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The post-pandemic ‘new normal’ begins to emerge

12 Feb 2021

Managing Consultant Stoyan Petrov takes a look at the enduring changes which the pandemic has had upon the retail landscape, and how these are likely to shape the post-pandemic ‘new normal’ – including coverage of grocery, ecommerce, experiential retail, and the growing trend towards buying locally.

While we are all eagerly awaiting the return of normality (be it a shiny ‘new normal’ or v2.0 of the pre-pandemic scenario), some areas of life and business seem to have been altered for good. One such example is how we shop for groceries which had always seem to be a more traditional shopping occasion generally carried out in physical stores. However, many consumers are saying they are unlikely to return to the old ways and will be switching to online for good. This shift has been reflected in the results of online retailers such as Ocado which reported a 35% jump in sales in 2020 (which could have been higher without certain capacity constraints). Together with online, more traditional retailers have struggled to cope with increased demand for online shopping highlighting a gap in both capabilities and capacity. Ocado and similar online players have been busy expanding their core online shopping and delivery capabilities around the world to enable fast scaling and capitalise on the ongoing shift in consumer behaviours. This can serve as a case study for traditional retail businesses still contemplating whether online is the future. By doing this Ocado and co are laying down solid capability and capacity foundations to respond not only to the current environment, but also to any future disruptions, and benefit both their businesses and customers.

The boost in online sales in 2020 has, however, also meant a huge increase in market penetration of other online retailers. Some analyses claim this increase in competition would eventually mean trouble for online market leaders such as Ocado even though they are currently enjoying success and popularity. On top of that, piling pressure to help brick-and-mortar retailers is likely to increase if the lockdown restrictions remain into 2021. Some of the suggested solutions to support traditional retail include digital sales tax and higher online business rates which can put a dent in online retailing success. And while legislative action is something new business and technology capability cannot help with directly, continuous improvement and innovation to satisfy changing consumer needs can create a cushion or a buffer for online businesses and soften any setbacks due to regulations and laws.

Apart from the shift to online, analysts predict that shopping locally (whether via clicks or bricks) will also become a new consumer behavioural constant. We should name the source 78% of consumers say it’s either ‘important’ or ‘very important’ to support local suppliers and retailers. This is very much related to another existing transformative trend that took off during the lockdown months – purposeful or sustainable shopping. The pandemic restrictions gave it another spin however, and now shopping locally doesn’t necessarily mean a physical experience as 48% of consumers report they would use local store delivery to do their groceries, while 27% even claim they would substitute takeaways with it. This is an interesting example of how some of the trends that have been accelerated during the pandemic have now started intertwining with each other meaning that retailers will have to create more holistic new offers to keep in line with the changing customer priorities.

So how are the more traditional high-street players dealing with this acceleration and disruption of the shopping experience? As transactional shopping is getting pushed online during lockdown, the real estate on the high street has started looking for a new purpose to deal with the Covid-fuelled store closures. Rather than selling goods, more and more traditional retailers have started and will continue transforming their brick-and-mortars into places to sell experiences. Experts expect more areas that focus on community activities to open up and traditional stores to follow suit and transform their operational model to accommodate this trend. So, expect to see more lifestyle and leisure services being offered together with the usual retail product assortment in order to keep customers visiting physical stores. But while previously this was done to extend the time customers spent there, the situation is slightly more nuanced now. It is highly likely that social distancing anxieties and concerns would stay for a little while more in our lives, thus, retailers will have to strike the right balance between helping customers with their socialising cravings while at the same time ensuring their every measure to keep people safe and healthy. Those retail businesses that find the right combination between the two and maybe even think outside of the box would win customers’ hearts and wallets in the still turbulent retail environment this year.