What Will Retail Look Like Post COVID-19

In just two months, COVID-19 has already had a devastating impact on the retail sector, leaving many wondering what the road to recovery will look like. As the spread of the virus widens and data on new trends in consumer behavior continue to emerge, many retailers are left having to adjust their existing business models. Can these new patterns in consumer habits serve as indicators of what is to come for the retail industry?

Retailers around the nation have never experienced a revenue impact such as that caused by this pandemic. The ease by which the COVID-19 virus transmits, paired with its high fatality rate, has caused the world to come to a halt. With retailers that provide "essential" services as the only exceptions, almost every mall and shopping center in the country has indefinitely closed their doors to the public. Though this "pause" has already ruined numerous businesses, some retailers have adapted to what may become the ‘new normal’. The real estate industry can learn from these retailers.

Fitness retailers such as Nike and Lululemon have been able to weather the COVID-19 storm. For the past couple of years, other companies in the fitness sector, such as Peloton, have successfully promoted the idea of "at-home fitness," and have made technology investments towards these ends. By enriching their digital experience and offering free online workout classes to the public, these retailers have thus far been able to benefit from this workout-from-home mentality during the coronavirus outbreak. Many have also focused on tailoring their digital platforms to support online sales better while they wait for brick-and-mortar stores to reopen.

Gyms and fitness chains large and small that find themselves struggling to stay afloat should consider taking a page out of Nike's playbook. Though most gyms are fixated on—and sell—the experience that in-person workouts provide, the uncertainty of when stay-at-home orders may be lifted across the nation should prompt gyms to reconsider enhancing their digital capabilities by offering workout classes and personal training sessions online. It will be interesting to see if the way people choose to workout will change post-COVID-19. Will consumers stick with the at-home workout concept, or instead vent pent up demand to step into a gym again once stay-at-home orders are lifted? The likely answer is a bit of both, and the fitness sector should prepare for the possibility of having to offer creative methods of engagement and added value to their memberships to get their ‘gym rats’ to return.

Both do it yourself (DIY) and home improvement retailers seem to be faring well. Considered ’essential businesses,’ stores such as Home Depot and Lowes have remained open to customers during the outbreak. Retailers such as Target also have remained open for business. Still, individual stores in this category seem to be experiencing widely varying impacts on foot traffic depending on their location in the U.S.  For example, in suburban America, consumers are visiting these types of retailers significantly more than shoppers in urban areas where the mounting coronavirus cases continue to intensify. It will be fascinating to see how retail chains account for these sales variations in their projections for the coming months.

It's no surprise that supermarkets around the nation are experiencing continued growth, despite the pandemic. While a certain category of grocery stores such as Trader Joe’s and Whole Foods Market are struggling since they typically thrive in urban areas where the impact of COVID-19 are felt the worst, more traditional markets like Kroger and Aldi are not. Besides the fact that essentials such as food and medicine are not items that a consumer can forego for long, old-fashioned grocery stores also provide discounts and value products to their customers which are enticing to shoppers. Additionally, as unemployment rates continue to skyrocket, value-add benefits will be an essential way for traditional stores to continue to captivate consumers. Grocery delivery services and ecommerce are also expected to continue trending post COVID-19. They have also played a significant role in helping grocery stores stave off the impact that the outbreak has had on other food industries such as restaurants. Over the past decade, delivery services have had haltering success in the grocery and prepared food segments. But those grocery stores which have embraced this sales ‘channel’ during the pandemic appear to be best positioned to survive the long haul.

Precisely what life will be like after this COVID-19 induced nightmare ends is still uncertain. However, there are valuable lessons that retailers and landlords can take away from the crisis. Future tenants should not be surprised if, before extending a lease agreement, a landlord requires that the tenant demonstrate that it can manage in the event of a disaster. For example, with respect to a clothing retailer, a landlord might demand that a retailer have online sales options which could supplement business should the stores be required to close again. For restaurants, a landlord may question what alternatives are offered, such as delivery or curbside pick-up. For a grocery tenant in a shopping center, the Landlord may re-evaluate the tenant is large enough to help keep the center anchored in the event of a future pandemic or disaster.

Though it is unlikely that we will experience a pandemic of this magnitude anytime soon, retail businesses and landlords must take a step back and reevaluate how they can better position themselves to take on any business interruption and remain viable.