Future of in-store retail

It's been a disconcerting couple of weeks to say the least. The coronavirus went from potential distant threat in Asia to in-your-face pandemic so quickly that we are all still trying to process what happened and adjust to our new lives. It’s not a subtle shift. I am used to seeing low single digit effects on an annual GDP and we are talking about a 24% drop in Q2 alone!

US Real GDP Growth in 2020

Those shifts are felt personally to all of us. In NYC, restaurants are closing and I am ordering groceries from their distributors who are filling the massive food delivery need (thanks Baldor and Debragga Butchers) so I can avoid the lines at Trader Joe’s. It’s just one of many ways that retail has changed and agile businesses are being rewarded, while slower incumbents struggle. But will the shift to restaurant wholesale distribution be a long-term shift or a temporary one? What about all the other shifts we are seeing?

To be clear, there is still so much uncertainty. How long will we be sequestered at home? When we will return to some semblance of normalcy? When will we no longer have to balance any coronavirus fears? I don’t have an answer for you, because the experts forecasts diverge wildly and are dependent on too many factors (treatments, vaccines, herd immunity dynamics, getting to consistent testing volumes).

That said, making bold predictions and taking action in an uncertain world is my job as the CEO of a leading innovator in retail marketing technology. We can look at where we were, see how current behaviors are changing and gleam insights from other countries to make some predictions about more seismic shifts.

eCommerce Will Take Immediate Share, But Long-Term Will Barely Make A Dent

It’s easy to sit a top of the pundit pedestal and declare that the Coronavirus will accelerate the adoption from Brick-and-Mortar to eCommerce. That’s likely true. As Scott Galloway writes:

Scott Galloway

But even with an additional 10-20% acceleration, you are only talking about eating 1-2% into brick-and-mortar’s dominant position in spending. Brick-and-mortar has been dominant overall and is even increasing more than eCommerce on dollar basis.

Dollar Increase in Brick-and-mortar and eCommerce

For grocery spending, only 4% is done online according to Nielsen, so interestingly the greatest current shift is also the area of least penetration. The surge will likely move that number considerably to the 4%, but still a small percentage of the whole.

But here is the rub - delivery orders are far less profitable than in-store orders in a category with already razor thin margins. It’s not clear whether this will be a positive or negative to earnings over the long-term unless the pricing changes and consumers are willing to pay additional for delivery, in a world where consumers are flocking to discounting and value. That’s one reason Buy Online Pickup In-Store or BOPIS is popular with retailers. It’s most of the consumer benefit of eCommerce without the additional costs of delivery. BOPIS will be a long-term winner, especially if used to increase in-store sales as well (see below).

The reality is that eCommerce customers are more expensive to acquire, spend 45% less, return items at 4x the rate, and are less profitable. Any surge in eCommerce will require grappling with the margin implications of the shift, and if the price is to go up, demand will go down. For more on this, I suggest that you read our popular and extensive analysis, The Case For The Bright Future of Brick-and-Mortar Retail.

In-Store Customers Spend More

Coronavirus Shift: Grocery Demand Skyrockets in $100b Q2 Food Shift

Let’s start with the most glaring shifts - grocery and essential items. With fear of supply chain shortages, consumers began panic buying, sometimes to great ridicule, but it is important to note that there haven’t been meaningful food shortages or supply shortages in Western countries, at least yet.

That said, the spend numbers have been astronomical. In the two weeks ending on March 22, U.S. grocery sales surged 83% from the year-ago period, accelerating significantly from the 12% year-over-year growth in the prior week. Drug stores have seen a similar trend, with sales increasing 43% in the two-week period ending on March 22. 

Mass market supermarkets have fared better than specialty and high-end grocers like Whole Foods.

Grocery Store Traffic Jump

And with a large, double-digit surge in unemployment, expect Walmart, Target, Aldi and discount grocery like Dollar Stores to gain share.


