Post-Pandemic Retailing: What Retailers Should Expect

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Post-Pandemic Retailing: What Retailers Should Expect

Introduction

In the midst of the COVID-19 pandemic, many (if not all) brick-and-mortar retail stores in some areas have completely shut down. This leaves them solely to online sales to bring in revenue, which many small businesses do not have. As a result, they are left wondering what the state of their business will be after the economy reopens from its current state. In order to put this into perspective, information on what was expected of the retail and discount/secondhand market was located and compared to its current state. In addition, recommendation on how discount and retail brick-and-mortar stores can compensate and alter their business methods once reopening were located and provided below.

Prior Expectations for Retail (before COVID-19)

  • According to the U.S. Census Bureau, eCommerce retail sales accounted for 11.4% of all retail sales in the United States by the end of Q4 2019. This compares with 11.2% in Q3 2019 and 10.1% in Q4 2018. This means that 88.6% of all retail sales were still taking place via brick-and-mortar stores.
  • Prior to the COVID-19 pandemic, eMarketer estimated that U.S. retail sales would reach $5.621 trillion, a 2.8% increase from 2019, by the end of 2020.

Prior State of Resale/Secondhand (before COVID-19)

  • As stated in the 2019 Fashion Resale Market and Trend Report that was published by thredUP, secondhand shopping was expected to grow by 13% by the year 2028.
  • Secondhand fashion was also expected to grow 1.5 times faster than "fast fashion" and have a market size of approximately $64B by 2028.
  • At the time of writing, thredUP calculated that 51% of U.S. consumers were planning to spend more money on secondhand shopping over the next 5 years. 56% also said that if off-price retailers (i.e. TJ Maxx, Marshalls, etc.) offered secondhand items, they would be much more included to purchase more items from these and similar retailers.
  • thredUP also determined that the three most quickly growing retail segments before the COVID-19 pandemic were secondhand stores, subscription-based resale, and rental.
  • The National Association of Resale Professionals (NARTS) concluded that outside of the current pandemic, anywhere from 16% to 18% of U.S. consumers would thrift shop within a given year, compared with 12% to 15% that would shop at consignment/resale stores. This compares with 11.4% that would shop at factory/outlet malls, 21.3% in department stores, and 19.6% in private apparel stores.

Changes to Retail Since COVID-19 Outbreak

  • By March 11, Rakuten calculated that online sales for apparel and footwear combined decreased by 37%, ShopperTrak found that brick-and-mortar sales dropped by 58.4% just a week later.
  • LEK Consulting also found that 42% of U.S. consumers have began shopping online more since the COVID-19 pandemic. Of these, though, only 48% claim to be remaining loyal to their usual brands, compared with 21% that are buying both their usual and new brands and 19% buying whatever is available regardless of brand.

Reducing Customer Fears

  • Harvard Health recommends that stores selling secondhand clothing during the COVID-19 pandemic can wash clothes as an extra precaution, although they do not think the virus is transmittable via fabric.
  • Some secondhand apparel retailers have begun steeping clothes in cleaning solutions (while wearing gloves) for a full 24 hours and washing them by hand with antibacterial solution to ensure all germs are fully removed from fabrics before selling them.
  • Other precautionary measures for secondhand apparel during this time includes packing them with gloves if selling online and spraying them with antibacterial solution before shipping. Some even suggest providing gloves in aisles to help reduce touching and increase hygiene.
  • Professionals recommend that brick-and-mortar stores, regardless of type, place hand sanitizer stations at the entrances and throughout the stores to promote healthy shopping practices.
  • It is recommended that store employees regularly wipe down carts, baskets, payment portals, hard surfaces, and self-service stations on a regular and often basis with disinfectants and sanitizers.
  • A more strict and available cleaning process in stores should also be implemented once reopened. Experts recommend that this includes ensuring paper towels are available in all restrooms, even if hand dryers are present — this ensures customers don't have to touch door handles after washing hands.
  • It is also suggested that restrooms place their cleaning schedule with respective sign-offs in viewing site of users, to provide customers with confidence that facilities are cleaned regularly and efficiently.
  • Retailers should make sure that they follow advice on deep-cleaning procedures before opening and whilst remaining open, especially in elevators, air purifiers/conditioners, and HVAC ducts.
  • Clearer protocol on employee hygiene should be enacted and posted for frequent reminders. This should include frequent hand washing, use of hand sanitizers, prevention of touching faces, proper cough/sneeze etiquette, and even proper preventative greeting methods (i.e. handshakes vs. elbow bumps).
  • Where possible, stores should also communicate with local authorities, organizations, and volunteer groups to ensure that they are making their stores accessible for at-risk groups, including the elderly, handicapped, and immune-deficient. This will help them appear as caring to the public, and will help promote foot traffic during this time.
  • Retailers with brick-and-mortar shops should work to reduce the number of employees that they have working at a given time. This will help to reduce the spread of any illnesses and germs in the store. This can best be done by implementing more self-checkout options.

