First off, I would like to thank all the retailers who are on the frontlines and supporting our basic needs for food and medicines: Thank you!
No one can reliably predict what is going to happen over the next several months, but we know the more we follow the advice of our health officials and practice social distancing, the more quickly we will move past COVID-19.
Since there are plenty of brilliant people focused on this dire situation, I will focus my attention on what will be the most likely scenarios in retail during and once we are past the COVID-19 pandemic.
As the pandemic has been unfolding, grocery retailers have seen massive sales and stockouts with customers pantry loading and panic buying in anticipation of an extended lockdown. If we come out of this in a shorter timeline, retailers need to be conservative and re-stock items close to their normal sales levels or slightly above as consumers will not continue their pantry-loading behaviour.
In the short term, the product mix will be heavily focused not only on home consumption and health but also on entertainment, toys, home gym, and home improvement. These categories should also see short term growth in demand as we keep busy during an extended stay-at-home mandate. Accurately anticipating these changing customer behaviour dynamics and the impact on the product mix will be crucial to retailers.
A long period of sheltering-in-place will have significant economic impact on travel, entertainment, sports, restaurants, bars and non-essential retail. Substantial layoffs will occur as businesses simply try and stay afloat. Although food retailers — and particularly discount banners — will fare well during this time, consumer shopping behaviour going forward will certainly change.
So, when we do fully move past COVID-19, it will be in an economy that has tipped into a recession and a period of increased unemployment. Customers will increasingly rely on retailers to provide the right items at the right prices to accommodate fundamentally changed shopping behaviours and patterns.
This economic slowdown will impact the average basket size and mix of products as well as put pressure on prices and sales overall. In an industry already margin-challenged before COVID-19, an extended lockdown and recession is a further test for the retail sector. Cost reduction strategies including innovative technologies will be more critical than ever.
It’s hard to imagine that a year from now grocery retail, or any industry for that matter, will operate like it has historically. The COVID-19 pandemic will push us all to adapt, and we will.