According to Barclays analyst Karen Short, $100 billion in food sales from the restaurant to retail channels in the second quarter alone, but it is important to note that both food price deflation and broader economic effects of the pandemic could weaken overall demand in the long term.

Additionally, we are seeing food spending beginning to normalize across categories in Japan as new cases flatten, people return to public life on a limited basis, and many gradually shift back to just what’s needed from week to week.

Grocery Sales Normalize as New Covid-19 Cases Subside

While what we are seeing is an immediate and needed shift now, long-term we expect restaurants to re-emerge as fundamental to long-term consumer and social behavior as soon as we release ourselves from our social distancing shackles. The bigger question may be how long that might take, given the extraordinary losses so many restaurants will take weathering the storm and how many are likely to go out of business. Massive levels of capital will be needed to restart new restaurants among the ashes of the old ones bankrupted by closure and an already fragile business model.

Hot take on a disruption opportunity: we might see the rise of more virtual kitchens without traditional restaurant storefronts in urban areas with lower costs of commercial real estate and lots of used equipment flooding the market.

Coronavirus Shift: Hospitality, Auto and Fashion Hurt Most, Pets Remain Strong and Electronics Surge


Target, which has historically struggled in grocery, has seen its grocery business explode. Essential and everyday goods sales are up 20%, but their higher-margin categories like clothing are down 20%, which is why their stock dropped 7% when they announced the spending shift in March. Everyone is worried about the essentials now, that it’s hard to even think about the longer term.

Pets continue to be a recession-proof category, as people want to take care of their treasured companions. In fact, pet spending has increased considerably according to Criteo. At Perch by Raydiant, we are about to launch a major pet initiative and our conversations have barely been impacted by the Coronavirus. The only difference is we have to install outside of normal store hours given the increase in demand.

Pet Supplies Climbed Coronavirus

Meanwhile, electronics has seen a surprising strength based on the sudden shift to educate and occupy children at home and enable home offices. Chromebooks outpaced Macs for the first time and are sold out at many retailers.

Electronics and WFH Purchases Are Up

Internationally, we are seeing slightly different dynamics over time, with electronics being affected negatively, indicating a longer term trend about spending confidence.

Across every global market, fashion is the among the hardest hit with the top reasons being other priorities, no need for new clothing and inability to have a physical shopping experience. The return to physical shopping will be critical to the entire fashion ecosystem including department stores, and we hope it happens sooner rather than later.

Global Category declines from coronavirus

Coronavirus Shift: eCommerce, Delivery and BOPIS Surge and Struggle

The closing of restaurants has forced America to cook for itself, greatly increasing demand just as “Buy Online Pickup In Store” (BOPIS) has been launching, which further feeds into our desire for social distancing. With BOPIS, retailers can both maximize the value of their store footprints as distribution centers and provide online ordering convenience and margin protection. Retailers that invest early in technology are often best able to adapt to changing needs. Walmart and Target have been big winners here, as shoppers online flock to value rather than experience.

In fact, according to the Forrester Report - Omnichannel Mastery: Optimize Fulfillment and Engagement, the number one reason consumers use BOPIS is to avoid the delivery charge.


And ironically, the main business reason for retailers for BOPIS is to get customers to also go into the store and buy other things. This points to the necessity of in-store retail for the long-term. For serendipity and product discovery and maximizing the value of the shopper. And of course, I always forget something on my order and need to make a second run.


96% of grocers offer home delivery now so additional winners are the all the delivery services that support the eCommerce or delivery at home grocery channel (Instacart, Postmates, etc) and grocery eCommerce players (Amazon, Walmart, FreshDirect, Peapod, etc.). Daily app downloads for Instacart, Shipt, and Walmart increased 218%, 124%, and 160% from February to March, according to app-data analytics firm Apptopia. Instacart also announced plans to hire 300,000 more full-service shoppers in the next three months, an estimated 150% increase from the current level.

