Even before coronavirus started to force the closure of offline retail businesses across the globe, the move to ecommerce appeared to pose an existential threat to offline retail. Growth rates in online shopping have been around four times that of the broader retail sector for over 10 years now.
However, since the COVID-19 crisis spread to Europe and the U.S., many businesses have been forced to close. Governments have ordered brick-and-mortar sales stripped back to all but the essential services. In turn, this has pushed up demand for online purchases, particularly in categories such as toys, sporting goods, and industrial supplies.
Therefore, it seems logical to assume that if people can’t buy their goods in-store, the coronavirus restrictions could spell an imminent crisis point for offline retail. One report from Coresight Research predicts that there will be 15,000 stores closing in 2020, up more than 5,000 from 2019. Advertising platforms, including Facebook, have also imposed restrictions on store advertising in an attempt to ensure people follow the instruction to stay at home and prevent the virus from spreading further.
On the other hand, there are many other factors at play that point to the survival of brick-and-mortar retail.
Offline retail is suffering, but online sales aren’t immune
The damage wrought in the offline sector doesn’t mean that online sales are proving to be immune to the impact of the coronavirus. Many segments, including jewelry and apparel, are down in both traffic and sales. This is understandable, considering many countries ban people from gathering and traveling.
These bans preclude events such as weddings, parties, holidays, or conferences that would typically prompt consumers towards buying some new clothes or accessories.
Even the mighty Amazon isn’t escaping the damage of the coronavirus unscathed. Online shopping behemoth has had to take multiple measures to address the crisis. Amid rising demand, the company has started to run short of essential groceries and goods such as disinfectant wipes.
Why do retailers remain optimistic?
With so many challenges facing the sector, it would be fair to assume there’s no coming back from the damage wreaked by the coronavirus, particularly for offline retailers forced to close their doors entirely. However, many are taking a more optimistic outlook. In a recent survey of retailers taken by Digital Commerce 360 in early March, around two-thirds still predicted that their businesses would perform the same as or better than expected this year.
While this level of optimism could be misleading, given that the virus has continued to spread since that survey, there are some indicators that retailers have reason to remain optimistic.
Although flights are grounded, in general, supply chains can keep moving because most governments haven’t yet restricted the movement of goods. Therefore, retailers can continue to supply their products, even if demand is down.
A recent Ipsos survey covering attitudes to the coronavirus across various affected countries shows that we can expect an increasing trend towards ordering goods online that consumers would usually buy in stores.
This trend was most pronounced in China and Italy, which at the time were the most affected countries, indicating that other geographies may see a shift to online shopping. If brick-and-mortar retailers can increase their digital capabilities in time, then they can capture this opportunity as it emerges, mainly if they’re selling products that are in demand.
Finding new gaps?
Amazon’s pullback from non-essential deliveries perhaps provides a further opportunity for retailers. When locked in at home, people may be more likely to engage in hobbies such as cooking, gardening, crafts, or DIY home improvement. Products that meet these needs are likely to be deemed non-essential, meaning Amazon won’t be able to fulfill demand. This gap potentially offers an opportunity for smaller retailers to capture market share.
In some localized instances, communities are also being rallied to support small businesses in their area affected by the coronavirus. The Star, a local news outlet in Florida, published a piece in mid-March imploring residents to help local businesses by purchasing gift vouchers, ordering online, or merely asking owners how people can support them.
Similarly, a local news site in the U.K. highlighted how local businesses were helping out during the crisis by delivering essential supplies to those in isolation and providing healthcare workers with discounts. In return, the editor urged residents to “get behind these businesses in this difficult time so that they will continue to thrive and enrich our communities.”
While statistics around the movement to support local brick-and-mortar businesses amid the crisis are not yet available, many communities are visibly rallying behind the cause.
Finally, governments across the globe appear to be determined that the retail sector shouldn’t suffer unnecessarily from the fallout of the coronavirus.
The economic stimulus package approved by the U.S. Senate on March 25 contained several specific provisions targeted at the retail sector, including an employee retention tax credit and extending the right to tax deductions for net operating losses.
The U.K. has rolled out similar measures. The U.K. government is backing low-cost loans for businesses of all sizes that suffer interruption due to coronavirus.
None of this is to deny that 2020 is going to be a tough year for many. However, although individual segments will suffer worse than others, there’s reason to believe that the offline retail industry will not be among COVID-19’s casualties.
TK DataSec Consultancy provides advice on ecommerce security.Favorite