What Lessons Did Retailers Learn from the Pandemic?

Keith Jelinek

With COVID-19’s hold on retail easing, in-store purchasing will return—but online sales will keep growing.

As states start reopening across the country, Keith Jelinek looks at the post-pandemic landscape in the retail market. What lessons did retailers learn over the past year? What should they do as shoppers return to stores?

The National Retail Federation (NRF) is projecting up to 8.2 percent retail growth in 2021 as Americans look to spend post-pandemic. But about half of that growth is projected to be from online sales. What does the end of the pandemic mean for traditional bricks-and-mortar?

KJ: The NRF projections feel on target—especially with vaccinations progressing and state and local authorities lifting social-distancing restrictions. I think we can comfortably say two things about the rest of 2021: Customers are returning to in-person shopping, and they’ll continue to do a lot of shopping online after getting more comfortable doing so over the past 14 months. Baby boomers, in particular, embraced online shopping as part of broader efforts to stay in touch with the outside world.

That said, as we look at the early 2021 numbers, context is important. In some cases, we should compare what’s happening now with 2019, as opposed to the low points of 2020. According to Mastercard’s early read of March sales, specialty apparel was up 61 percent over 2020 and nearly 19 percent over 2019. Department stores were up 114 percent compared with 2020, but flat compared with 2019. There also are early indications that consumers are buying accessories and more casual dress-up items, compared with more “comfy and casual” items at the height of the lockdown.

But, judging by the March numbers, the NRF is right about online’s place in all of this. Online sales were up 56 percent over 2020 and rose nearly 86 percent over 2019. This is another sign that even as consumers return to physical stores, they have become more confident and comfortable with online purchasing, and retailers and consumer goods companies have stepped up their communications—i.e., targeting them with more personalization.

How much of the growth will be driven by people finally getting out of their homes, as opposed to a stronger overall economy? Maybe more to the point, does the distinction matter for businesses planning for the future?

KJ: There are a lot of economic factors at play, so I’ll touch on just a few. Much of the growth in consumer goods has been driven by a combination of stimulus checks, tax refunds and spending of personal savings. According to Statista, personal savings rates were at 14 percent in February as opposed to 20 percent in January, which tells us that consumers dipped into their rainy-day funds. 

Other aspects of breaking free from the pandemic are at play too. People are getting out of not only their homes, but their cities, states and even their country in some cases. According to TSA data, 1.5 million people traveled by air on April 8 compared with just over 100,000 on the same day in 2020. That’s well below the 2.5 million who traveled on that day two years ago, but it shows personal and business travel is resuming, and people are then doing things like buying new clothing and accessories for vacations.

You’ve talked in the past about how hard businesses that couldn’t offer ecommerce options—gyms, salons, etc.—were hit by the pandemic. How are their prospects for the rest of 2021? 

KJ: The pandemic forced many smaller businesses, those that traditionally did not rely on online commerce, to up their games and develop new CRM applications to connect with current customers and attract new ones. That’s been especially difficult for businesses that offer services as opposed to products—and those businesses have been the most affected by COVID restrictions.

Now, with some restrictions easing and people beginning to resume pre-pandemic routines, business is returning to fitness centers and salons. These businesses also will benefit from foot traffic, as many are located near shopping centers, which are seeing increases in traffic as well. 

What is one thing about how retail adapted, or didn’t adapt, over the past year that has surprised you most?

KJ: The biggest difference has been in regard to leadership, some of which predated COVID-19. While many retailers went into the pandemic with weak balance sheets, a lack of scenario sales planning and little to no availability for borrowing, others, with strong executive leadership teams and experienced boards or sponsors, used the past year as an opportunity to “sur-thrive.”

As an example, there was a lot of quick decision making around cash management. Capital-intensive projects ceased, and attention refocused on how best to serve the customer in the new environment. That meant investing in online capabilities, virtual selling, CRM investments, BOPIS (buy online, pickup in store), curbside delivery and reassessing store portfolios. This fast-on-your-feet thinking required strong leadership to reprioritize efforts across the entire organization.

Apparel and department stores have struggled during the pandemic. What should executives in those industries do to position themselves for a comeback?

KJ: We are working with several retail executive teams as they rethink how to engage with the consumer. It’s increasingly important to look at consumers in an omni-fashion and connect with and provide goods and services to them wherever and whenever they want. Customers want to make sure you know them: what they buy, what they are interested in, etc. This is where retailers can recommend items that bring a fresh, new, fashionable look to go with consumers’ wardrobes and preferences—ideally through personalized communications, not big email blasts.

This approach also works when customers are physically in stores. A combination of loyalty programs and informed sales associates means customers can be addressed by name and receive tailored recommendations. This kind of approach in combination with new delivery options we discussed earlier is part of reengineering the customer experience. Retailers who haven’t already started down this road would be wise to start now.

The next big disruptor might be the further development of 5G. How should retailers plan for that? What don’t they understand now that could bite them later?

KJ: 5G is going to bring more horsepower to analyze and move data at faster rates. 5G’s speed and bandwidth will change dressing rooms in department stores and specialty retailers. Technology such as virtual mirrors will allow users to hold an item up and see how it looks on them without actually trying it on. Imagine the time saved in not having to go through the hassle of trying on clothes. It also will save on the wear, tear and soilage of the articles of clothing themselves.

Another advantage will be solving the out-of-stock problems that plague stores today. With RFID (radio-frequency identification) and the right infrastructure, tracking an item the moment it leaves the shelf or a rack in a store will allow businesses to restock the item more quickly.

For retailers, what will be the single biggest legacy of COVID-19?

KJ: In some cases, COVID-19’s legacy will be the dismembering of prominent retailers that either completely went away or are now in new formats after their IP was sold at auction. 

For retailers able to “sur-thrive,” COVID-19’s legacy is their ability to have catapulted forward five or more years into the future. They were forced to rethink how to engage with their customers, become more efficient and make the right capital investments—steps that needed to be taken eventually, but were expedited by the pandemic.