The Supply Side: What consumer behaviors will persist after COVID-19 subsides?

The COVID-19 (coronavirus) pandemic has redefined retail for American consumers who are largely hunkered down at home and going out only for groceries and consumables. That has meant far more shoppers have taken advantage of ordering online with curbside pickup options for groceries and medications.

More than 630,000 retail stores have been shuttered and millions of retail employees furloughed while the stores remain full of spring merchandise that will likely have to be discounted when the COVID-19 outbreak subsides. Retail experts agree COVID-19 will likely be the demise of some retail banners should the shutdown linger into the early summer.

The National Retail Federation (NRF) estimates the shuttered stores will lose an estimated $400 billion from the shutdown.

Carol Spieckerman, CEO of Spieckerman Retail, said the pandemic spells trouble for JCPenney and other companies that rely on soft-line (apparel) sales. She said pent-up demand for those categories will benefit the retailers who make it through. Spieckerman said COVID-19 has caused many new consumers to order products online and buy more categories sight unseen.

“Consumers will be more comfortable relinquishing control in general, particularly when it comes to picking and choosing food items like produce and meat,” Spieckerman said. “At the same time, there will be a lingering expectation of vigilance around cleanliness and sanitation in-store. The affinity for touch-less commerce will increase and smart retailers will proactively build these capabilities in anticipation.”

Jason Long, CEO of St. Louis-based Shift Marketing, said the strong retailers will get stronger, and the weak will get weaker or die altogether.

“Obviously, Amazon benefits [reporting their visits are up 32%]. The larger players such as Walmart, Costco, [and] Home Depot benefit as they’re seen as stock up destinations [that] have also built out their online/pickup platforms and were prepared better than many for the online surge,” Long said.

Kohl’s has drawn down $1 billion from an existing credit line to shore up cash reserves to weather the shutdown, and Neiman Marcus is contemplating bankruptcy.

Like Spieckerman, Long expects the shift to e-commerce and delivery will continue to accelerate. He said no matter how long the economic downturn continues, the recovery will likely take some time. He sees a new normal will develop over the next five years.

“A lot of retailers won’t survive five years, and the shift to online ordering will be profound. But that, of course, varies by channel. Home Depot and Lowe’s stores will still be popular in five years as people pick out their gardening flowers and supplies,” Long said.

He said one trend that might have been derailed because of COVID-19 is the pre-owned and used clothing craze. Long said that now seems less sanitary than many would want.

He said those who stocked up on food and survival items were often ridiculed in the past, but the behavior has become more mainstream in recent weeks. He predicts retailers will continue to see mini-preppers who won’t soon forget running out of toilet paper, cleaning supplies, hand sanitizers or basic over-the-counter meds and will begin to build a stash ahead of the next crisis.

Long said teens who are picking a career field might think twice about being a nurse or first responder, jobs that look more dangerous than they did a month ago. He also sees a continued trend toward healthy living as those who smoke, have diabetes or respiratory illness have higher casualties when exposed to COVID-19.

Profitero reports a “fitness freakout” that has taken hold as gyms, spin cycling and other fitness locations have shut down. They report workout equipment topped the needs hierarchy during COVID-19. The search term “workout equipment” increased 14 fold over the past two weeks on Amazon.com. Other behaviors include a “nesting” phase as more consumers are confined to their homes. Profitero found the searches for “bread machines” rose 13 fold and “board game” searches were up six times their normal volume in the past two weeks.

Scott Benedict, professor of retail at Texas A&M University and a former Walmart executive, said some of the behaviors displayed now will remain long after the crisis has passed.

“There has been significant growth in online account creation and app downloads,” Benedict said. “The utilization of these accounts as a purchase portal, as well as a digital marketing portal for retailers, will last long after this crisis has passed.”

Benedict said the industry has seen a 12 times increase in industry online account creation and a triple increase in retail app downloads in recent weeks. Benedict also said increased investment in BOPIS capabilities (buy online pick-up in-store) will be robust for retailers and restaurants whose investment was perhaps limited before the crisis but saw how critical that infrastructure proved to be during recent weeks. He said brand relationships will also likely strengthen between consumers and the retailers who were there for them during the COVID-19 outbreak.

“From grocery chains and pharmacy chains that delivered goods without a delivery fee, had special shopping hours for elderly customers, relentlessly cleaned and restocked stores and made heroes of their workforce … including mass merchants like Walmart, Target, Costco and Sam’s Club … consumers will likely have a stronger attachment to them and to their brands because of how they conducted themselves in difficult times,” Benedict said.

He said COVID-19 could also make emergency preparedness a bigger focus for families. He expects they will keep pantries well stocked with basic necessities, as well as cleaning supplies and disinfectants in their homes even after the immediate crisis is over.

“In addition, retailers … indeed all businesses … will be adding a new chapter to their emergency plans,” Benedict said. “Hurricanes, tornados, floods and other natural disasters will now be joined by global pandemics as a key element of retailers emergency planning and preparation.”

Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Propak Logistics.