How Coronavirus Shook the Shops We Rely On

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A curbside pickup sign is seen at the Nordstrom department store parking lot in Skokie, Ill., Saturday, Nov. 28, 2020. (AP Photo/Nam Y. Huh)
December 8, 2020
Retailers in 2020 have seen it all: highs and lows, bankruptcies and windfalls, boarded-up storefronts and lines around the block. The sector, which is arguably the most visible indicator of the country's economic health, has endured everything from state-imposed lockdowns and employee outbreaks to product shortages and booming online sales.  
Some companies thrived, especially e-commerce giants, big-box stores, and grocery chains, while others were less suited to the COVID economy, including department stores, men's apparel, and specialty retailers. In many cases, success or failure was determined by a store's fiscal health going into the crisis, or the extent to which they invested ahead in things like delivery, fulfillment, and technology capabilities. 
One thing they couldn't account for exactly was the spending habits of consumers who were undergoing an unprecedented global pandemic. While many increased their savings, others shifted their money toward merchandise as travel and dining out became risky, if not impossible. 
So to kick off this look-back at the biggest trends in retail of 2020, Cheddar first explored how consumers themselves changed their ways.

'Pretty Bullish on the Balance of the Year'

First, let's take a look at the trusty U.S. Census data on retail sales. In most years, the graph stays mostly flat with a few divots up or down. This year, it looks more like an earthquake on a seismograph
As coronavirus spread across the country this year, and lockdowns followed suit, sales dropped 8.2 percent in March and a record 14.7 percent in April. 
Some of the hardest-hit retailers in those months were clothing stores, furniture and home furnishings, sporting goods, and electronics. 
Clothing and accessories — a category that has also seen some of the highest-profile bankruptcies, from JCPenney to Brooks Brothers — dropped nearly 80 percent in this period.
Then something happened that took many economists by surprise. Retail sales shot back up 18.3 percent in May and 8.6 in June. Of course, this happened in the context of early-hit states easing up on their lockdown measures, while other states that had not yet experienced a major surge were refusing to enforce lockdown restrictions at all. 
This divide is still evident in the data today, even as month-over-month sales evened out to a more normal 1-2 percent through the summer. States that were laxer with their COVID restrictions, in general, saw higher sales than stricter states, according to Affinity Solutions, a research firm whose data tracks closely with the U.S. Census numbers.
Another trend Affinity identified is that not everyone cut their spending equally. Income played an important role as well. 
"The surprise here is that with this recession and recovery, the higher income people got hit much worse in terms of the discretionary spend from COVID and recovered much more slowly," Jonathan Silver, founder and CEO of Affinity Solutions, told Cheddar. 
This had all kinds of unfortunate knock-on effects, including a harder employment situation for low-income workers who worked in the hospitality and retail industries in more affluent areas and depended on that spending for their livelihoods. 
High-income spending was still down 5.7 percent going into December, while low-income spending was up 1.8 percent, according to Opportunity Insights, a research and policy institution at Harvard University that worked with Affinity on gathering the data.
Overall, though, Silver said he is surprised at how well the economy is doing given the unprecedented shock of the pandemic and the uncertainty surrounding federal stimulus. He added that the lack of travel spending could be helping boost the demand for merchandise. 
"We're pretty bullish on the balance of the year," he said. 
Silver noted that it's important to look beyond the month-over-month data. In October, for instance, year-over-year sales were up 5.6 percent.

A Frictionless Shopping Experience 

When the dust settles, however, the impact of COVID on many retailers may have less to do with their bottom line and more to do with changing business practices. Behind every transaction is a world of technology, supply chains, and labor practices, all of which have recently adapted. 
"Traditionally, retailers have been a little reluctant and slow to adopt a lot of the new technologies that we see coming out," said David Wilkinson, president at NCR Retail, which works with companies on back-end technology systems. "Then COVID hit, and clearly our business changed on a couple different fronts." 
This fits the common narrative of COVID as an accelerant rather than a game-changer. Many of the biggest changes were years in the making. The pandemic just expedited things. 
Wilkinson, whose company helped Walmart implement contactless payments, said many of these new practices, such as alternative payment options, faster checkouts, and buying online to pick up at the store, are likely here to stay. 
Metering foot traffic and setting appointments for shopping, however, are likely to fade away as the threat of the virus recedes, he added. The same goes for social distancing and more spacious store layouts. 
"We're all going to be more spatially aware as a society, but I don't think we're going to need all of the space or plexiglass shields," he said.
Wilkinson predicted that coronavirus will push retailers to make the shopping experience more seamless and less oriented around the traditional layout of a check-out lane at the front of the store. Increasingly, he said, things like remote ordering and self-checkout will fully take over. 
"The shopping experience of the future becomes much more frictionless," he predicted. 

How, When, and Where

Certain businesses entered the crisis in a better position than others, particularly those with developed e-commerce platforms and the in-store infrastructure to offer robust pick-up and delivery options. 
"During 2018 and 2019, we had a number of what I'll call sort of our forward-thinking, leading-edge retailers that were already using their stores to leverage digital fulfillment," said Chris Shaw, senior director of product marketing at Manhattan Associates, a provider of e-commerce and supply chain technology solutions to retailers. "In fact, in 2019 during the holiday season, we had a few of those retailers where more than 50 percent of all their store volume was digital demand."
What's happening now is that best practices are trickling down through the industry. Offerings such as order online but pick-up at the store or curbside pick-up and delivery are becoming less of a novelty and more of a necessity for companies looking to capitalize on the boom in online sales. 
Best Buy, the big-box consumer electronics store, is pulling out all of the stops this holiday season by the expanding hours for contactless curbside pickup, offering same-day delivery through third parties, and enlisting more stores to serve as "ship-from-store" hubs, which will have trained staff on hand to handle higher volumes of delivery orders. 
Boutique retailers, such as independent book stores and clothing outlets, have also expanded their pickup and delivery options just to survive. A survey from Main Street America, a nonprofit trade group, found that more than 40 percent of small businesses offered curbside pick-up, and just under 40 percent offered order online and then pick-up in-store. 
Shaw explained that companies were able to improvise when it came to meeting limited demand for pick-up or delivery. But once they hit critical mass, which happened for many during the pandemic, their whole business model had to change. Oxxo, one of Mexico's largest commercial chains, has expanded its delivery options amid the pandemic explicitly to keep up with Walmart's new offerings. 
Organizational practices typically applied in warehouses are then needed in retail environments. Rather than working in a checkout lane, workers were redeployed to help with stocking and packing on pick-up and delivery orders. Early in the pandemic, for instance, CVS ramped up its hiring of warehouse and stocking positions to meet demand. 
On the consumer end, the expectation of timely fulfillment — a standard that titans such as Amazon have done their part in creating — have transformed the selling experience for retailers. 
"How, when, and where we get our item has become just as important as color and size," Shaw said. "So I'm making the decision to buy with you, to even finish my shopping experience, based on when you're telling me I can get this item. As consumers, we no longer want to wait until the cart, or even sometimes the checkout, to find out when our item will be available, and we certainly don't want you giving us a promise that says something like 5-7 days." 
In other words, offering e-commerce isn't worth much if companies can't deliver on actually getting the product in customers' hands when and how they like it.  Nearly a year into a pandemic, these new expectations aren't likely to go away now. 
"As we say, the first time you shop online, it's a novelty," Silver said. "Twice, it's interesting. But three times or more it becomes a habit."
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