Post COVID-19 a new reality for retail

Marina Vaganova

By Marina Vaganova, Business Director, Russia

Posted on

It is hard to fully appreciate how dramatically the world has been changing over the past few months. Obviously, it is hardly possible to provide clear predictions for any sector at this point of time. However, it’s vital to start reconsidering how businesses will still be able to add value to retail consumers once the pandemic ends.

  • What will this new reality mean for shopping malls and retailers when restrictions are lifted?
  • What tools may potentially help shopping centres begin recovery after opening?
  • How can they best respond to the rapid change in consumer habits, resulting from an extended lockdown?

Bearing in mind all the differences and specific features of regional markets, it is interesting to examine what is happening in newly reopened shopping malls in the US and Europe.

There are five key trends, which we believe will affect the operation of shopping centres in the immediate future:

1. An increase in personal security standards – a higher level of customer control will lead to a decrease in traffic

2. An increase in store safety regulations – a new approach to shopping experiences in the sectors where customers touch or try products without purchase, and products need to be returned to the shelves

3. A decrease in customer mobility – a switch to visiting local shopping centres will lead to an increasing relevance for communities

4. An acceleration in the shift to online retail, with a 10% increase

5. New business models – retailers depending on click and collect and shopping centres offering online shopping portals.

1. Increasing personal security standards - will masks and temperature checks become the norm?

Straight after easing the lockdown and reopening their shopping malls in the USA, Simon shopping malls, introduced a higher standard of security control which includes:

  • Limiting working hours: from 11:00 to 19:00 Monday to Saturday and from 12:00. to 18:00 on Sunday, to allow for overnight cleaning and sanitation
  • Decreasing the amount of seating inside the mall
  • Introducing additional signage and navigation to control the traffic flow
  • Obliging all shopping centre visitors and employees to wear personal protective masks

Looking at these measures, it is obvious that any toolkit for attracting customers to shopping centres will work only if the needs of shoppers are resolved efficiently and securely. It’s going to be important to build shopper confidence that mall owners and retailers are taking their responsibilities very seriously in terms of creating and maintaining a safe, clean environment.

We expect there to be the need for a high provision of new navigation and signage indicating special measures, such as food court floor marking, signs for disinfectant locations and social distance markers in public areas.

Temperature checking of customers at the entrance, provision of medical masks and other self-protection, plus limiting number of customers in store – all these new shopping experiences will become part of our daily shopping routines.

As a result, footfall and the number of staff will drop and may never return to previous levels. You can forget about Black Friday with its unlimited number of customers queuing up to enter the mall! Malls will have to accept their responsibility in preventing any excessive queuing inside or outside.

Pick-up points or a secured service centres with an electronic queueing system will be the new norm. Customers can choose the exact time and date convenient for his or her visit. As a result, shoppers who do not want to risk doing traditional shopping or those who don’t want to wait for a home delivery, will choose this new way of shopping.

Retail post COVID

2. Increasing store safety regulations - new rules for merchandising and an increased use of digital

It’s fair to say that more complicated issues regarding personal safety will need to be addressed within retail stores themselves.

The main problem is minimising tactile contact with surfaces, including goods.

Therefore, we predict the need to reconsider merchandising principles, especially on shelves with small goods. In fashion retail, for example, developing a manual with rules for returning goods to shelves is important. In some US shopping malls a new recommendation is to adhere to the rule of returning goods to shelves no earlier than a day after the customer has tried it on.

With higher safety and hygiene demands, we predict the increased use of digital signage to help avoid physical contact with products.

A good example is digital mirrors – interactive mirrors that enable customers to ‘virtually’ try on different outfits, reducing the need to move around the store to choose items and the need to physically pick them up until a purchase decision has been made.

Digital displays will become even more significant triggers to action, with relevance to both shopping centres and retailers. Shopping centres will take an active role in organising cross-promotional activity to create both beautiful storytelling and valuable product offer benefits.

3. Decreasing customer mobility means a move towards 'shop local'

We forecast that consumer desire for convenient and quick purchases will be more relevant than ever. First, it’s highly likely that traffic will become more and more localised and shopping malls will have to understand how to stay ahead of their target demographic in the most relevant way: know their catchment area, target audience segmentation, their issues and desires.

And most importantly, they will need to clearly understand what their target audience is happy to keep purchasing in their physical space.

Of course, people may continue visiting larger shopping malls located further from home, but we can expect a reduction in the number of visits per consumer and a likely increase in the average receipt value per visit.

For this reason, driving satisfaction and loyalty will be vital to neighbourhood malls. This is a window of opportunity that has appeared due to lockdown and it will be fully utilised by shopping centres. The battle for local communities will become even stronger.

The core of shopping centre marketing strategies in the first year and a half after pandemic will be marketing activities aimed at attracting their local communities.

4. Accelerating online sales

Online sales have really taken off during the physical closure of stores. Retail chains that quickly transformed into dark stores (large retail outlet that is set up for click and collect) were able to retain 30%-50% of sales in April.

They were able to attract customers who had previously resisted online shopping and those did not want to shop under the new restrictions. Many of these new online shoppers are likely to continue making purchases online.

We predict that on average retail online sales will increase by 10%, increasing overall share from 10-15% of all sales.  Under normal market conditions, this shift to online would have taken much longer.

5. New business models for retailers and shopping centres

Retailers

However, after reopening their physical stores many retailers will not be able to deal with the increased amount of online purchases and will have to have to adjust their business models. Not every retail chain has a flexible central warehouse to quickly and easily convert into a ‘dark store’.

Retailers can profit from the increased demand for online by adapting their traditional stores to allow for click and collect. In this case shopping malls can help their tenants by providing them with more storage areas. For example, with decreased traffic flow, empty parking spaces can be transformed into warehouses.

Shopping Centres

The need for shopping centres to create online marketplaces is fast becoming today’s necessity, rather than tomorrow’s vision. An single online portal which cuts across all retailers within their mall, creating a seamless online shopping experience for customers, generating sales for their retail tenants and building loyalty for mall owners.

In Russia there are already a few shopping centres introducing their own online marketplace models: Rio by Tashir and MEGA. These are still quite expensive and challenging from a technical point of view, putting them in the realm of big property groups at the moment.

However, we predict the emergence of some out-of-the-box solutions for online marketplace developments in the near future. This will enable medium and small players to also undertake digital transformations over short period of time.  But that’s another subject – maybe one for my next blog?

Find out more

The challenges ahead are not insignificant but as always, it’s those who adapt that will thrive. We work with stores such as Rive Gauche in Russia and entire shopping malls such as the Mander Centre in the UK, to deliver innovative retail solutions in many different parts of the world.

Email me for an informal chat on how we might be able to help you to ensure that you are ready for the next chapter in retail.

This article was originally published in Russian on the specialist Real Estate website, RBC: Read the original article in Russian