Retail in the emergency weeks: what’s happening and what’s to come

19 May 2020Reading time: 5 min.

Some studies reveal the guidelines that will reshape retailer’s strategies, while the Chinese experience offers us some examples of successful conversion.

Although time is needed to measure the real impact of the health emergency, it is now clear that the pandemic will represent a driving force for digital retail transformation.

The impossibility (or reluctance) to frequent physical stores will lead companies to develop a new mentality and newstrategies. As it quite often happens, great opportunities for growth and innovation arise from major crises.

Let’s sort out what’s going on by pointing out how the lockdown is impacting the retail sector.

What’s happening in Italy during the coronavirus emergency

As we know, all the conventional physical stores had to close on March 10. This shuttered all points of sale, except for those of public utility, which was primarily food.

It is precisely the grocery sector that drives e-commerce growth. There are two peculiarities of this evolution: the first is that it isn’t a short-medium term change; the second is that it isn’t simply a strategic change in distribution. In other words, the change doesn’t come from companies, but from consumers.

And that’s why the impact will be much deeper than you think. It’s no coincidence that we’ve already heard about retail 5.0. Let’s look at why this is such a profound change: Nielsen found that the growth in the value of e-commerce (compared to the same period of 2019) was + 81% and +82%in the second and third week of March, respectively. Now, this isn’t such a remarkable growth if we consider other indicators, such as the search volumes of Google indexed with “online spending”. Here, we find growth curves that reach a peak of +1,250%.

What does this mean? It means that the demand for online purchases was far greater than the market’s ability to satisfy it.

75% of those who bought online in the last month had never done so before

Netcomm conducted a flash search on 200 of its associates to find that 75% of shoppers from e-commerce sites had never done so before.

Retail in the near future

From the weeks of the actual emergency, we move on to the weeks ahead: phase two. Bain & Company, an international consulting firm, conducted a study where it managed to predict a contraction in consumption between -20 and -25% in 2020 and a rebound in 2021 (yet always well below the values of 2019 for at least a 5–10%).

If it’s true that there’ll be an important contribution from the state to support many retail entities brought to their knees, it’s also true that this support won’t be enough. We need to rethink our response to the market and to the new normal.

According to Andrea Petronio, partner of Bain & Company, some consumer trends are emerging. Through these, retailers will find themselves assimilating, interpreting, and converting into strategy:

  • #buyonline. As we know, the lockdown has stimulated online spending. As far as possible, the distribution managed to put home delivery into motion. Delivery sector growth won’t drop when the shops reopen. Further, it will definitely accentuate the proximity footprint (the neighborhood shop, with faster delivery times and more availability).

To handle the flood of requests, intermediate formulas were also tested: Carrefour, for example, invented “Drive.” After shopping online, the user simply goes by car to an authorized sales point to collect the parcels that have already been packed in the supermarket parking lot. There’s no need to enter.  Walmart USA has also developed the same strategy.

  • #buyItalian. Attention to the sustainability of the supply chain will also be accentuated. This means that a certain neo-patriotism will turn the made in Italy label and 0 km into two pillars during the months ahead. The growth of local versus global brands will make retailers more local in both their assortment and the supply chain.
  • #sharingisgood. The solidarity and volunteering that we have seen grow in recent months won’t stop. An increased sensitivity on these issues will necessarily be assimilated in the most diverse forms, even by retail.
  • #safetyandcommunity. Safety will obviously remain the guiding principle for everyone, including citizens and businesses. Security means many things, from hygiene to management policies of spaces and people in the physical store. This also includes IT security to avoid abuses that inevitably increase in this period.
  • #dealsmeansaving. The crisis (whether it’s actually perceived or just feared) will inevitably trigger a hunt for deals, leading consumers to greater sensitivity and attention to prices.

The Chinese lesson for retail and catering

The Chinese experience can teach us something, yet with a premise: when the coronavirus arrived, the Chinese e-commerce was clearly better prepared and more developed than the Italian one (moreover, in 2002–2003, Sars had already given a strong stimulus to home deliveries in China, contributing massively to the development of Alibaba).

  • Food e-commerce
    This sector’s increase has been impressive: fresh products, from vegetables to fish, are the masters. This is a scenario that we are also likely to find in Italy, still because of the diffidence toward packaging (especially plastic) since the virus seems to be persistent on inert surfaces.
  • Restaurants
    The restaurants have reorganized by opening the so-called ghost kitchen (the restaurant is closed but its kitchen is open for home delivery and to go/take away). Besides the fully prepared meals, they have offered pre-made dishes to cook at home.
  • Flexible workforce
    In seeking solutions to forced closure, hotels, restaurants, and cinemas have shared their employees with Hema (chain owned by Alibaba) to provide delivery services. Other realities (Ele, Meituan, and 7Fresh of JD) have lined up using restaurant workforce.
  • Beauty
    The Chinese cosmetics company, Lin Qingxuan, was forced to close 40% of its stores during the epidemic. As a result, it transferred all its beauty consultants online, turning them into influencers. It seems to have been a success, even in revenue. Several companies in the U.S. are doing the same by opting to increase content on the site and offering additional live content via FaceTime (e.g. 10 bookable minutes of personalized makeup tips).
  • Fashion and clothing
    Cosmo Lady, the largest Chinese underwear and lingerie company, has moved its sales to WeChat by involving all employees (including the CEO) in the sales operations.

In summary

That e-commerce would be a rising channel was no surprise to anyone. According to the Polytechnic of Milan, e-commerce has grown year after year in the last 10 years in Italy (which doesn’t rank among the first countries in developing online sales) with figures ranging between 17 and 22% and peaks of +40% in sectors like grocery.

The health emergency is multiplying this growth rate by four and by five. A structural change, which is just at its beginning, brings the new habit of digital purchasing into many new homes where it will settle.

Google searches tell us that infocommerce is driving this growth. In turn, this is the first of the cross-channel solutions (usually people inquire online to buy both on and offline). For this reason, giving consumers the opportunity to start, conduct, and finalize a shopping experience through whatever means and at the time that most suit them will be increasingly important. This includes search enginesocial networks, e-mailmobile app, e-shop, as well as physical store, which will always maintain a key role.

This article was written by

Andrea Serventi

Andrea Serventi

Editor

I was born in 1986 in Milan, where I graduated in Modern Literature and started writing for online newspapers, magazines and TV news programs. Having now converted to marketing and the digital world, I am a Content Editor at MailUp: I read, listen, collect ideas, and write about what email marketing is and how to use it strategically.

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