How is COVID-19 affecting the retail industry?
It’s been six months since the United States was hit with the corona virus after its first appearance in Wuhan, China.
Since then, every business sector has been affected by the global outbreak of Corona.
This has been widely seen within the retail industry since the beginning of the pandemic.
In this article, we’ll look at how COVID-19 is affecting the retail industry and what this means for both companies and consumers.
How COVID-19 is Affecting the Retail Industry
According to S&P Global, there were 43 filings for retail bankruptcies by August; this only five less than what was declared in 2010, after the financial strain of the Great Recession.
The financial crisis in 2008 saw 441 retailers file for bankruptcy.
During the 2008 financial crisis, many Americans put a hold on their shopping and caused retailers to come up with more ways to boost consumer spending.
Retail sales dropped and many popular department stores closed locations in response to the rise of discount stores, like Family Dollar and General Dollar, and ecommerce stores, such as Amazon.
Those initial closings seemed to have started what experts called a ‘retail apocalypse’, with big name companies also filing for bankruptcy in the crisis’ following years.
While the current retail closings aren’t the levels seen twelve years ago, it has impacted not just the companies, but their workers.
Big name companies, like Pier 1 and JC Penney’s, have filed Chapter 11 and have let go of their employees; other companies have had to reduce their work force.
This of course puts additional pressure on an already unknown economic market.
Holiday Shopping Season
As discussed above, the corona virus has impacted the retail industry in a similar way that the 2008 financial crisis did.
The difference here is that there are added restrictions, such as social distancing or temporary closures, that affect retail stores.
Another difference is the holiday shopping season.
At the end of July, a number of brick and mortar retailers announced that they would not be conducting Black Friday sales.
Black Friday is considered the start of the holiday shopping season, starting the day after Thanksgiving, and allowing shoppers in stores during early hours.
Black Friday has previously been the busiest shopping day of the year, with stores offering promotions and discounts on items.
In previous years, this tradition expanded to begin on the evening hours of Thanksgiving Day itself in order to get a jump start on the shopping season.
However, with the ongoing pandemic and social distancing measures, many retailers have canceled this particular shopping day.
Instead, these stores are following the trend of ecommerce stores by offering online deals.
Amazon, which normally hold it’s Prime Day shopping event in July, delayed it to sometime later in the year.
How Consumers are Reacting
With growing uncertainty in all business industries, consumers have taken precautions and social distancing to heart by staying mostly at home.
A recent study from Accenture revealed that 36% of consumers preferred socializing at home or at someone else’s home.
73% stated that they planned to socialize at home for the next six months.
Consumers also stated they also planned to connect virtually with friends (33%) and 59% favored doing so in the next six months.
This also extends to working at home, with 86% planning to continue or increasing work at home activities.
The study also found that in the last three months, consumer’s attitudes and behaviors have shifted to three priorities:
Personal health, as well as the health of friends and family, is a top priority of focus for them; this is on top of finance fears, with 50% of consumers ranking finance security as a top concern.
It’s these financial fears that are also helping to keep consumers inside.
In another report by Accenture, 33% of consumers stated that they find themselves “financially-squeezed” with less disposable income during the outbreak.
Even in areas where the pandemic has stabilized, 85% are worried about what impact the pandemic will have on the economy.
The combination of businesses closing or locking down and consumer worry, retail consumers have embraced commerce and omnichannel.
These same trends are echoed across the pond, as European consumers share the same worries and concerns.
Outlook for Retail After COVID-19
With retail stores closing and consumer confidence at a low, what is the outlook for retail after COVID-19?
As with other industries, the outlook is actually positive. Retail stores have a great opportunity where it comes to addressing this new state of things.
We noted above that bigger retail stores have already looked ahead in order to prepare for the holiday season, with some even increasing their hiring.
The outlook for smaller, independent retailers is still uncertain, but with changing behaviors from consumers, these stores may be able to return before the end of the year.
One idea that could help boost consumer interest are pop up shops. Pop up shops are temporary store fronts that appear for a limited time.
In some cases, these temporary stores have become permanent.
In this article, we took a look at how COVID-19 is affecting the retail industry and in effect, how that affects consumers as well.
The pandemic continues as of this writing; however many states and cities have begun to reopen and have seen a flattening of the curve.
This is not the first time the retail industry has seen setbacks, but they have grown and changed to meet consumer demand and preference.
And they are poised to do so again.