2020 Q3 in retail: What happened yesterday, what to expect from tomorrow
Discover some highly predicted 2020 retail trends. Besides the expected forecast for the continuous rise of the digital, which was no surprise, the 2020 pandemic took this industry by surprise.
Most predicted Retail trends for 2020 were almost all wrong. Besides the expected forecast for the continuous rise of the digital, which was no surprise, the 2020 pandemic took this industry by surprise.
When we look back, according to Delloite, 2019 had the slowest rate of spending growth in the last decade. Retail had a large-scale business restructuring worldwide: 85.000 jobs were lost and almost 10.000 stores closed their doors. With this setback, online sales faced a continuous growth of up to 20% of the total sales, with predictions saying that the next year will follow the same trend.
In Germany, for example, KPMG's Trends in Retail 2020 focuses on three important factors that were thought to shape the industry in the future: the mobile internet, multi-channel, and demographic change. They said that 'while online retail continues to grow dramatically, brick and mortar stores will remain the most important point of contact between retailers and consumers for the foreseeable future'.
But last year's challenges did not prepare the industry enough for the unforeseeable pandemic that hit strong in 2020. As the worldwide economic downturn forces businesses to face difficult decisions, a lot of companies had to close their brick and mortar stores in Q1 and especially during Q2 as the COVID-19 situation evolved.
Q1 and Q2: closings and uncertainty were the 2020 reality
Depending on their strategy, some businesses closed their physical locations temporarily and started investing in their online presence, but lots had to permanently reduce locations to at least keep the most profitable ones open. Unfortunately, a considerable number of companies, especially small businesses that did not have enough funding went into bankruptcy or even completely out of business.
Here are five retailers that had to make changes to their activity during 2020 according to Offers.com:
Bed, Bath & Beyond, who is selling home goods through brands such as Buy Buy Baby, Cost Plus World Market and Decorist. In January, before the pandemic, the retailer announced it would close 60 of its over 1,400 locations in 2020. But due to the pandemic, the retailer closed even more of its stores. They are since focusing on their online store and is are expanding online sales, pickup in-store (BOPIS) in over half of its locations as it reopens stores.
H&M, one of the largest clothing retailers in the world with more than 5000 stores worldwide. The business is dealing with losses that made the company announce in June that it would be permanently closing 170 locations in 2020, a higher number than they originally planned.
Starbucks, the popular café chain, had to temporarily close locations in response to the pandemic. They closed 400 of its company-operated locations in the U.S. and Canada. But they recovered quickly as they plan to re-open 300 locations in the next 18 months.
Walgreens is one of the largest pharmacy chains in the U.S. In 2019, the company announced it would be permanently closing 200 locations due to the pandemic. The company operates over 9000 locations in the U.S.
Inditex operates brands that include Zara, Zara Home, Massimo Dutti and Pull&Bear, that are all well-known clothing and home goods retailers. In June they announced that it would be closing to 1200 locations across all its brands and focus on its online platform.
Q3 and Q4: what to expect from tomorrow?
As unpredictable as the situation was for the first two quarters of 2020, experts try to foresee what the rest of Q3 and finally Q4 will bring to retailers.
Three trends for the retail industry of tomorrow:
1. Multi-channel approaches and automated supply chain
Now more than ever it is clear that store-based retail is on a descending trend. Although names like Starbucks and H&M are expected to start reopening brick and mortar locations and continue their growth, the days when online stores weren't a necessity are long gone. More than that, platforms like Amazon and eBay will continue to grow and generate sales for all-size companies. Such solutions tend to point towards an automatization of the entire supply chain as leaders in the industry start investing in optimization and automation solutions.
2. Shifts in consumer behaviour demand flexibility and availability
Even before COVID-19, the consumer behaviour and the migration towards digital solutions made retailers rethink the way they do business. The crisis has severely impacted companies and rushed them towards a digital approach, but now that the consumer is more home-centric and spends more time indoors than ever, sellers must adapt to the new paradigm and cater to the new lifestyle of the consumer. Increased availability and keeping the lights on 24/7 are paramount for competitive retailers.
3. Sustainability is becoming the area of focus
Sustainability standards must be maintained along the entire supply chain. This will be challenging for the retail industry with complex supply chain and a growing dependence on scarce resources. Soon enough, ecological and social sustainability will not be a strategic move, but a must for those who want to stay competitive on the market. Therefore, investing in a strategy to go sustainable is and will continue to be a growing trend.
We think it is safe to say that the retail industry faces immense challenges in the upcoming timeframe. Not only demographic and consumer behaviour changes are factors, but the overall uncertainty in what will come next will make businesses change faster than anyone could have thought.
As retailers start changing the way they do business, they will have to rethink what their priorities are and define the commercial model required to deliver it and stay on the market even in the most uncertain times.