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Consumer spending accounts for roughly 70% of USA economic growth in the United States. In a short amount of time, COVID-19 has become a brutal disruptor of traditional buying patterns.
Research indicates that it takes 66 days or roughly two months for a behavior to become an automatic habit. That is roughly how long most countries were in various lockdown phases.
As we reopen stores, we are in unchartered shopping territory. This article summarizes the latest shopping data, key insights on the digital shifts underway, and recommendations for a stronger retail industry recovery.
"Retailers need to stop expecting business to return to “normal.” There’s no going back to how it was anytime soon. Even before the Covid-19 pandemic and economic crisis, brick-and-mortar retailers had been fighting a fierce battle against Amazon and other e-commerce players. Those challenges have now accelerated at staggering speed."
Throughout the COVID-19 lockdown phase, I have been following very closely the global economic and retail trends in anticipation of the reopening phases which are now underway in many parts of the world. Good signs from key markets such as USA which saw the biggest historical increase in retail sales in May.
The threat of multiple other waves of COVID-19 is still present, but key lessons have already emerged to guide countries during the reopening phase. Continuing to do well are most of the essential retailers, e.g. food and drug stores. Their growth spike will slow as more of the retail industry reopens. Best positioned are those essential retailers that had fully scaled services such as Buy-on-Line-Pick-Up-in-Store (BOPIS) prior to the pandemic lockdown.
Non-essential retailers, especially apparel and department stores have a longer road to recovery and some projections have them returning to 2019 level in the distant year 2023. To survive these sectors have already accelerated discounting, a recipe which will trains consumers to expect more and further delay profitability. As Neil Saunders pointed out in his June 12 Webinar, in May 2019 just over 21% of apparel items were discounted and the average discount was nearly 18%. For May 2020, nearly 70% of the items are discounted and the average discount rate is more than double at just over 44%.
The lockdown online shopping spike is subsiding with various forecasts having 2020 reach 20% to 21% of total USA retail sales. Prior to the pandemic, USA ecommerce was expected to reach anywhere from 15% to 19% of total retail sales as projected by multiple industry analysts.
COVID-19 has become a brutal accelerator of digital transformation trends that were already underway. Ecommerce has leaped two to three years ahead of previous growth patterns. There will be a substantial number of physical stores in the boring middle that failed to keep up with consumer engagement and innovation that will close.
"Brands will matter more in the world the virus leaves behind, and those that work now to build trust by acting, visibly and decisively, with an essential and authentic purpose, will be among the survivors. If they find new reserves of agility, creativity, and resolve, they can shape the way consumers view them in the midst of the crisis, and emerge not just with a viable business, but a sharp competitive edge." - BrandZ 2020 Report
Every year I look forward to the latest BrandZ Global Most Valuable Brands Report. Timely for 2020, BrandZ published a separate Global Top 75 Retail Brands edition that includes in-depth COVID-19 analysis on the impact of the pandemic to brands.
"The combined value of the BrandZ Top 75 Most Valuable Retail Brands has risen by 12% in the past year, to $1.514 trillion. These brands come from four sub-categories: Pure Retail, Fast Food, Apparel and Luxury, and they are growing despite – and in some cases as a result of – severe disruption in the market."
This article summarizes some of my favorite insights from the 131 pages 2020 retail report.
For the last couple of months during the lockdown, I have been extremely busy continuing to speak with retailers, working several board opportunities, setting up an in-house studio, opening a new YouTube Channel, hiring research resources, and participating in a plethora of podcasts and webinars. Because of COVID-19, my primary focus has shifted to providing intensive data-backed analysis to the "new normal" ahead.
This article summarizes the latest data from multiple leadership sources on the near term economic and retail challenges from COVID-19. All the trends confirm a post pandemic "New Normal".
What will be the 2020 GDP impact to key economies? Which consumer categories are positive? Which continent will lead the recovery? How many USA stores have reopened? Will it be a V, U, or L shaped retail recovery? How long will it take for key USA retail sectors to recover? Is online retail permanently eating the consumer world? Where do we go from here?
In 2019, China was projected to surpass the United States to become the world's largest retail market. On November 11, 2019, Alibaba celebrated a record $38 billion in online retail sales during the Singles' Day 24-hour shopping holiday.
Because of the USA trade wars and subsequently COVID-19, the euphoric rise of China in being THE number one country in retail has been delayed. Notwithstanding this ascension, China continues to be the digital laboratory for the future of retail.
In this article, we explore a few of the China emerging technologies deployed during the lockdown which have a direct impact on retail. Next, we look at the digital innovation steps leading to the reopening of a "new normal" retail industry.
Very impressive is a recent presentation from Andreessen Horowitz on the number of apps deployed in China to fight COVID-19. Linked to the Alipay (Alibaba) mobile payment system, one of the examples apps provides a color QR code on your health.
"At a time when people were confined to their homes, we moved swiftly to leverage our digital app ecosystem and Nike expert trainer network to inspire and support consumers across China to stay active and connected while at home. As a result, our Nike Training Club (NTC) workouts in China saw an extraordinary rise in signup and engagement. In fact, our weekly active users for all of our Nike activity apps were up 80% by the end of Q3 versus the beginning of the quarter.
And here's what happened - the strong engagement of Chinese consumers with our activity apps translated into strong engagement with our Nike commerce app. As a result, our digital business in China grew more than 30% and maintained strong momentum throughout this challenging period, a powerful statement of Nike’s agile problem-solving in times of disruption." - Nike CEO
During China's peak of the COVID-19 outbreak earlier this year, nearly 760 million people were in some form of home lockdown. Above Nike response is an example of the positive actions taken by retailers during the health crisis.
This article summarizes the COVID-19 China's "new retail" strategies, generational commerce transformation trends, and the latest global / regional retail sales forecasts post the pandemic.
Conceived by Alibaba co-founder Jack Ma, "New Retail is a critical chapter in the comeback story of physical retail, and the digitization of all retail." As China has now transitioned through most of the COVID-19 crisis, here are a few lessons from new retail:
Having a substantial part of my family south of the red zone in Italy, I have been following very closely the progression of COVID-19. As of March 17, Italy had over 31,500 cases of Coronavirus with 2,503 people now deceased. To put that in perspective, Italy with 60 million people has already reached nearly 78% of the fatalities in China with a population reaching 1.4 billion.
"Italy has one of the oldest populations in the world, with a median age of about 46 years old. Nearly 60% of the population is aged 40 and over, about 23% of which is over 65." The data from China confirms that fatalities increase with age.
As exemplified by panic buying, COVID-19 feels overwhelming. Protecting your family and your health should continue to be paramount.
This article summarizes lessons for retail in China and where the industry transforms next. Several projected economic scenarios are also presented. Finally, we will explore the unforeseen new 'normal' that will emerge from digitally transformed stale business models.