COVID-19 represents a sea change for retail services that will alter the customer experience for years, perhaps decades to come. What at first appeared to be a temporary aberration is taking on a measure of permanence. Some have even resorted to reframing the popular aphorism as the new “abnormal.”
Key to the impending transformation is the concept of space and its relationship to traditional business models. For example, developers will opt for more open areas and install antibacterial ventilation ductwork within buildings, among other things—all of which will push up their costs. It’s very possible that prices will rise or profit margins shrink—probably both, and on a secular basis faster than increases in productivity.
Rate-of-return expectations by investors may temper when greater space requirements and wages for front-line workers—long-overdue—increase. Since the 1970s, most of the benefits of rising productivity went to investors and senior management, while employees got short shrift. Growing unrest appears primed to boost compensation for workers most at risk.
With so many emerging trends, it’s hard to know where to begin. Restaurant and public space design will become more, well, spacious. Take-out, drive-thrus and drive-in movies will win big. In some ways, fifties’ lifestyles will make a comeback.
Large venues and modes of transport will no longer pack patrons in like sardines to maximize revenue. Drive-up appeal will factor more prominently as a way to draw customers to the curb, while parking lots convert to pick-up points. Guests will insist on more sanitary hotel rooms and Airbnb properties. Additional bankruptcies await retailers than cannot adapt.
The reworking of the retail industry is taking place in earnest, as stores convert to warehouses, and logistics networks morph to accommodate residential delivery. If brick-and-mortar locations can shift to online-only presence, they will close or convert to stockroom and shipping hubs.
Wholesale purveyors of commodities such as milk, toilet paper, institutional food services and other items designed around bulky or high-volume distribution to restaurants or office buildings will adjust to accommodate household and individual-purchase quantities, or else significantly reduce their scale of operations. Supply chains will become more local to avoid disruption and decrease vulnerability of viral spreads from this and future pandemics.
Supply chain theory taught in business schools and practiced by consulting firms will shift its emphasis from near-obsessive focus on cost and efficiency – no matter how geographically far-flung—to resilience and reliability. They will advise organizations to retain larger buffer stock quantities, particularly essential dry goods, non-perishable food, hand sanitizer and surgical masks. The government will step in for more expensive items where the private sector has little incentive to maintain substantial inventories such as ventilators.
Welcoming concierges will instruct and direct at store entrances, subjecting visitors to scans or sterilization. Motion and voice-activated sensors will provide guidance and dispense information from product shelves. Smartphones will further integrate with the retail experience. Plexiglass shields will abound, and sanitary supervisors will make regular rounds. Fewer displays will reduce clutter on showroom floors.
Hard hit venues will continue to struggle, such as nail and beauty salons, bars and other close-quarter businesses. As socializing and exchanging gossip in the twenty-first century moves from the physical to virtual realms, things may never be the same again. Avoidance of close contact by non-family members will establish new social norms, new etiquettes.
Crowded locales of humans in proximity with animals sparked previous pandemics—the threat of more in the future seems destined to alter buyer behavior for the long haul. If the joy of the retail experience diminishes, more circumspect behavior by consumers will result, implying a completely different meaning for the shop-til-you-drop culture.
Physical distancing—once thought of as the refuge of the aloof, detached or unsociable—is now positively fashionable. Every economic upheaval leaves its mark. In this instance, COVID-19 will overhaul supply chains and buying patterns—and even the nature of human interaction—much farther into the future than anyone ever imagined.
About the author: Thomas Tunstall, Ph.D. is the senior research director at the Institute for Economic Development at the University of Texas at San Antonio. He is the principal investigator for numerous economic and community development studies and has published extensively. Dr. Tunstall recently completed a novel entitled “The Entropy Model.”