Maintaining Business Traffic

  • While many non-essential businesses are shutdown right now, retailers can offer consumers gift cards to purchase for use once stores reopen. This will provide companies with an inflow of cash that they can use right now to keep afloat until they can reopen.
  • If doable via non-contact methods, retailers and apparel stores, even discount ones, can work to sell off their C-grade products during this time. One way to do this is via curbside pickup, although an online store is necessary. However, selling off C-grade products, even at a discounted price to ensure they are purchased, will provide stores with some form of income to help them get by.
  • Another option is to offer high-value, loyal customers some sort of incentive to return to the store once it reopens. This may include but is not limited to implementing a rewards program, special discounts, etc.
  • Shopify recommends that retailers pause and/or redirect some of their marketing efforts during the COVID-19 pandemic to show consumers that they are aware and sensitive to the current state of the economy.
  • Brick-and-mortar retail stores are urged to test out eCommerce options during the COVID-19 pandemic, as it poses a very "forgiving" opportunity to take some risks, since the entire economy is struggling right now.
  • For apparel stores that are testing out eCommerce, eMarketer recommends trying out online showrooms to showcase their goods to consumers in a time when they are building new habits.
  • Even once non-essential businesses reopen from the current pandemic, including retail and discount stores, 48% of U.S. consumers stated that they do not expect to change their prior shopping habits. This indicates that many will return to the stores they once shopped at before.

Expectations for Discount Stores After Coronavirus

  • JP Morgan analyst Matthew Boss is expecting discount stores such as Dollar General and Dollar Tree to actually excel because of the COVID-19 pandemic, as they provide low-cost options to consumers during a financially tense time.
  • Other stores that Boss is expecting to do well once they reopen include Five Below and Ollies, because the discounts they offer are more affordable than shopping at big box stores.
  • Discount stores such as TJ Maxx, Ross, Marshalls, etc. are expected to become more popular after the COVID-19 pandemic, as they offer valuable options at low prices, in addition to providing a "rewarding" feeling for consumers in the shopping process.


Research Strategy

In working to identify how discount stores specifically would be impact and forced to change as a result of the current COVID-19 pandemic, it was determined that information that was publicly and readily available was minimal for this sector. Most reports focused on retail in general, and as it is still unknown when the U.S. economy is going to fully reopen, many experts are unsure what the state of in-person business will be by the time things "go back to normal." As a result, some creative tactics were required to find information. For example, a look into the roll that secondhand and resale apparel stores play in struggling economies provided some insights on how discount stores might need to alter their methodologies. Additionally, insights on how to reduce consumer fears once reopened appeared to be uniform across all stores, regardless of type, and thus were included above. Finally, ways in which small businesses can effectively reach out to consumers during this time to stay afloat proved to provide useful information that could easily be applied to discount stores. All of this information combined was used to build an understanding of how low-cost, discount retailers, including secondhand/resale clothing stores, specifically brick-and-mortar ones, may have to change their operating procedures after the COVID-19 pandemic.
Sources
Sources

