A new report predicts the retail industry will feel effects from the COVID-19 pandemic even after shops are allowed to gradually reopen, as consumers will likely remain wary of shopping in-person.
The report from KPMG predicts lower rates of consumer spending “will disproportionately impact the same retailers that were forced to close their outlets during the lockdown,” and that sales for apparel, speciality and department stores will fall off “and remain depressed until employment and consumer confidence rebound.”
“Stores may also suffer from continued social distancing behavior—with consumers staying home and avoiding public spaces, even after they are not required to,” the report reads, noting this trend has played out in countries where many businesses have already reopened.
However, the report notes retailers that sell groceries and other necessities, and particularly large chains, “will benefit from relatively steady demand,” as will online grocery orders and other online sales.
And the report predicts that store closures will accelerate as a result of the virus-tied restrictions, particularly in retail because the “shutdown broke the model most retailers use: building inventory and paying suppliers when the goods are sole.”
“This will intensify the Darwinian struggle for survival that has already been under way,” the report reads. “A record number of retailers have filed for bankruptcy protection in the past several years, and we expect that bankruptcies will at least double in 2020.”
In the future, the report urges retailers to “be flexible” in crafting their approach, as it’s unclear what the long term impact from the pandemic will be on consumer habits and trends.
The KPMG strategists recommend that retail leaders should begin by reviewing the current markets, changes in consumer behavior and how competitors are handling the economic fallout before starting to draft baseline revenue projections and create an operational starting point for the business to use going forward.
Retailers should then develop a strategic direction and financial goals for the near future, and then move to considering new initiatives that could help their business on top of their existing baseline scenarios.
“Given the fluid market conditions and the need for speed, the execution of the initiatives has to be agile. Retailers will still need to develop detailed execution plans for the identified initiatives supporting their strategic ambitions, including designating initiative managers and specifying targets and timelines,” the report reads. “However, given the unpredictability of the current environment, companies will have to be willing to modify, reprioritize, and accelerate initiatives rapidly, if necessary. This is the time to prioritize good over perfect and now over later.”
