The effects of Covid-19 on the retail sector

As the economic recession is sweeping through the globe, we can see that the crisis is biting into the retail sector. As many retailers in the UK are struggling to survive, hard lessons are being learned. How can retailers best adapt to a new post-COVID world? To answer that, let's examine first how the pandemic changed the way we shop.

Retail is one of the hardest-hit industries from the Coronavirus pandemic.  
Throughout lockdown, we’ve noticed how some people’s shopping habits have been shifting: budgets are tighter, contactless payments are surging and many activities are shifting online. Although shoppers will eventually return, will the new normal be drastically different from the old normal? And if so, how will this impact the retail sector? Here are a few ways we believe Covid-19 will affect consumer habits. 

Shifting services online

With lockdown, people are staying inside and shopping online. There’s a huge increase in transactions and online shopping: from March 23 to March 30, e-commerce marketplaces saw a 14% increase in volume, according to data from the Forter Global Merchant Network. As we can see, retailers have no choice but to shift services online and develop digital solutions. 

But the retail system itself is shifting: the long queues, lack of product communication and confusing store layouts are irrelevant in a digital world. Now, with mobile technology, customer experience improves significantly: customers have their own shopping lists, can easily be guided throughout the online store and don’t have to deal with shopping queues. By shopping online, customers not only enjoy a much more convenient and personalised service, but are also more hygienic.

This shift is highly beneficial to retailers: with the right analytics in place, they can easily track and store every shopper’s move online. This offers a greater opportunity to learn about consumer habits, offer highly personalised discounts and gain customer feedback. 

The largest effect of Covid-19 on retail has been the “forced” shift online. The Coronavirus pandemic is acting as a catalyst for retailers to build digital service. So far, the main problem with shifting online has been the kinks in the supply chain caused by a spike in demand. The sudden switch from offline to online means fulfilment centres are struggling to cope with high demand. Once the supply chain is adjusted, retailers have an opportunity to improve their online services and use the large amounts of data they collect to grow their business overall.

Changes in customer behaviour

The pandemic has brought about new consumer behaviours that retailers are still adapting to. But will those behaviours change again once the pandemic dissipates? Which behaviours are likely to stay? At this stage, it’s difficult to say, but these are some of the possible shifts:

1.   Health is very much wealth
This pandemic has revealed how fragile the human species is against a virus. It’s shown that something invisible can have huge disastrous consequences for anyone who contracts it. 

The silver lining of this crisis is that it has encouraged people to make their health more of a priority. Not just their physical health, but also the quality of the products they are buying. This could indicate a shift to more sustainable and healthier consumer products. People will be looking to buy products from companies who put consumer health and building trust at the core of their business model.

We’re first seeing this in physical stores: hand sanitizer stations in every store, more self-checkouts and fewer touch-screens. And then online: digital consumption will lean more towards highly convenient products that offer in-house and personalised hygienic services. Consumers may also be more keen to buy products from a company that focuses on empathy and care of their customers, rather than cutting prices.

Telehealth will also offer an interesting opportunity for retailers and retailtechs to offer products that help solve health problems online. A survey by HRI found that 5% of consumers in America started using telehealth for the first time with the pandemic, and 88% said they would use it again. This is good news for retailtech: the more consumers get used to digital health services, the more they will be open to bringing other habits online.

2.           Data sharing is acceptable

Consumers are much more open to sharing data in order to help stunt the spread of the virus and find a cure. Citizens are happier to make their private information public in order to enable contact tracing and help society get rid of the virus. 

The data confirms it: the same HRI survey found that 50% of consumers in the US would share their data directly with a drug company. And according to an Ubamarket report, 52% of shoppers are happy to share data with retailers in order to save money. As more consumers share information with both companies and governments, data sharing will become more socially acceptable.

Once again, this is good news for the retail and retailtech sector as it will be easier to gather important information about customers. If consumers are already used to sharing private information about their health, they’ll be more willing to share their information with retailers. This will not only create new opportunities for retail business models, but will also encourage an environment where both consumers and companies value transparency. 

Companies like Recash are already adopting a new data-sharing business model by allowing consumers to share their banking data through the Open Banking directive in exchange for compelling cashback offers. With this regulation in place, retailers can access the data of their competitors’ customers’ and offer them personalised discounts as a strategy to acquire new customers.

3.           Save money

With a pandemic and looming recession, people are financially stressed and are learning towards saving rather than spending money. This means that companies helping consumers save will likely offer more attractive options to shoppers.

This also offers brands an opportunity to help shoppers that might find themselves in a worrying financial position. If a retailer is selling more expensive items such as a washing machine or sofa, they can consider offering a payment scheme or discounts that help people save money in the long run. 

This stronger saving culture means cashback solutions will have a big comeback - customers are interested in receiving liquid cash, especially in a world where budgets and reserves are tight. Will this behaviour change prevail in the long term? It’s likely it won’t, but predictions are always uncertain. 

Retailers will also be looking for risk-free marketing solutions in an attempt to reduce budgets and weather the storm of the pandemic. These solutions are likely to come from the tech, fintech and retailtech sector, which will in turn increase competition as more and more players emerge. This may lead to more retailers and retailtechs partnering up in order to implement cheaper technology, market products more efficiently and offer more digitally optimised services to customers.

By using a retailtech solution with Recash, retailers can help customers save money through highly personalised cashback offers. Not only will they be able to target competitors’ customers by acquiring the data, but they’ll only need to pay a percentage on what they make or on the cashback offer they paid - allowing them to implement a risk-free marketing solution. 

Covid-19 is having some unparalleled effects on consumer behaviour and the entire retail sector. Services are shifting online and some interesting consumer habits are evolving that could end up staying for the long term. Having said that, these are trends and predictions that change from day to day. Since no one has been through this before, most of it is unknown and new. Although the pandemic and crisis will eventually pass, it’s the retailers that are able to keep up with new consumer habits and adapt to change that will survive and thrive.