In a time of pandemic, every purchase feels fraught with purpose. Is a trip to Market Basket worth the risk? Does an online order put delivery drivers in danger? We are thinking more than ever of what we don’t have enough of — toilet paper, anyone? — and how much we really need.
As we all look ahead to the still-distant day when we can indulge in simple pleasures like grabbing coffee in Harvard Square, browsing Back Bay boutiques, or ordering drinks with friends at a favorite neighborhood haunt, we wonder: What will the new normal feel like? How will coronavirus remake us as consumers, changing what we buy, where we buy it, and why?
“There’s an old phrase, it takes 30 days to make a habit,” said Erik Rosenstrauch, the founder of Fuel Partnerships, a retail marketing firm. “Now we’ve all had 30 days stuck at home to begin developing new habits.”
Long before the pandemic upended American consumption habits, there was already a coup underway. Downscale malls were dying, and retail bankruptcies were becoming commonplace, though some brick-and-mortar stores, long undermined by e-commerce, were adopting new ways to compete. Direct-to-consumer brands were building audiences and loyalty. Mobile shopping was on the rise. Grocery stores were dabbling in deliveries and pickups.
The pandemic is likely to accelerate all of these trends, and leave a landscape littered with retail casualties, putting more power in the hands of the powerful few.
Here’s a glimpse at what the future might look like.
We’ll care more about prices
Any economic recession will bring about a rise in price sensitivity, but this one will probably intensify that effect, because of how shockingly fast it happened — and the sheer number of Americans who have felt the immediate impact of job losses or lost wages. “We went into this with a sense of price ignorance; we didn’t care about prices at all," said David Marcotte, senior vice president of cross-border retail at Kantar Consulting. “And now we’re coming out the other side."
Marcotte said restaurants were the biggest beneficiary of that blissful price passivity, and they now stand to lose the most. Dining out will come back, but fitfully; menu prices may have to come down, and profit margins, always thin, may vanish. “There are going to be considerably fewer restaurants in the future," Marcotte said. "It’s hard enough under good conditions. In bad conditions, man, it’s brutal.”
More take-out, fewer food halls
Many restaurants aren’t just worried about whether they’ll reopen after the shutdown, but concerned about whether they can operate at all if social distancing restrictions remain in place.
Think crowded food halls, so trendy and popular. Will there be a place for them?
“All the hallmarks of our present urbanism are highly interactive and close together,” said Daniel Dain, a Boston real estate attorney and cofounder of the Restaurant Investment Group. He worries that people may be less inclined to come into the city to dine out and may continue the habit of ordering take-out meals.
And new models will emerge when restaurants close.
“So many restaurants will shutter, but the talent of their chefs and founders will continue,” predicts Sucharita Kodali, a retail analyst with Forrester Research. “What you’ll see is models" — like Uber founder Travis Kalanick’s CloudKitchens — "where people are operating restaurants out of their home or professional kitchens, and they make the menu available for pickup or delivery.” By selling pre-ordered meals, chefs could manage costs without having to pay waitstaff or rent.
“There is going to be a day when this pandemic will end, and slowly social interactions will come back,” Dain said. “But I worry that the food halls and the places that people interact with come back the slowest.”
Grocery shopping will feel more nostalgic
Grocery stores are among the few “winners” in the crisis, with their sales up 25 percent in March over the month prior, according to the Census Bureau. But what we’ve been buying has changed.
After years of moving away from the packaged goods in the center of the store, shoppers have been drawn back in to the comforts, and the pantry shelf lives, of soups and canned beans from trusted old brands like Campbell’s and Heinz, said Michael Nestrud, a Boston R&D consultant for the food industry.
In times of anxiety, he said, consumers more often reach for the foods that comfort them or remind them of childhood. “Part of me wonders if there’s a cultural trust about it being fundamentally safe, even if it might not be the healthiest for us.”
If this trend takes hold and lasts, it could be a boon for major food brands that have been struggling as consumers’ taste preferences have moved toward fresher food. And it might spell trouble for the smaller upstart food brands that have been able, perhaps until now, to charge higher prices for their goods.
Another big question for Rosenstrauch is whether the new protocols for grocery shopping, adopted in the name of social distancing and safety, will persist. He can see stores continuing to use one-way aisles. And they already have systems that spray water throughout the day on produce, he said. “Could they install an automatic spray system on freezer doors, or for wiping carts down?”
Fewer deliveries, more pickups at stores
Before the pandemic, grocery delivery made up 3 percent of all grocery sales. But those numbers have shot up since stay-at-home orders were put in place, with 21 percent of survey respondents in a Forrester poll saying the first time they purchased groceries online was after the pandemic started.
But don’t expect that trend to stick, says Forrester’s Kodali, as many customers have found online shopping frustrating and inefficient. Grocery stores may not be keen to promote the service, as it costs them a ton to manage and support home delivery and curbside pickup. She estimates stores spend about $20 on labor for a delivery order and about $7 for an in-store pickup.
