Wherever relief from COVID-19 is evident, we can see signs of recovery in offline retail, that is at physical stores and shops. In the first months of 2021 countries have lapsed again into third and fourth waves of COVID and lockdowns, which caused a reversal of earlier signs of recovery experienced. But where a recent relief seems to hold longer and be more stable this time, helped primarily by vaccination of larger proportions of the (adult) population, it is possible to notice how retailing practices and shopping behaviour have changed. Yet, it is early to determine how and to what extent the impact of changes occurring during the Corona pandemic will endure in the coming months and years.
We already know that lockdowns that interrupted outdoors activities and the shutdown of many businesses due to COVID-19 have hastened the pace of digitalization in retail. In several ways retail has become more technology-driven and even technology-reliant. On the one hand, the monetary value of online shopping increased considerably, generated by larger proportions of consumers who order products online, and do so in greater frequency. The share of online purchases out of total retail purchases jumped from around 10% to 20% and higher in categories where consumers were previously rather slow to adopt online shopping. On the other hand, where consumers do visit physical stores, they try to avoid personal contact with staff, and use mobile apps for various shopping-related actions (e.g., self-service checkout, contactless payment with mobile app). Shoppers have been doing this due to orders of social distancing or by their own personal health concerns. However, in the latest relief, while social distancing is still advised and people are required to continue wearing facial masks in closed spaces like stores, it can be observed that shoppers and sellers, more likely to be vaccinated against COVID-19, seem to approach and interact with each other more frequently.
It is hard to assess how much consumers will sustain their newer tendencies of online and mobile shopping versus traditional shopping in brick-and-mortar stores in the post-pandemic era, though it is expected that rates of utilisation of digital applications and features will remain higher than before the pandemic. It can be further more difficult to foresee how much digital technologies will impact shopping behaviour of consumers in the premises of brick-and-mortar stores, but it is becoming clearer that in-store experiences are going to be different — there is likely to be greater interaction between shopping online and in physical stores, more retailers will be operating in multiple channels, and (large / chain) retailers are likely to introduce more digital technologies in their physical stores, thus mixing offline and online shopping in-store.
In a survey of Adobe-Magento in October 2020 [1], 55% of respondents (mainly in Europe + Middle East & South Africa) said they were shopping online more frequently (46% among low users who had barely shopped online until the pandemic, 58% among modest users, and 65% among frequent users, more regular and active online shoppers). Nearly half of shoppers also appear to feel more comfortable now with online shopping (49%), and tend to be more reliant on it than a year before (46%).
But not all shoppers are happy to rely on home delivery of their orders — 27% say they are more likely to choose retailers that offer a click-and-collect service. There were frequent disruptions in deliveries, especially of food and other groceries, during the peak of lockdowns in the first half of 2020. Consumers could be re-shaping their expectations about online (including mobile) shopping — the interest in click-and-collect options is rising while consumers are seeking orders that are easier to make yet the goods purchased are readily-available to obtain when and where convenient for them. There are additional ways in which consumer expectations are heightened– consumers feel less committed to a retailer’s website if they cannot find the products they are looking for; they expect free delivery or free returns; and they scout more for discounts and special attractive offers. As consumers are becoming more experienced and fluent in online shopping they seem to set clearer preferences for data and payment security, display of product information, navigation, and a user-friendly flow of their shopping journey on a website (or mobile app).
Retailers are contemplating, experimenting with and implementing a number of digital developments in the field (Adobe-Econsultancy, [2]); a few noteworthy examples are described below.
- Firstly, stores have to be adjusted to serve differing purposes of shoppers-visitors: those who come to shop and buy in-store and those who come primarily to pick-up products they ordered online via a click-and-collect service. Separate areas in the store should be allocated to best serve these different goals. Areas and facilities may be set to allow customers to pick-up their advance orders without actually entering the store, such as curbside or drive-through collect posts. Nonetheless, shoppers who enter a store for picking-up an order at a dedicated area would be allowed to choose freely whether to leave the site quickly, or easily transit to the shopping area where products are displayed to complement their journey.
- Secondly, a retailer’s app can be designed and set not only to support online shopping and ordering but also for accompanying a shopper during a visit in a store as a virtual shopping assistant. The app’s assistant may help with locating a product and navigating in-store, finding information about products, receiving related special offers, and for checking-out and paying with the app.
