United States / Coronavirus Insights
Retail's Reopening

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by Cecilia Fernandez, Lead Industry Research Analyst
May 28 2020

Two months after the national lockdown, the Retail Trade sector (IBISWorld report 44-45) has started to reopen slowly across the United States. However, states where coronavirus cases have been higher are anticipated to open at a slower pace. Health officials fear that lifting restrictions and reopening the economy too quickly will cause the coronavirus to spread rapidly and reverse the progress the lockdown has made. However, businesses that have been reopening in specific states, such as Kentucky and Alaska, have been taking the necessary precautions and complying with regulations. These businesses are allowing fewer customers to enter simultaneously, requiring their employees and customers to wear masks and gloves, as well as ensuring that customers have enough space to social distance.

E-commerce's growing market share

Even though e-commerce sales account for about 10.0% of total retail sales, this share is anticipated to continue to increase as a result of the coronavirus pandemic. The pandemic has forced consumers to buy solely online, a trend that consumers will likely grow accustomed to. Previously, brick-and-mortar locations had the benefit of letting customers try on the item before purchase as well as the ability to offer premium hands-on customer services. Also, older demographics had been less inclined to shop online, a trend that will likely weaken as shopping online is perceived as a safer alternative. Retailers that offer essential items, such as the Supermarkets & Grocery Stores industry (44511), have been able to keep demand steady. Conversely, luxury or discretionary item retailers will likely suffer in the long run as consumer behavior and preferences change.

 

 

Adapting to digital demand

Shifts in consumer preferences pose a threat to brick and mortar locations as shoppers may be reluctant to enter a physical store. Tech-savvy retail chains, such as Lululemon and Nike, have kept demand steady as they created online workout apps in order to keep customers engaged and build a sense of community. The pandemic has forced retailers to quickly adapt in order to survive, whether that is to engage in e-commerce, offer delivery/pick up in-store options, or creating a new way of generating revenue. For example, Bed Bath & Beyond noticed an 85.0% surge in its e-commerce platform in April and has converted some of its retail locations to fulfillment centers. By trying to meet the company’s digital demand, the company has been able to rehire employees, which could be indicative of how the retail workforce focus will shift to order fulfillments in proportion to traditional brick and mortar tasks.

The coronavirus pandemic has also made operators in the retail sector to rethink their space. Smaller stores are harder to control and monitor than larger stores that have more space for social distancing. Smaller retail locations will have to limit the number of customers and impose social distance lines outside of the location as a safety measure. New technology will likely be the savior for retailers, especially in the apparel industry. Industry operators will try to virtually simulate the in-store shopping experience by introduction new technology tools, such as virtual showrooms, fittings and personal stylists.