The coming winter season will involve a gradual tightening of measures to tackle Covid. Yet for many people, 2020 has already been an economic catastrophe. The retail sector is waiting with bated breath: although it’s too early to accurately estimate the consequences of coronavirus on physical retail in the medium and long term, we can analyse consumer behaviour during and after the first lockdown and find parallels with other crises.

It comes as no surprise that physical retail has suffered enormously, both during and after the lockdown this spring. A wave of bankruptcies affecting Wibra, Brantano, Orchestra Prémaman, Naf-Naf and Camaïeu are proof of this. Although these brands were already struggling, the coronavirus crisis provided the final blow. We are convinced that Covid-19 (and other crises?) will merely accelerate or reinforce existing trends.

 

Our relationship with shops? Love/hate

Since the end of lockdown, we have been particularly struck by the ambivalent relationship which consumers have with physical retail. On the one hand, they are attached to it: French and Belgian consumers say that they continue to prefer physical shops. At the end of lockdown, a Belgian study by iVox showed that Belgians had genuinely missed being able to go to shops for several weeks: 63% stated a preference for physical shops at that time, compared to 54% before lockdown. (source).

Although this attachment to physical shops is still reflected in the figures, the evolution of these figures tells a different story: increasingly, consumers are abandoning certain physical shops for e-commerce which offers a wider choice and better prices.

The restrictions caused by this unprecedented situation don’t help: people are simply scared to mix with others, in case they catch the virus. Furthermore, shopping as a pleasurable activity is all but over as a concept: shoppers must wear a mask, queue to enter certain shops and accept other restrictions, including limits on the time which can be spent inside shops and a ban on shopping in a group.

 

E-commerce to the rescue, but without any miraculous effect

The obvious winner is e-commerce: it enables consumers to get round these issues. There are 3 key observations to be made with regard to this crisis:

• E-commerce has seen a drop in sales among the few industries which have been hard hit by the pandemic (travel, culture, etc.) but an increase for most other industries, with both new buyers and increased spending. In France, for example, the penetration rate of e-commerce reached 88.7% during lockdown (an increase of 2 per cent in a single month)(source). 19% of online shoppers bought a new category of products on the Internet during lockdown, while 30% of people in France bought more on the Internet. This increase has been observed both by pure players and by online shops which provide an “add-on” to physical shops, although in most cases, e-commerce has simply limited the damage of physical shops’ lost earnings, rather than making up for them.
• In terms of the products sold, electronic equipment is at the top of the list: we’ve all invested in products for efficient remote working, along with equipment for e-learning and children’s entertainment: from computers to second screens, from tablets to printers, from headsets to mice.

 

What recent crises have taught us

These observations can be made now, in the moment. However, we lack perspective when it comes to the coronavirus crisis: we’re still living through it and will probably continue to do so for many more months.

For a more detailed and long-term view of how this crisis may develop, we believe that it’s vital to look to the past and to analyse the similarities between this crisis and previous crises (although they were of, of course, fundamentally different!).

• In the short term, one thing we often see in the midst of a crisis is a certain paralysis among consumers. When people don’t know what’s going to happen, they’re glued to the news as they wait to find out more. Consequently, consumer spending (on goods other than basic necessities) takes a back seat. We saw this during the Gilets Jaunes crisis in France, for example.
• Since the beginning of the 21st century, crises have led to a rise in the popularity of e-commerce. Consumers see it as the ideal solution to many problems: strikes, transport disruption, the closure of physical shops, security issues, health issues, heat waves, other problematic weather and more.
• Every crisis sparks a desire for change and leads people to reflect on (hyper)consumerism. Conversely, the challenge lies in “making it through”. Depending on the consumer’s profile, a general distinction can be made between two types of behaviour/strategy:
  • The consumer who wants to spend but doesn’t have or no longer has the means to do so: he or she is therefore a frustrated consumer, who has become poorer or who has the impression that this is the case (even if this isn’t always true). This consumer will mainly focus on low prices to be able to maintain his or her level of consumer spending.
  • The consumer who has the resources to spend money but who feels guilty: often, he or she will buy less but will focus on buying better quality; he or she is ready to spend more on a more sustainable, local and higher quality product. He or she is a critical and conscious consumer.

It’s a remarkable fact that everyone is in agreement when it comes to shopping locally. Indeed, our collective psyche seems to see it as the solution to everything:

• the relocation of production to create employment, to ensure compliance with certain criteria, to promote the circular economy, etc.;
• consumer spending in local shops and local distribution networks to protect economic momentum and town centres, etc.

 

Inequalities and their impact on retail

Let’s take another look at consumer profiles: as we can see, we’re reaching a two-tier approach to the economy and consumerism. Many economists, including Thomas Piketty in his famous book Capital in the Twenty-First Century, have highlighted an explosion in inequality over the last few years. This is proving to be true.

This inequality and the behaviours which it causes explain the following phenomenon: on the one hand, quality and highly specialised shops are flourishing. An increasing number of consumers insist on sustainable and local products and are prepared to pay the (increased) price.

On the other hand, we are seeing an overall downward trend in prices. For example, in the 1990s and early 2000s, H&M enjoyed a reputation as a “cheap” retailer, but Primark proved that it was possible to be even cheaper. Former customers of Blokker and Wivra now shop at Action. Which shops experienced record queues at the end of lockdown?

 

Conclusion

Do you still want to be successful in physical retail in 2021? We have just two key pieces of advice:

• Ensure that your brand positioning is clear. This is particularly true when it comes to fashion: “mid-range” brands have been suffering for a number of years. In the future, there will be fewer opportunities for brands with an unclear identity and which offer no added value in comparison to e-commerce. In contrast, we are convinced that there will always be opportunities for retailers which cleverly combine a sustainable and “hyperlocal” approach with new technologies. Retailers who understand how to meet other needs (contact, advice, experience, services, etc.) will also succeed. E-commerce will never be able to replace these elements with anything equivalent: not now, not ever.
• To identify this positioning, analyse the market in advance to ensure that you can meet the real needs of your consumers and your catchment area. Keep up-to-date with the latest market trends in your industry.

 

In normal times, we can tend to develop tunnel vision. A crisis and a resultant calmer period are an opportunity to reflect so as to be able to make better progress in the future.