The Economic Impact of COVID-19 in the US
A "Temporarily Closed" sign hangs in the window of Nordstrom Inc. store. Photographer: Gabby Jones/Bloomberg
The COVID-19 pandemic continues to force retail stores to close, signaling an unprecedented disruption of commerce.
Retailers and brands face a difficult multitude of short-term challenges around health and safety, supply chain, labor force, cash flow, consumer demand and marketing.
Yet successfully navigating these issues alone will not assure a bright future, or any future at all. That’s because once we get through this pandemic — and we will get through it — we will emerge in a very different world from the one we left prior to the outbreak!
In order to ensure a future where businesses not only survive, but thrive, it is critical to anticipate what a post-pandemic world will look like, and then begin to transform to better match this new reality.
Consumers will have adopted short-term behaviors during the pandemic that in many cases will become permanent.
The COVID-19 pandemic is rapidly accelerating the transition to digital commerce. As consumers are being asked to practice social distancing, e-commerce orders for groceries and other essentials have become a survival tool for the American family.
Faced with this new reality, consumers are likely to be more germ cautious than ever before. No-touch deliveries may become the new normal. Bulk self-service food items, communal buffets and salad bars are likely to be less popular. Consumers may be less receptive to in-store food sampling and more hesitant to use public touch screens or keypads. Community play areas may be less appealing. Retailers will need to develop no-touch customer experiences with an emphasis on hygiene.
COVID-19 is forcing consumers beyond their preferred brands like never before.
As grocery shelves for popular items sit empty, consumers brand preference erodes. Even though consumers may prefer Charmin toilet paper, but when confronted with the reality of not having toilet paper, any brand will do.
Those consumers could emerge from the pandemic with entirely new brand preferences or lower overall brand loyalty. This was already trending before the pandemic, with exclusive store brands gaining market share, but this trend will now be amplified.
Consumers that learned to cook while quarantined at home, may continue to do so. Consumers that broke their daily Starbucks habit may not return to it. Those that bought a Peloton bike are unlikely to resume their gym membership. Families that added a streaming media subscription may choose to keep it. A large portion of the workforce may permanently shift from working in an office, to working from home. To the extent these behaviors become permanent, they will fundamentally shift demand for various goods and services.
Several product categories were aggressively shopped as consumers rushed to stock their homes in preparation for shelter in place orders. Some of these products, like toilet paper and cold medicine, are unlikely to be consumed as quickly. The result will be a delayed decline in sales in those categories as consumers work through their home inventory.
It is very possible that the U.S. will emerge from the pandemic in a recession, where consumer spending is dramatically curtailed. Not only do consumers become more financially conservative, but consumer credit may become less available and a large group of people may go into default on their debt, dramatically limiting purchasing power.
Amazon, Walmart and Costco, are relatively not impacted by the economic effects of the pandemic. Online sales at general merchandise retailers climbed 50% on March 13. These retailers are aggressively hiring to meet demand, they are increasing employee pay and could well emerge with record quarterly growth.
Conversely, retailers of non-essential products that are forced to shut down will bear the brunt of the economic impact. Online sales for apparel and footwear retailers fell 37% on March 11 alone, and foot traffic to U.S. stores fell 58.4% in the third week of March. If the retail shutdown is prolonged, those with the bulk of their inventory trapped in stores and without a strong balance sheet may find they are economically unable to continue operations.
Many specialty stores and independents may no longer exist. Consumers will emerge from the pandemic in a new economic reality, changing commerce behaviors in profound ways. The combination of all these forces, will significantly disrupt commerce as we know it.
Jason Goldberg.Forbes Contributor