
Another important area for retailers in the coming months involves product returns. Over the years, such programs have become more efficient, sophisticated and favorable to consumers as retailers try to stay afloat amid fiercer online competition — and try to make bank during the holiday shopping season — with assurances of easy returns.
The pandemic has added a new challenge to returns, thanks to concerns about the spread of the virus. But as the Deloitte report indicated, every challenge also presents an opportunity. “Returns processing — likely to increase amid more online sales — will require new safety standards to meet customer expectations,” is how the report put it.
It’s probably an understatement to say that the months ahead will be difficult for pretty much all retailers. New tactics won’t be enough. New strategies are needed — along with associated financial and time investments in technology, payments, marketing, customer service and employee training.
“All of this calls for structural change in the industry. By challenging traditional orthodoxies, retailers can redefine the basic assumptions of the industry — how to build trust with stakeholders, how to operate stores in new ways and how to structure their entire operations around new consumer expectations,” the Deloitte report observed. “In short, they can thrive in the new normal of retail.”