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by Fiona Swerdlow, VP & Research Director, Forrester
Industry View from
Emerging from the second phase of Covid-19 (social distancing), the retail industry is taking stock of consumer sentiment as well as short and longer term impacts and the overall prospects for recovery. Globally, on average across multiple scenarios that we’ve analysed, we expect a $2.1 trillion loss in total retail sales compared with Forrester’s pre-Covid-19 forecast. Lockdown-enforced store closures, demand surges in essentials categories, local and national-level regulation, and profound societal changes are already significantly changing how retailers manage store networks, operating procedures, customer experience, employee experience, and – of course – bottom-line sales. We’re finding that online consumers are:
• Worried – but retain hope for normalcy. Forrester’s Consumer Technographics research in mid-April found that 61 per cent of US online consumers are worried about an economic recession – only slightly fewer than online consumers in China (65 per cent) and the UK (67 per cent). Not surprisingly, online consumers have told us that they have cut back on unnecessary spending but also that they – at that point – had increased their spending on essentials such as groceries and cleaning supplies. The good news: close to half of these online consumers also “hope to resume [their] usual shopping habits soon.”
• Cutting back on nice-to-haves but buying more essentials. Online consumers have told us that they have cut back on unnecessary spending but also that they – at that point – had increased their spending on essentials such as groceries and cleaning supplies. The good news: close to half of these online consumers also “hope to resume [their] usual shopping habits soon.”
• Warming to contactless payment and pickup. Online shoppers in China, the UK and the US are using contactless payments more often to avoid touching in-store screens and hardware. And approximately one in five online consumers in China and the US would like “more places to offer kerbside pickup.”
With no clear episodic end to the pandemic, retailers and brands need to proactively manage phase 3 (management) – which we estimate will last from mid-May 2020 to early 2021 – areas such as:
• Weighing the guidance of medical institutions and global and national experts (WHO, CDC, ECDC) with local government regulations – and each individual organisation’s tolerance for risk. For example, in Italy, we’re now seeing limited opening hours for formerly “non-essentials” goods shops (e.g. books, children’s clothing), and some US states are gradually opening salons and stores.
• Multiple recovery (peak and decline) scenarios at different times across multiple regions. Retailers need to have in place processes, operations and both employee and customer communication vehicles and protocols (think PPE, tools and data) to swiftly close and reopen in response. They’ll also need pandemic management protocols (PMPs) for multiple regions for both stores and their supply chain.
• Supply chain planning to safeguard employees, operations and third parties. Expect lots of analysis for retailers and brands in this crucial area, aided by technologies from supply chain control towers to AI-powered retail planning.
• A new normal for many aspects of life. Shopping itself is changing – from growing contactless payments and pick up to in-store protocols (staffing, one-way aisles, queueing and more) to significantly altered employee and customer experiences. In fact, employee power is one of four “shocks” that we foresee distinguishing employer winners through the 2020s. As for corporate headquarters staff, they may return to the office sometime – in limited numbers – but in an office likely unrecognisable from the way it was just months ago.
Much change is still ahead for most retailers, whether they’re barely keeping up with surging demand or simply trying to salvage sales. As an industry, retail is resilient and generally adapts (and innovates) through adverse times. Do right by your employees and customers: watch the economy, and build the operational flexibility now to navigate rapidly changing conditions throughout Covid-19 phase 3 and beyond.
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