- Thirdly, online and in-store shopping can be additionally linked by personalising in-store experiences based on patterns of online behaviour (36% of retailing respondents perceive this operation as critically important and 39% perceive it as important). There are insights on consumer interests, preferences and priorities, relevant across channels, that can be traced in online behaviour and followed to the setting of a physical store.
Already before the Coronavirus pandemic, a shift started in retailing towards experience-driven shopping in physical stores. Concisely, it means that the focus in stores should shift from piling products on display to curating experiences — activity-based, sensory, intriguing or emotional — wherein shoppers engage with products and brands; in what channel the purchase transactions are carried out, offline or online, would matter less. We can expect to see this experiential transformation of retailing to be accelerated by the Corona pandemic, side by side with the digital transformation, moreover given that modern experiences are supported and facilitated by digital technologies.
While the growth in online sales is likely to recede somewhat in the next few years, the Economist Intelligence Unit (EIU) forecasts in a recent report [3], based on 58 markets worldwide, that the share of global online sales will increase to nearly 20% overall out of total retail sales by 2025, up from 10.3% in 2019 prior to the pandemic. The EIU expects large retailers, following greater digitalisation, to suffice with fewer stores, and furthermore to focus on more specialised stores that provide personalised experiences. This trend, according to EIU, could hurt particularly smaller franchisees, but also larger ones — they may have to change their forms of business or become redundant. The digital transformation may also spell bad news for employees of brick-and-mortar stores. At first, demand for sellers in stores is in decline; subsequently, terms of employment (e.g., pay and benefits) are at least not likely to improve in the near future. Some retail workers may turn to jobs in warehousing and fulfillment centres, logistics, and courier or delivery services, where demand for employees is increasing with the rise in online shopping. However, they could find there harsher working conditions, including physically, pay likely to be lower, and sellers may especially miss the interactions with customers-shoppers is stores. The researchers at EIU do foresee, however, a possibility that workers’ discontent and tensions with employers will invoke government intervention and pressures for unionisation, leading to improvement in terms of employment (and increased labour costs for the employers).
- In the latest relief from COVID (April 2021), coffee-houses in Tel-Aviv seem to have filled-up again quite quickly. That covers cafés that operate also as patisserie shops, café-restaurants serving light meals (e.g., breakfast, lunch), and espresso bars. Pubs also are reviving (specially those with outdoors seating). The recovery of restaurants looks much more hesitant and gradual. Restaurants are taking longer to resume full-service at tables. Some continue to operate on the basis of deliveries while merely letting customers take their orders and sit at tables. In restaurants that resume service, menus may be reduced and opening hours being curtailed (e.g., evenings only). Some restaurants remain in renovation works that extend longer than usual. Most restaurants continue to suffer from shortage of experienced workers since their usual employees remain in furlough (due to political tensions in Israel, employees continue to receive state compensation until end of June since the government failed to terminate this support scheme with return of the country to business) — this situation has adverse effects on the level of customer-diner service in restaurants.
The ongoing transformation in retail has multiple facets, entailing digital and data-driven technologies, personalisation, and experience-driven (rather than product-driven) stores. A new balance is forming between online, mobile and in-store shopping. It can produce promising advantages and benefits for retailers and shoppers. But there could also be individuals whose well-being is compromised by this process, such as employees in brick-and-mortar stores and shops, retail-franchisees, and not least consumers who are less digital-oriented and more digital-wary, mainly consumers in older ages (mainly 70+), but not only. A recovery process of retail that is coupled with transformative developments has to be handled with great care, allow time and flexibility for adaptation, and catering for different segments of shoppers, especially keeping an eye open on those who could be left behind to provide them with essential assistance.
Sources:
[1] The Shop Never Stops: Consumer Preferences Report 2020; Adobe and Magento Commerce, 2021 (March)
[2] 2021 Digital Trends: Retail in Focus, Adobe and Econsultancy, 2021 (April)
[3] Online Retailing: How to Navigate the New Normal; The Economist Intelligence Unit (EIU), 2021 (April)
Consumer / Shopper / Customer Behaviour 