Quotes
  • "E-commerce sales are sales of goods and services where the buyer places an order, or the price and terms of the sale are negotiated over an Internet, mobile device (M-commerce), extranet, Electronic Data Interchange (EDI) network, electronic mail, or other comparable online system. Payment may or may not be made online."
  • "Q4 2019: 11.4% Q3 2019: 11.2% Q2 2019: 10.8% Q1 2019: 10.5% Q4 2018: 10.1%"
Quotes
  • "While online shopping can pick up some slack, 88.6% of retail sales were still at brick-and-mortar stores as of the last quarter of 2019"
Quotes
  • "Online sales for apparel and footwear retailers fell 37% on March 11 alone, according to Rakuten. Foot traffic to U.S. stores fell 58.4% in the third week of March, according to ShopperTrak. If the retail shutdown is prolonged, those with the bulk of their inventory trapped in stores and without a strong balance sheet may find they are economically unable to continue operations."
  • "A recent Deloitte study found that between 2017 and 2019 retail had experienced significant consolidation, while consumer package goods had experienced additional fragmentation during the same period. The COVID-19 pandemic will only accelerate this trend."
Quotes
  • "Harvard Health has only noted washing clothes as an 'extra precaution' for those directly caring for Covid-19 sufferers, and places 'counters, tabletops, doorknobs, bathroom fixtures, toilets, phones, keyboards, tablets, and bedside tables' as high-priority surfaces to clean."
  • "Picking clothes out with gloves on, both steeping the clothes for 24 hours in a cleaning solution and hand washing them in antibacterial detergent (still with gloves on), spraying her products with antibacterial solution when dry and packaging them with gloves on once more."
Quotes
  • "Local Goodwill organizations have been taking additional measures to clean and sanitize stores and program facilities, assessing and responding to the unique community needs in the areas they operate."
Quotes
  • "Gift cards provide retailers with an immediate infusion of cash and (in most cases) ensure that a customer will return to their business in the future...To further incentivize customers, you can discount gift cards, or even collaborate with complementary local businesses to create co-marketing opportunities that can help you acquire new customers. Finally, to reduce the risk of human contact, you should consider a digital gift card program to include in your social media and email marketing campaigns."
  • "Reduce carrying costs by selling off C-grade products. Consider heavily discounting, bundling, or even selling these products to liquidation retailers. This might seem counterintuitive to your business, but it will provide you with much-needed cash flow and leave room for stock that moves."
  • "Since roughly 20% of your customers contribute 80% of your revenue, consider prioritizing your high-value customers to ensure their lifetime loyalty."
  • "During the coming weeks, brands need to be sensitive to consumers’ needs and rethink their marketing and advertising. That might mean pausing certain campaigns for certain products, and adjusting the copy and creative on ads to better speak to the realities of the COVID-19 pandemic."
  • "Another option to avoid shipping costs is to offer “curbside pickup”. In other words, local customers can purchase a product online and pick it up from your store (even if you’re not technically open)."
Quotes
  • "Dollar General and Dollar Tree are among the retailers that could benefit after the COVID-19 pandemic subsides, JPMorgan analyst Matthew Boss said Thursday. "
  • "The coronavirus crisis and its resulting economic shock could represent more bad news for department stores and mall-based specialty stores. "
  • "In addition to Dollar General and Dollar Tree, Boss said Five Below and Ollie’s are well positioned to continue appealing to consumers and have “debt-free balance sheets.”"
  • "Off-price retailers Burlington, TJ Maxx owner TJX and Ross Stores also will remain attractive as consumers seek value, Boss argued. “There still will be a treasure hunt,” he said."
Quotes
  • "Resale has grown 21x faster than the retail apparel market over the past three years"
  • "64% [in 2018] of women bought or are now willing to buy secondhand products. 45% in 2016 52% in 2017"
  • "56M women bought secondhand products in 2018, up from 44M in 2017"
  • "59% of consumers expect retailers to create clothes ethically and sustainability"
  • "40% of consumers now consider the resale value of an item before buying it. That's nearly a 2x increase from 5 years ago"
  • "Secondhand is expected to grow more than 2x (13%) in the next 10 years and is on track to make up 1/3 of closets by 2033"
  • "Secondhand, subscription, and rental are the top 3 fastest growing categories, as today's consumers seek variety and value"
