How Will The Coronavirus Pandemic Permanently Alter The Retail Industry?
As the COVID-19 pandemic continues to destabilize everyday life, people are starting to come to terms with the reality that this disruption may not end anytime soon. The effects of both the virus and the shut-down can already be seen across the board, including the retail market. According to estimates from GlobalData Retail, more than 190,000 stores have already been closed—making up nearly 50% of all US retail square footage. And while many of these closures are temporary, the fall-out from this pandemic is expected to have a serious and lasting impact on the retail industry as a whole.
In fact, Fitch Ratings recently downgraded the credit ratings for a number of major retailers, including Kohl’s, Macy’s and Nordstrom. But even more interesting than the downgrade itself is the model the estimates are based on. It assumes that these retailers will remain closed until May, see their revenues fall by 90% (even with the shift from in-store to online sales), and continue a double-digit drop in sales all the way through 2021. Simply put, the financial market is not expecting every retailer to immediately bounce-back even after the most serious stay-at-home orders have been lifted.
Of course, many of these retailers were already poised for financial trouble even before the pandemic began to ramp up. Across the country, retailers have been struggling with too many brick-and-mortar locations and too much debt. Multi-store closures are often a sign that bankruptcy is on the horizon; and, in 2019, stores like JC Penney, Kmart, Macy’s and Sears all closed 25 or more stores.
At the same time, experts are expecting some retailers to emerge from this pandemic stronger. This primarily includes the “essential” retail stores like grocery and drug stores, mass merchandisers and e-commerce retailers. As more consumers are shifting to online purchasing out of necessity—and more companies are figuring out how to make that process even more efficient—most forecasts expect that e-commerce will continue to see a huge boon after this is all over. Retailers with well-oiled digital sales capabilities may be better equipped to weather this crisis, and those that do not will likely suffer the consequences.
“The big retailers are going to do really well and benefit from this, but there is going to be a lot of distress for marginal retailers with many that won’t make it,” explained David Berliner, partner at BDO Advisory, to Forbes. “We are going to see a heightened and accelerated retail transformation.”
Of course, there is another factor to consider as well: consumer behavior. Even before the virus hit, many consumers were already strapped for cash. Over the past five years, Americans have continually increased their borrowing—with household debt exceeding $14 trillion for the first time at the end of 2019. That coupled with a serious drop in consumer confidence in March and unprecedented unemployment, it’s hard to anticipate how consumer spending will change moving forward.
“Consumer behavior is going to be a real wildcard,” Berliner continued. “I don’t know if they will go back to the way they shopped before COVID-19 or even if they will be able to.”
While some home furnishings products are expected to see a sales spike post-coronavirus (as people have spent ample amount of time inside), larger ticket purchases may still be put on hold as people take a more risk-adverse approach to buying. Though some experts are also predicting that we may see a boom in so-called “comfort products” moving forward: the kinds of items that make homes feel comfier and cozier. For the bedding market, that may mean a shift towards extra-plush mattresses—or maybe an even bigger interest in calming wellness categories like CBD-infused products or weighted blankets.
No matter what, there is no question that this pandemic is going to permanently alter the retail industry in a number of ways, especially for the in-store shopping experience. Brick-and-mortar stores will eventually be allowed to re-open—but that does not necessarily mean people will immediately come flooding back even at the level they had prior to the pandemic.
Consumer habits will no doubt change for financial reasons, but also emotional ones. And retailers should be prepared for both. We shouldn’t expect that the fear and anxiety people are feeling right now will simply disappear overnight. And while the severity of social distancing safety measures will eventually be lifted, many consumers may nevertheless continue to adhere to them out of caution.
With all of this uncertainty surrounding the retail industry, we want to hear from you.
How do you think the COVID-19 pandemic will change in-store retail? Will it have lasting effects on the way people approach public spaces (like brick-and-mortar stores)? Will consumers simply skip the store and double-down on online ordering? Or will they invest more time in online research beforehand in order to limit their interaction with an RSA? Will people be willing to utilize in-store kiosks or iPads if they are not provided with necessary cleaning supplies or protective materials?
Join the conversation on the Sleep Retailer Facebook and Twitter channels now or simply tweet at or tag us!
Right now, there are a whole lot of questions and very few definitive answers. But in times like these, there’s real value in coming together to brainstorm all potential possibilities. By keeping the conversation going, we hope the industry can work towards finding new solutions that will support the many and not just the few.