However, this is an unexpected surge and stress on the system. Amazon is struggling to keep up with its grocery demand and some grocers like H-E-B have created a special order delivery service just for high-risk customers like seniors. To keep up with this demand spike, Amazon has committed to hire 100,000 temporary workers and Walmart plans to hire 150,000 new workers and Instacart plans to hire a remarkable 300,000 workers.

While some are positing that Coronavirus could be the spark for robot delivery, the timeline for adoption and regulation seems longer than the likely return to more normal conditions.

Coronavirus Shift: The Role Of Retail Workers and The Gig Economy

The firing in one category and surge in hiring has put the gig economy and workers’ rights more in the national conversation. For the near-term, it’s a secondary rumble, as we focus on getting a grip on public health, personal safety and economic impact. Long-term, the questions of workers’ rights, benefits for gig economy workers and how we treat people in fluid economic and social environments will have to be addressed. Retail categories with large employee base exposures may be materially affected. It was unclear whether delivery models were sustainable before Coronavirus, and sudden scale and shock isn’t going to solve the fundamental issues.

Alberstons, the nation’s second-largest grocery retailer that also operates the Safeway, Jewel-Osco, and Acme chains, is granting a $2 per hour “Appreciation Pay” bonus to its 230,000 employees’ checks through March 28 when it will reevaluate the situation. At the same time, US unemployment is scheduled to rise double digits this quarter, which may create access to cheaper labor. Automation is threatening whole swaths of the back-of-the-house retail industry and Coronavirus will only further encourage less personal interaction in the front of the house, including interactive retail displays that provide information, education and entertainment. From healthcare to 401ks to payroll taxes, the US will have to deal with the systemic shifts from a W2 to a 1099 economy.

Coronavirus Shift: Acceleration Of Cause-Based Marketing and Personalization Intelligence

Coronavirus has forced everyone to tighten their marketing budgets and at the same time relook at all of the messaging. Different demographics are reacting quite differently and so those retailers and brands that have already invested in CRM and first-party data to personalize messaging. Retargeting on out-of-stock items was inconvenient in the past and unacceptable now. The stakes are higher.

Consumers are more price-sensitive than ever, and will not react well to unexpected costs and “gotcha” type charges. Banks are waiving overdraft fees, and some in the car industry are offering 0% financing for up to 7 years! Value-based marketing will continue to be powerful, both in an acceleration of the existing hollowing of the middle and in empathy towards consumers who are hard hit.

Plugging into empathy will be key. Cause-based marketing was already critical for reaching Millenials and Gen Z. Now it will spread across demographics. Consumers are cheering on conscientious brands who are shifting production to help the COVID efforts. Brands as diverse as Eddie Bauer and  Prada are making protective clothing, LVMH’s perfume division is making hand sanitizer and Tesla is producing ventilators, although apparently the wrong type needed by medical staff.  Navigating these times can be a double edge sword.

56% of consumers indicate that they like to hear how brands and retailers support their communities.  “Brands that are getting this right are finding ways to bring people together and show how they can support the greater good during times of crisis. We also do advise that retailers should be segmenting their COVID-19 messaging based on demographics as we’re finding many differences in attitudes and behaviors,” said a spokesperson for 4A.  

One marketing tack that has resonated is the celebration of all the workers keeping retail going in these trying times.  While we are social distancing or sheltering in place, millions of workers are ensuring our food supplies are running smoothly.  Amazon has committed to hire 100,000 temporary workers and Walmart plans to hire 150,000 new workers and Instacart plans to hire a remarkable 300,000 workers.  But this is a temporary surge, flooding to the front-lines to keep supply chains running.

While workers challenge their employer to provide greater safety, some retailers like Albertson’s have put in place an extra $2 per hour during the crisis as having Walmart and Target, and CVS is offering $!50-500 bonuses.   Mark Cuban is paying his arena’s hourly employees even as they don’t work. Treating your workers right will have lasting impressions for communities’ affinity to them for the long-term. Treating employees as ambassadors of your brand is critical, doubly so if they are your consumers.

