Retail in the Eye of the Storm

As retailers look beyond the holiday season and into 2021, all are hoping for a swift recovery. News reports are promising that a vaccine approval is imminent and that the return to pre-COVID-19 normalcy is just around the corner. Yet it is much more likely that retailers will face a challenging recovery that lasts 15 to 20 more months, given the need for virus containment and the strong likelihood of a recession. And the longer it takes, the more likely retailers are to confront increasingly difficult changes in their economics as well as customers who are ever more habituated to the current state of affairs.

This new reality encompasses five powerful new consumer trends that have emerged during the crisis:

• Increased time and money spent on in-home activities versus out-of-home, such as restaurants and gyms
• Growing income insecurity, with consumers spending less of their discretionary income
• A greater focus on health and cleanliness, including more purchasing in these categories
• An acceleration of e-commerce spending, especially in categories such as food
• Population shifts, as consumers move away from high-density urban areas

While retailers have implemented drastic changes to stay afloat during the pandemic so far, they may find that they have reached only the eye of the storm, with much more to come. To prepare, they should go above and beyond what they have already accomplished, refocusing on longer-term actions such as rethinking their assortments to match shifting consumer needs, managing costs aggressively (and creating a distinctive value offer funded by the savings), continuing to redefine the in-store experience, improving e-commerce profitability, and building a store network tailored to the new reality, supported by a flexible and robust supply chain.

The time for bold action is now; competitors are already making their next moves. Our perspectives are detailed further in the slideshow below.