Despite the coronavirus pandemic causing store closures, stay-at-home orders, and declined demand for nonessential goods, retail investing over the past two quarters has hit new highs for some sectors.  

Here are 5 trends our team has identified that are here to stay:

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ONLINE > IN STORE

The surge in digital demand for retail and consumer goods is not surprising, especially as the U.S. lockdowns forced many brick-and-mortar store closures nationwide. While online retailers such as Amazon expressed concerns for the bottom line during the initial lockdown (due to the high costs associated with operating during the pandemic), Q2’s earning results indicate that the company had little need to worry.

During the second fiscal quarter, Amazon’s overall sales increased to $88.9 billion—a 40% increase in year-over-year earnings. These earnings are impressive given the over $4 billion the company spent on virus-related expenditures, including additional safety measures and “thank-you” bonuses for logistics and delivery workers.  

Amazon isn’t the only company to see success in online retail:

• At Best Buy, online sales were up 242% during its fiscal second quarter, with people stocking up on electronics and equipment for their home offices.
• Target, Dick’s Sporting Goods, Lowe’s, Tiffany and Home Depot all also reported triple-digit growth online.
• Gap Inc.’s total e-commerce sales soared 95% from a year ago, and within that it said its Old Navy business surged 136% online.

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DIGITAL & CONTACTLESS PAYMENTS

Previously a choice rather than a necessity, digital and contactless payments  (Apple Pay, PayPal, Venmo) have become mainstream as more sales are made online.

Many retailers have begun enabling as many forms of digital payment as possible, hoping to provide consumers with the convenience of a preferred and trusted mode of payment, both for big and small purchases.

According to a new National Retail Federation and Forrester survey, 67% of retailers accept some form of no-touch payment. The survey found that 58% accept contactless cards, an increase from 40% last year. In addition, 19% think no-touch payments accounted for more than half of their in-store transactions. Looking forward, 94% of retailers anticipate contactless payments to increase over the next 18 months, but many (67%) were concerned about the fees for processing transactions.

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SHIFT IN SPENDING

Retailers have also observed a shift in the items consumers are purchasing. With financial uncertainty, a limited availability of certain goods, and changes in pricing due to shifts of demand, consumers have spent and continue to spend on necessities while dialing back  usual discretionary spending. In fact, 1 in 4 are now spending up to 133% extra a month on groceries, with consumers spending a whopping 558.4% more on grocery delivery services.

Similarly, sales of office supplies increased by 6.1% as many consumers shifted to working from home and sales of medical and cleaning supplies increased by 500% and 200% respectively.  Interestingly, spending in the pet category has also increased by 50%.

This shift in consumer values is undoubtedly here to stay as we move into Q4.

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SELF-SERVICE

Self-servicing and contact free may be the next normal for many retailers. While customer convenience has always been critical to the retail industry, social distancing has accelerated the development of self-service models. In fact, buy-online-pickup-in-store and buy-online-ship-to-store service options have gained increasing popularity in the past months.

According to Adobe Analytics data, buy-online-pickup-in-store orders (including curbside) increased 62% year over year from late February to March 21. Grocery stores, pharmacies and restaurants aren’t the only ones adopting curbside pickups; other big brands that added this option include Kohl's, Best Buy and Dick's Sporting Goods.

SHOP LOCAL

The retail industry has also noted an extreme uptake in shoppers at local stores. While some consumers attribute this change to limited mobility and convenience, others indicate they’re making a conscious decision to shop local and in hopes of boosting their local economy. Research shows that:

• 49% of consumers “have made a purchase specifically to support local small businesses during the pandemic.”
• 68% of people tipped more than they usually do between April 9 to April 14 of this year.
• More people have begun to shop locally for produce, and small scale food producers observed an uptick in sales, beginning in April.
• Small businesses that invested in eCommerce during the pandemic experienced large yields. In a case study by the U.S. Chamber of Commerce, a small four-shop chain saw growth of 750% for their app within the first two weeks of April.

Many shoppers may elect to continue to shop small even as the next normal goes into effect, as local stores offer a unique level of personalization, high levels of service, convenience, and low-prices for loyal shoppers. In fact, a recent study by Groupon indicated that 75% of consumers aim to back local businesses more extensively post-COVID. In addition, the average American plans to spend nearly $100 per week at local businesses post-COVID.

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THE NEXT NORMAL

Amid unprecedented uncertainty, only one thing is clear: industries are changing rapidly in response to the effects of the COVID-19 pandemic. Here are 3 retail predictions for Q4 from our experts:

• Retailers will pivot from their original Black Friday strategies, scrapping plans to drive foot traffic in-store to online promotions and events.
• Ecommerce holiday sales will be the highest of all time.
• Supply chain’s will be pushed to the brink, and shipment lead times will likely increase.

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