  • "As consumers embrace new retail models, department stores will lose over 1/2 of their 2008 market share by 2028"
  • "Secondhand is projected to grow to nearly 1.5x the size of fast fashion by 2028. Secondhand in 2028 ($64B) Fast Fashion in 2028 ($44B)"
  • "51% of consumers plan to spend more on secondhand in the next 5 years. Retailers offering the fun of new arrivals will own future market shares. 4x as many people plan to increase spending in secondhand verses fast fashion."
  • "1 in 2 shoppers (56%) would buy more from off-price rtailers like TJ Maxx if secondhand apparel was offered"
  • "60% of consumers would increase loyalty to a brand if a recycling program was offered"
Quotes
  • "First Research estimates the resale industry in the U.S. to have annual revenues of approximately $17.5 billion including revenue from antique stores which are 13% of their statistics. ThredUP, an online resale marketplace, pegs the total resale market in 2018 at $24 billion ... predicting it will reach $64 billion by 2028."
  • "According to America’s Research Group, a consumer research firm, about 16 - 18% of Americans will shop at a thrift store during a given year. For consignment/resale shops, it’s about 12 - 15%. To keep these figures in perspective, consider that during the same time frame; 11.4% of Americans shop in factory outlet malls, 19.6% in apparel stores and 21.3% in major department stores."
Quotes
  • "According to our estimates, which were published before the outbreak and subsequent store closures, US retail sales are expected to climb 2.8% this year to $5.621 trillion."
  • "This may be an opportunity for the retailers that have lagged in the ecommerce space. This could accelerate digital transformation and get retailers to omnichannel faster. Out of necessity, they may even explore showrooming and downsizing retail footprints as shoppers develop new habits."
  • "Retailers can test and learn new ways to sell inventory and quickly meet new demands. It’s a forgiving time to take some risks."
Quotes
  • "Additional hand sanitizer stations can be added at entrances and throughout a store, and shopping cart handles should be regularly wiped down with disinfectant."
  • "Staff should be told to wash their hands frequently, using soap and water or alcohol-based hand sanitizers, and avoid touching their eyes, nose, and mouth."
  • "Retailers should ensure paper towels are available in bathrooms so that customers and staff do not need to touch door handles – air dryers and door handles are not a hygienic combination – and that bathroom door handles are frequently sanitized. Posting the schedule can help to reassure customers. "
  • "Coughs and sneezes should be covered with a tissue or an elbow, not a hand. Handshakes can be replaced by fist bumps or elbow taps (or even better, a wave)."
  • "Staff should – starting today – be told to stay home if they are sick and to encourage their families to do the same."
  • "Store managers could be encouraged to work with local community organizations and volunteers to ensure at-risk groups, including the elderly, have their needs met through the crisis. Such collective action will reinforce the sense that retailers are thinking foremost about the wellbeing of the community, which can be reinforced by helping to disseminate reliable information from the relevant authorities to the community."
Quotes
  • "Follow official advice on deep-cleaning the most-used areas or facilities, such as elevators, meeting rooms and toilets, as well as air purifiers, air conditioners and HVAC ducts."
  • "Gain a full and real-time understanding of customer concerns by social media tracking and other forms of monitoring."
  • "Provide clear communication on hygiene procedures implemented for stores, staff and customers."
  • "Provide equipment (such as plastic gloves) to increase hygiene in self-service aisles. If the problem escalates, retailers should consider reducing or eliminating self-service options in categories such as produce, bakery and prepared food."
  • "Implement contactless service options where possible, such as self-checkout."
  • "Retailers will need to redouble cleaning efforts, while minimizing manual handling of products and encouraging self-checkout. They should also defer nonessential tasks in order to free personnel and prepare for a possible worsening of the situation."
Quotes
  • "42% of consumers were shopping more online with only 8% saying they were engaged in less e-commerce."
  • "48% are remaining loyal to their usual/familiar brands. 21% are purchasing a mix of usual and new brands. 13% are “taking the opportunity to discover new brands.” 19% are feeling less brand loyal, buying what’s available."
  • "About half survey respondents (48%) said they didn’t expect to adopt new behaviors in the aftermath of the outbreak."
  • "U.S. consumer stated % change in average monthly spend since COVID-19: Apparel: -15-20% Beauty: -5-10%"