Coronavirus/COVID-19 is rapidly taking the world in its grasp. Just a week ago people in some countries were advised to wash their hands more frequently, today more and more nations are on lockdown and in some areas, a state of emergency has been declared.
For our clients (leading global consumer brands), the virus introduces additional challenges as stores have either stopped selling altogether or seen a dramatic decrease in sales due to government-imposed curfews (lockdowns). Nike, IKEA, Apple and entire countries like Italy and Spain and Belgium have now closed all their stores. For many brands, retail sales still drive over 80% of total revenue, so the overnight absence of this sales channel imposes an immediate problem.
With people self-isolating to avoid social contact, there will be a huge shift to online sales. It is, therefore, no surprise that Amazon is hiring 100K extra workers and increasing salaries to cope with the expected surge in demand. Predictions are that this situation might last until Q3 this year (best case) or Q2 of 2021 (worst case).
Our view on the current market & outlook
The current situation leads us to wonder whether traditional retail will ever recover from this shift in consumer buying behavior. Large groups – who previously rarely ordered online – have now been forced to do so, and will experience its convenience and ease, perhaps for the first time. It is our view that this will cause structural change in buying behaviour.
Amazon has drastically restricted its FBA program (logistics & warehousing) for third party sellers to fully utilize its capacity for other purposes. We believe that Amazon is positioning itself to maximally profit from this change in consumer buying behavior. As a result the retail landscape could drastically change. Will these retailers recover their losses when business resumes facing a decreased market size for offline shopping? We foresee that many retail chains (already struggling) will perhaps cease to exist if they haven’t implemented a solid e-commerce strategy and platform.
Do you have a contingency plan?
Leveraging the online retail channel is more crucial than ever. Brands are reaching out to us for advice on their omni-channel capabilities, and we can help them with some immediate contingency measures to cope with the changes. So how can brands best position themselves to cope with the upcoming challenges?
Get in touch with us if you would like to receive a consultation.
Furthermore, we are conducting a series of interviews with a selection of top executives at leading global consumer brands to discuss their views, how the retail landscape will evolve, what contingency measures are put in place and how best to cope with the situation.
We aim to share these learnings with our clients and with you, so we would also like to invite you to participate. If you are interested in sharing your views, please get in touch.
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Written by Joris Kroese