Reopening Retail in 2020: Insights From 400+ Brick-and-Mortar Operators [Research]
At the end of 2019, how many brick-and-mortar retailers talked about their strategies to reopen after the worst global pandemic of the last 100 years? Answer: absolutely none of them.
The concept that brick-and-mortar stores would have to close their doors to avoid becoming vector points for a deadly virus never entered anyone’s mind. Why would it? Retailers were far too concerned with customer engagement and supply chain management to entertain wild fantasies of global shutdowns. Then, the world changed.
After months of chaos and untold numbers of closures, the retail industry has finally begun to reopen. Though stores only shut down for a short period of time, the world to which they return looks vastly different than the one they left. Many stores remain desperate to reopen yet unsure about how to do so, what the rules will be, and whether customers will return with them.
We wanted to quantify retailers’ concerns and learn more about how stores have adapted to the stress of the pandemic and its economic fallout. What are retailers doing to prepare? What worries them the most? What do they believe the future holds for their businesses?
To answer these questions and more, we surveyed 400 brick-and-mortar retail business owners in the U.S. Our survey respondents ran the full spectrum of the retail shutdown experience: 56% were closed by government order but preparing to reopen, 29% were closed but had reopened recently, and 14% remained closed and were not sure when they would reopen. We believed this broad range of experiences would help us paint an accurate picture of the retail reopening landscape.
Commercial real estate is poised for a massive shift
After being forced into an uncomfortable situation, 29% of respondents now plan to close their physical locations to go online-only, while 14% intend to downsize.
Curbside pickup and delivery options are now permanent
During the pandemic, 21% of retailers began offering curbside services, and 31% started offering delivery. Most who added these services intend to keep them.
In-store experiences remain a vital differentiator
When we asked where retailers would focus next, 41% said creating better experiences would be their top priority upon reopening. The majority of the survey group (85%) believed in-store experiences would be important to their reopening success.
Many brick-and-mortar retailers relied on e-commerce to survive the pandemic
Surprised? Don’t be. Physical stores often use e-commerce to expand their offerings. In our survey, 43% said they could have survived without expanding into e-commerce, but 26% said the move saved their businesses and 29% weren’t sure whether they would have made it on their own.
Retailers are prepared but have concerns about compliance
Retailers believe they can serve the health needs of customers and employees alike, but they don’t know whether local regulators will agree. Of our group, 75% feel prepared to reopen, but 34% worry about compliance.
New tech and tools will debut during the reopening
Better tech mattered before, but with new customer expectations developing, 58% of respondents said they are considering investments in new tools for reopening.
This overview paints a picture of a confident, capable group of retail business owners who are nonetheless concerned about the state of their market base and uncertain about their futures. Let’s take a closer look at how retail business owners plan to approach the great reopening.
Step 1: Pandemic Response Measures
Brick-and-mortar retailers did not have the luxury of foresight. The pandemic swept across the world in a matter of weeks, leaving shop owners to fend for themselves as they struggled to make sense of continually evolving regulations and advice. Despite the odds, retailers managed to implement several changes with both speed and consideration for the people in their stores. Our research found the most popular changes to be these.
1. Total Physical Store Closure (51%)
2. Partial Physical Store Closure (31%)
3. Layoffs and Furloughs (31%)
4. Increased Investment in Ecommerce (31%)
5. Limited or Reduced Store Hours (26%)
6. Curbside Pickup (21%)
7. Enhanced Cleaning and Sanitary Procedures (19%)
After the pandemic ends, stores must woo customers by continuing to follow best practices for health and safety. Most commonly, store owners expect to limit the number of employees per shift (36%), but many stores also expect to invest more in their websites (24%) and to continue offering curbside (17%) and delivery (14%) services. Fortunately, only 12% of stores expect layoffs to become permanent.
E-commerce played a critical role in COVID-19 survival for several businesses. When physical stores closed, many local options only scraped by because they were able to pivot and generate revenue online. Our research found that 78% of stores already had websites before the closures began, while 22% did not. As stated earlier, 26% believe they would not have survived this long without e-commerce options, while 29% were not sure.
