Retail In The Coronavirus Age

Retail In The Coronavirus Age

almost 4 years ago3 mins

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The coronavirus pandemic is giving retailers around the world a radical makeover – whether they want one or not. There are plenty of losers, a few winners, and a few old ideas whose time may finally have come.

⏰ Recap

  • April saw the biggest ever drop in US retail spending, with clothing and electronics hit hardest by the COVID lockdown
  • But many stores that were deemed essential and allowed to remain open – like Walmart – saw increased business
  • Facebook saw an opportunity, relaunching and enhancing its ecommerce offering for small businesses
  • While retail spending might still improve as authorities ease lockdown rules, any rebound will be capped by the millions who’ve lost their jobs in the crisis

✍️ Connecting The Dots

Retail is so ubiquitous that we can sift through the results of huge multinational chains for clues on how hard the virus has hit economies around the world. Clothing store H&M, for example, saw sales tumble 80% in Italy, 76% in Spain, 71% in the US, and 46% in Germany. And even without forced store closures, many worried shoppers would surely have stayed home anyway: sales in H&M’s native Sweden – which only imposed a limited lockdown – were down by nearly a third.

Another trend stands out from H&M’s earnings: the 32% jump in web purchases, even as overall revenue plunged by more than half. Thanks to the accelerated shift online – not to mention the shutdown of many traditional retail outlets – Bank of America reckons internet shopping’s share of total US consumer spending has gone from just 15% before the crisis to 27%.

While this digital disruption is causing a noticeable shake-up in retail itself, it’s worth remembering the second-order effects further down the supply chain. For one thing, as consumers spend more and more money online, advertisers will follow. Digital ad spend is already more than half the total, and it’s been growing every year even without viral assistance. And that might be why shares of traditional ad giants WPP and Publicis have dropped more than 40% this year, while those of smaller, digital-focused rivals – like S4Capital, founded by WPP’s former CEO – are up.

🥡 Takeaways

Traditional retailers can’t get you to buy something until you walk into their store. That so-called footfall is a key measure of the viability of a retail location – and hence the amount of rent a store will be willing to pay. And given that so much money relies on accurate footfall calculations, consultancies can charge big bucks for the intelligence. What we’ve witnessed in recent months is what happens when footfall is suddenly decimated: even after the easing of some lockdown restrictions, traffic in US malls is down by three-quarters on last year. But what effect this has on both rents themselves and on satellite industries like retail consulting remains to be seen.

Facebook has certainly scented an opportunity in the retail revolution. It’s been pushing tools for online sellers since at least 2012, but with limited success. With Facebook Shops, unveiled on Tuesday, the social network now has another chance to graduate from the world of ad sales – where businesses might pay a few cents for a casual view of their website – to more lucrative sections of the “customer acquisition funnel”, where businesses will pay a lot more for a confirmed sale.

🎯 Also On Our Radar

We loved this blog post titled “Doordash and Pizza Arbitrage”, all about the incentives driving some venture capital backed businesses – like US food delivery firm Doordash – to pursue growth at all costs. Even if it means paying a pizzeria in Kansas to deliver to the restaurant’s own proprietor, and losing at least $8 a pizza in the bargain. We kid you not.

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