Marcotte expects grocery stores will look to recoup that by cutting in-store promotions.
While deliveries may ebb, the “buy online and pick up in-store” model of commerce, dubbed BOPIS by retail trackers, may have staying power. The trend had been gaining momentum, and now the pandemic has tipped it into the mainstream, said Aaron Cheris, head of Bain & Co.'s retail practice. According to Adobe Analytics, from Feb. 24 to March 21, BOPIS orders increased 62 percent, compared with the same period a year earlier.
Cheris said he’s seeing pickups make up 40 to 50 percent of e-commerce orders at some stores, and predicts that will continue post-pandemic. “It’s super-convenient and feels super-fast,” he said.
Mobile payments and e-commerce will thrive
As we avoid the ick factor of the germ-riddled credit card machine, it may push more of us to use mobile payment systems like Apple Watches or smartphones to pay at the checkout, Rosenstrauch said.
And avoiding checkouts entirely by shopping online is likely to grow in popularity and market share. With brick-and-mortar stores shuttered, there has been an unprecedented surge in online shopping, with transaction volumes in most retail sectors seeing a 74 percent increase in March, compared to the same period last year, according to ACI Worldwide, an electronic payments processing company.
“There’s definitely no question that Amazon is going to come out ahead at the end of this, even though I don’t know that they deserve to,” Kodali said. “They’ve always been customer-centric, but they’ve had tons of out-of-stocks, they’ve delayed deliveries, treated suppliers badly, and haven’t been model employers, either.”
But analysts are quick to point out that e-commerce accounted for only 11 percent of all retail sales in 2019, according to the US census. Many think that shoppers will be eager to return to stores once the shutdowns are lifted. The question is what they’ll find when they get there.
'The mother of all clearance sales’
Right now, most retail storefronts are frozen back in some week in March. “When everyone reopens, everyone is going to have the wrong inventory in the wrong place at the wrong time,” Marcotte said. They’ll want to get rid of out-of-season products fast to get cash on hand and restock. “It will be the mother of all clearance sales,” he said.
Meanwhile, those stores that have remained open — like Walmart, Target, and Home Depot — will still have to worry. Many have been limiting their spring promotions to ensure they don’t bring crowds to the stores. Now they’ll have to do the math once other stores reopen: Do they slash prices in order to compete?
After the Great Recession, “it took a long time for retailers to get back to a point where people had the expectation that you would pay something close to what the ticket price is,” Cheris said. “This is that, but worse.”
Department stores are DOA, and malls may be next
Both Neiman Marcus and JCPenney are close to filing for bankruptcy protection, and other department stores that have been on the edge are likely to topple, Marcotte predicted. “Macy’s, Sears, I can see them basically declaring bankruptcy at this point, for justifiable reasons,” he said. "They have no means of recovery, and they don’t have the buffer to survive this.”
That’s bad news for malls that have those department stores as anchor tenants, particularly the lower-end malls, Cheris said. “Vacancy rates at lower-quality malls were already high. Does that create a doom loop where 10 to 20 percent of the doors are closed? It feels like this could really accelerate the demise of the lower-tier malls.”
And Marcotte said malls will feel different in other ways. He predicted more security will be in place to discourage group gatherings, and temperature checks of people on their way in to the stores may become common.
The pandemic may have sartorial implications
“We’ve already been in a slow decline into casual workwear, and there are still some people who wear blazers and ties to work, but that may never come back," Cheris said. “People have gotten used to seeing you over Zoom.”
And that may extend to the once-dominant beauty industry, Rosenstrauch said. “Sephora and Ulta were two of the fastest-growing chains in the US. Part of the fun was you could go in and touch stuff and try it on your face,” he said. “Are women going to go in and press on bottles that someone else just pressed on?”
An emphasis on the local
“As much as the media talks about the online purchasing and how Amazon is taking over the world, the American shopper has recalibrated over the past few weeks and realized their local store is the place where they go to get the products they need,” Rosenstrauch said.
Alexis Bateman, director of the MIT Sustainable Supply Chains program, said that empty shelves in supermarkets have pushed consumers to look locally for their food — as evidenced by a surge in community supported agriculture. It’s a clear opportunity for consumers “to double down on farmers markets and locally produced food,” she said.
We’ll care more about workers
With COVID-19 outbreaks crippling meatpacking plants in the Midwest, the fragility of the food systems has been thrown into focus. “Policies are going to necessarily change around employees’ welfare, because it’s been directly linked to the bottom line,” Nestrud said. “The cost of shutting down a factory and having to scrub it clean for three days is not insignificant, versus paying for a few days of sick time for employees.”
Unions have played a big role in ensuring that workers get the protective gear and hazard pay that they need to work in such conditions. Marcotte believes those patterns will persist, and that safety and workplace practices will be something consumers will weigh when choosing which retailers to patronize.
“You’re going to see a resurgence of union activity,” Marcotte said. “They have the upper hand right now. They’re not being nasty or confrontational, they’re saying, ‘Our members need to be safe.’ ”