Online shopping. (Photo by Peter Vo)
As the coronavirus continues to cause upheaval in the world, retailers have been caught in the storm.
With a freeze on the economy, many retailers have received bleak news in terms of consumer spending. As the New York Times reports,”total sales, which include retail purchases in stores and online as well as money spent at bars and restaurants fell 8.7 percent from the previous month...the decline was by far the largest” in three decades. As the pandemic continues, The World Economic Forum reports that along with spending being down across all industries, consumers have also become more inclined to spend less as households continue to be affected by the virus.
With such grim news, major retailers have resorted to furloughing most of their part-time and full time staff. One major retailer doing this is Best Buy.
The company currently employs about 125,000 employees, but it has furloughed “51,000 hourly store workers.. including nearly all of its part-time staff.” Other major retailers such as Macy’s and Nordstrom have also announced that the majority of their workforce would be furloughed. As many companies continue to furlough their staff, others are shifting to an entire new business model.
As the virus continues to alter economic life in the United States, companies have begun to shift the manner in which they do business. Companies are now shifting to a business model in which the majority of their business will be catered to an online audience.
As Forbes states, “traditional retailers who shifted to online business are likely to also show huge increases in sales through this channel.” With more orders being fulfilled online than in person, companies have had to restructure their workforce to meet these needs.
In a recent study conducted by Glossy, “32% of the respondents have temporarily furloughed their store staff, while 30% have shifted their store staff to service customers online..6% of associates are deployed, sitting at home or social distancing..6% were laid off completely.” The survey also shows that 23% of retail companies are renegotiating store leases, 18% closing locations and 2% breaking store leases.
As the virus challenges business models, the future of retail could look remarkably different from what we knew before the pandemic. Direct to consumer grocery has been an essential service during the pandemic as many individuals were sheltered at home. As Forbes comments, major retailers such as Target have seen an increased jump in grocery sales by 20% as Target continues to prioritize the flow of food, medicine and other essentials” during the pandemic.
Another change that could occur in the retail industry is that of checkout-free retail. Many retailers have already placed preventative measures for their staff such as adding a shield of plexiglass to protect their customers and associates.This however could be taken further as companies such as Amazon and Sam’s Club have already begun to use a checkout system independent of people. The system works by allowing the customers to scan a barcode to get into the store, take items and leave.
As the virus has challenged many industries worldwide, it is clear that retail is an industry that has also been shaken by the recent pandemic. As companies continue to explore new ways of doing business, they could emerge from the pandemic with an entirely new business model of retail.