In this study, 45% of retailers claimed their online sales accounted for less than 20% of their total revenue prior to the pandemic. The next largest group, 30%, said they made between 21-40% of their money online. Only 10% said they earned more than half their revenue through online sales, indicating that the large proportion who shifted to e-commerce did so quickly and out of necessity.
Retailers deserve praise for their response to the pandemic, but praise alone will not keep stores open for long. As the world begins the uncertain process of returning to restaurants, shops, and events, retail locations must focus on welcoming in-store experiences that complement a more online-heavy approach.
Step 2: Reopening Preparations
Are businesses truly prepared to reopen? Do retail owners see customers returning in droves, or do they believe that the reopening process will take a long time to return to comfortable sales levels? We wanted to know, so we got the answers straight from the source.
Three-fourths of retailers feel prepared to reopen. The remaining quarter do not feel prepared. Their reasons vary from the financial to the regulatory, but for retail stores, the immediate future remains uncharted territory.
Retailers navigating those uncharted waters have three primary concerns. First, they worry about complying with evolving regulations (34%). Next, they don’t know whether they will see enough customer demand to stay open (24%). Finally, they anticipate problems with their supply chains (19%).
Physical stores exist as commercial real estate, and retailers expect to see (or to create) some big changes in that industry during reopening. As of May, $32 billion worth of commercial property loans were in “special servicing,” a form of financial relief due to business hardship. Our research found that 29% of retailers plan to close their stores to move fully online, while 14% plan to downsize. Of those staying put, 29% expect to remodel to encourage social distancing, indicating a belief that personal boundaries will remain a customer priority.
Retailers know they can’t just announce reopening and expect customers to flock back to their stores. Buyers will continue to shop cautiously. To attract traffic, 41% of respondents said they plan to focus primarily on creating unique experiences. With 86% of retailers believing in-store experiences will be critical to their success, it should come as no surprise that our respondents want to improve theirs. As our State of Consumer Behavior 2020 report proved, people will continue to shop in physical stores, but only when those stores give them good reason to do so.
Despite significant challenges, most retailers in the survey maintain a positive outlook about reopening. Our results found that 22% believe sales will surpass pre-pandemic numbers, while 58.5% believe sales will be the same or slightly lower. Only 14.5% expect a major dropoff.
In conclusion: Retailers believe shoppers will return, and they plan to offer top-tier experiences to attract traffic to their stores. Online will play a bigger role than ever as retailers attempt to blend their online and offline presences into a single cohesive experience. Now, the question becomes, how can stores accomplish that feat using technology?
Step 3: The New Tools of the Trade
Retailers know they need help from smarter tools to create better experiences, communicate with customers, maintain health and safety standards, and keep up with evolving expectations from regulators and audiences. When we asked our participants about the technologies they prioritized the most, we discovered some interesting revelations.
As retail stores begin to reopen, 58% of owners are considering new investments in technologies and tools. Only 24% of respondents said they were not currently considering adding new tools to their arsenals. Nearly all retailers recognize the need for better experiences and technology’s role in creating those experiences, suggesting that hesitation to adopt may be more a matter of budget.
When we delved into the details, we found a focus on experiences in retailers’ investment choices:
1. Tools to Help Train Associates (54%)
2. Tools to Improve In-Store Experiences (50%)
3. Tools to Limit Interpersonal Contact (50%)
4. Tools to Improve Online Experiences (33%)
5. Tools to Create Seamless Online-to-Offline Experiences (24%)
At every level, retailers respect the customer experience and want what’s best for their audiences. This first manifests itself in a focus on associate training. Retailers recognize that associates play an outsized role in the success or failure of any experience and want employees to feel empowered. With all the top five tools focusing on improved customer experiences in one way or another, brick-and-mortar retail operations clearly appreciate the task ahead of them.
Leading the Reopening With Enthusiasm and Innovation
Retailers have battled in a competitive industry since the moment they opened their doors. The coronavirus pandemic may have presented unique challenges, but retail shops are no strangers to adversity. This study should prove to any doubters that the retail world will not die out because of the virus but will instead adapt to circumstances as necessary. Thanks to the tenacity of the people working behind the scenes, the future of retail continues to look bright.