1. Ongoing shifts in consumer behavior due to pandemic
As we bid farewell to the turbulent times of 2021, it seems like the harsh memory of the COVID-19 pandemic is gradually fading away with the new year's dawn. The optimistic narratives of a "post-pandemic" era were already being penned last year, all thanks to the rapid development of vaccines that brought a measure of relief in the fight against the deadly coronavirus, allowing a fragment of normalcy to seep back into our daily lives.
However, it's important to note that while the global health crisis may appear to have eased for now, the pandemic is far from over. Institutions like the World Health Organization (WHO) and the US government no longer deem it as an emergency, a decision that also means that the innovations and adaptations that retailers feverishly developed to survive during the lockdown-ridden year of 2020 will no longer be as essential.
But despite the semblance of a return to pre-pandemic times, the retail industry still carries the indelible imprint of the pandemic in several significant ways.
"Never in recent history has there been a wave as powerful as the pandemic that swept over the retail landscape, leaving an enduring mark," remarks Sanford Stein, founder of Retail Speak, via email. "It cast such a long shadow over retail that it's unlikely to fully dissipate anytime soon, maybe ever."
1. The innovative, hybrid workplace has transformed retail
Long after offices have reopened and companies tightened their leashes on remote work, widespread surveys indicate that the hybrid workplace model has become the norm for many employees in the U.S.
"The most significant impact from the pandemic is the work-from-home culture, resulting in a surge of local or online shopping," offers Lee Peterson, executive vice president of thought leadership and marketing at WD Partners, in an email conversation.
In a survey of over 2,500 consumers by WD Partners, none of the respondents expressed a desire to return to a five-day office week. Instead, nearly 40% have shifted their shopping behavior towards retail businesses located within 3 miles of their homes, and 10% have gravitated towards malls.
Similarly, a Pew Research Center survey revealed that 35% of those whose jobs can be carried out remotely now always work from home, while 41% are on a hybrid schedule. According to consultancy Kearney, the work-from-home trend appears to have stabilized at approximately 30%, depending on the nature of the job.
This shift is spurring a modern-day reenactment of the post-World War II flight to the suburbs, but this time featuring millennials and their families.
"The urban-to-suburban shift has been energized by work-from-home dads and moms," notes Stein. "With this newfound flexibility, they now shop close to home between Zoom meetings instead of during lunch breaks in urban centers."
Also, a notable decline in foot traffic to corporate centers has been observed, as companies reevaluate their leases downtown.
2. The rise of online shopping: The convenient alternative that refuses to fade away
Though brick-and-mortar stores still account for the majority of retail sales, the pandemic-fueled boom in online shopping shows no signs of slowing down. While e-commerce sales are expected to grow by 10% or less in the coming years, their expansion through 2025 will nevertheless outpace the growth of store-based sales by more than double, according to FTI Consulting's 2023 U.S. Online Retail Report.
"The pandemic forced people to shop online, and, once you've tasted single-malt scotch, you're not going back to that swill you drank before!" quips WD's Peterson. "Online shopping is just too convenient, and it's getting easier every day while stores don't bother to attract new customers."
Conversely, the carryover of online retail habits has been unsettling for many retailers, particularly in the grocery and mass merchant sectors, where consumers now anticipate more from their physical shopping experiences.
"Consumers expect a lot more from their in-store experiences now, having grown accustomed to the ease and flexibility offered by digital platforms," explains David Gottlieb, chief revenue officer at Trax Retail, in an email conversation. "They want the ability to interact with stores in new ways, such as searching, filtering, and finding products within the store just like they do online."
3. Inventory management is proving to be a challenge
While there has been a marked improvement in supply chain recovery, retailers are now grappling with inventory management issues. Out-of-stock issues persist, and retailers are still grappling with an excess of inventory due to overproduction during the pandemic.
"AI will play a significant role in creating a leaner supply chain in 2024, eliminating stock that fails consumers and reducing costs," predicts Gottlieb.
The excess inventory is expected to put continued pressure on retailers to offer discounts, particularly in the apparel market.
4. The convenience of BOPIS continues to thrive
Buy online, pick up in-store (BOPIS) services became crucial for retailers during the pandemic and have become a popular, time-saving convenience for shoppers, especially during the holiday season when wait times for shipping can be lengthy.
"Initially, BOPIS might have been seen as a necessary pandemic workaround, but it has transitioned into a convenience that isn't likely to disappear anytime soon," comments Stein.
Retailers like Target are now expanding their store formats to include more backroom space for fulfillment, while others are reviewing the financial viability of BOPIS services, concluding that they are less profitable when compared to distribution center labor.
5. The future of self-checkout seems uncertain
While self-checkout stations became commonplace during the pandemic, retailers are now grappling with growing concerns about shrink and theft, as kiosks have emerged as prime targets for shoplifting.
"Retailers are recognizing that the costs of shrink associated with fewer associates outweigh the benefits of reducing labor costs," shares Gottlieb. "In 2024, retailers may begin to phase out self-checkout services and shift their focus towards loss prevention."
- The government has agreed to invest in research to improve self-checkout technology in order to combat shrink and theft.
- The finance industry is closely monitoring the retail sector's recovery from the pandemic, with stocks showcasing mixed performances.
- In the sports industry, many events were canceled or postponed during the pandemic, but the industry is now innovating ways to create safer fan experiences.
- Space exploration has not been directly affected by the pandemic, but it may face budget cuts due to government priorities shifting towards pandemic recovery.
- The travel and hospitality industry has been greatly impacted by the pandemic, with jobs in labor-intensive sectors like housekeeping and food service being particularly hard hit.
- The policy of mandatory vaccines for employees in certain industries has been a contentious topic, with businesses debating whether it's a necessary measure to ensure workplace safety during the pandemic.
- The pandemic has shifted the focus of the television industry towards news, particularly regarding pandemic updates and government responses.
- The war against crime has been a challenge during the pandemic, with some arguing that increased mobility due to reopening has led to an uptick in criminal activity.
- The retailers that have thrived during the pandemic are those that successfully implemented innovations like contactless payment options and curbside pickup.
- The business community disagrees on the long-term effects of the pandemic on the economy, with some arguing that it will lead to permanent changes in consumer behavior and others believing that it will be short-lived.
- Artificial intelligence has been employed in pandemic research to develop new treatments and vaccines, as well as in retail to optimize inventory management.
- The job market is showing signs of recovery, with many industries reporting increased hiring in 2024, particularly in sectors like technology and healthcare.