Another effective marketing strategy has been providing support to first responders.   CVS has opened drive through testing for first responders.  Giant Eagle has special shopping hours for them. Hero recognition in our communities could be a lasting shift as we learn to do this both locally and at scale.

Coronavirus will make us all question our relationship with retailers. Those who step up at this time will be remembered lastingly. Those who accelerate the shift to cause- and community-based marketing will be rewarded.

Coronavirus Shift: Contactless Payment Thrives

As shoppers look to touch and interact less, contactless payments are thriving. According to a Bain study in 2018, credit cards are the most popular form of payment in the U.S. (80% of consumers use them), followed by cash (79%), and then debit cards (59%). Apple Pay, in contrast, is only used by just 9% of the population. 

“Despite issuers pumping out millions of contactless cards and more stores accepting Apple Pay, U.S. consumers have just shrugged their shoulders while the world embraced contactless payments. The question has always been ‘what will get consumers to change their payment behavior?’ Given coronavirus fears, I think we now have the answer,” said Demitry Estrin, founder and CEO of the Futurist Group, a financial services and information management consultancy.

Early research already shows an 8% shift from “I don’t need this” to “Basic, I need this.” Expect it to jump much further over the coming months.

Coronavirus is shifting consumers view on contactless cards

63% of transactions are taking place at contactless-enabled merchants. Yet several notable many merchants are using contactless to promote their proprietary wallet apps. Walmart and Kroger for example only allow contactless payments through their apps and neither commented on changing the policy, while Target supports contactless payments both through Apple Pay and their proprietary wallet and loyalty app.

If Denmark is any indication, contactless payments will continue to grow rapidly using Coronavirus as a catalyst. Europe as a whole is currently reducing limits on contactless payments to which force the shopper to add their pin for security, which the US has avoided completely.

the rapid rise of contactless in Denmark

Early “Post-Coronavirus” Retail Indications From Recovering Countries

What will happen to retail after Coronavirus? It's too early to tell, but one indicator is to look at China which is about 1-2 months ahead of the US. It would be inaccurate to call the current period Post-Coronavirus, because there are still many restrictions, consumer and personal behavior is still heavily influenced by Coronavirus fears, and the data set is very fresh. In preparation for this future, Perch by Raydiant is deploying our line of anti-COVID self-cleaning touchscreens for retail.

According to a March 2020 YouGov survey, 85% of internet users surveyed in China said they still have avoided crowded public places over the past two weeks. That said Chinese manufacturing and purchasing indices have returned to expansion, which is an extraordinary sign of strength.


At the same time, as retail has reopened, luxury shoppers are returning in droves, forming lines around Chanel store re-openings. Ferragamo projects net growth this year. That said, categories are responding differently.


At the same time as category responses differ, so will different demographics. According to a survey by Chinese Renaissance Bank, people between the ages of 18 and 35 were thinking about tightening their budget, but people over the age of 45, as well as students, showed greater confidence in spending.

Of course any reaction here in the US will depend heavily on how long the coronavirus forces us to stay at home and how deep the impacts will be to employment and consumer spending power. While the CARES Act is unprecedented for the modern era in its scale, there are indications that the allocated moneys will take longer than projected to get in the hands of consumers and there are talks of a need for a large public works plan on the scale of the Marshall Plan to put America back to work.

The reality is that being a couple weeks on the back-half of peak infections and lock-down is too early to make substantive conclusions from abroad. This is an area we will continue to monitor closely. And hopefully, truly hopefully, we will find ourselves on the back half of our own peak infections here in the US and return to some semblance of normal life including normalized retail spending behavior.

I hope this has been helpful in aggregating the key data we are seeing. Just like The Case For The Bright Future of Brick-and-Mortar Retail, I will be updating this regularly as new data comes along. Let me know any good sources or your thoughts by reaching out to me on Twitter or LinkedIn.

Be well. Wash your hands and don’t touch your face.