COVID-19 is an unprecedented crisis in the history of mankind. As if now, there is no readymade solutions in a manual or a business school textbook. The trauma of the pandemic, has led to significant changes in human behaviour. Human beings will no longer consider themselves infallible. Nobody will ever take anything for granted, ever again. An invisible virus has brought the entire planet to a complete halt. The virus was a great equaliser, it attacked with complete immunity. It attacked presidents; it attacked paupers.
Human beings learnt to live in their homes, without stirring out for months. We worked from homes. The laptop, Wi-Fi and Zoom, saved the world, for they kept the wheels of business moving. Companies and people worked remotely, at lower costs. So, businesses will now deploy these strategies in the future too. These new ways of living will impact shopping patterns and businesses in the future. The major changes are reviewed below:
Chastened Consumers: In the post COVID-19 world, customers may be frugal and focus on savings for at least three to five years. During the lockdown, many people, from managing directors to janitors, have lost jobs. Many employees have had their salaries reduced. Many people across the globe are currently living on their savings. So, the markets for consumer products could be rather cloudy.
COVID-19 is subjecting families to severe stress. People buy what they need. Not what they fancy or are great to own. We are learning, how little we really need, to live. Luxuries and expensive brands are exiting our lives. People economise and survive on bare minimum savings. Customers have downgraded to cheaper brands. They have given up consumption of non-essential products. The World Bank has opined that between 2020 and 2021, COVID-19 will push about 150 million people below the poverty line of USD 1.90 per day. It will be some years, before customers splurge USD two million on a Hermes Kelly Rose Gold handbag or USD 1,000 plus on a Stefano Ricci formal Crystal necktie.
Explosion in Online Business: The markets and businesses have also changed irrevocably due to COVID-19 lockdowns. COVID-19 has transformed shopping habits, across the world.
During the lockdowns, online sales doubled and even tripled for some retailers. Consumers have got habituated to shopping online for everything they need, including essentials like flour, rice, pickles, pastas, etc. They have shopped online, due to sheer necessity. However, they have enjoyed the experience of having products delivered at their homes, with a few clicks on their laptops. As brick-and-mortar retail outlets downed their shutters, online sales moved North.
Retailers -New Strategies: Retailers have gone back to their drawing boards, to chart new strategies for a mortified markets and consumer. So, brick-and-mortar retailers may reduce the number of outlets and build online distribution networks. They will spruce their online portals. Retailers are also offering new options, like booking the order online and collecting the merchandise from the nearest store. Retailers have also prioritised sanitisation, distancing, masking, etc., to augment the safety in their stores.
Innovative Role of Supermarkets: During the lockdown the traditional distribution channels of companies through distributors, wholesalers, retailers and consumers, were unable to open their outlets. In countries where supermarkets are popular, like USA, Europe, Latin America, Middle East, etc., consumers buy their requirements of essential products like grocery items, foods, etc., from these self-service stores. Some of the supermarkets diversified into home delivery of essential products. They thus become e-commerce outlets with online booking portals. They accepted orders online and then delivered products to homes. The Reliance stores were pioneers in this mode. They should build on this innovation.
Best Buy in the USA, could ward off the Amazon challenge only by developing an e-commence business. Even Best Buy’s dynamic and visionary CEO, now Chairman, Hubert Joly, took about seven years to transform the business. Traditional brick and mortar trade will have to be supplemented with online portals in the future, for a retail business to prosper, or even survive.
Business to Consumer Options (B2C): Most corporations across the world are evaluating B2C (Business to Consumer) distribution channels. This channel will grow exponentially in the future. Some companies started distribution vans to deliver their products directly to consumers’ homes. Consumers could book orders for their essential products online and the company vans delivered the products to their homes.
After the lockdowns are lifted, the former distribution channels i.e. wholesalers and retailers will bounce back to life. However, companies who have pioneered in distributing their products directly to the consumers and the supermarkets which have diversified into online bookings, should continue these new initiatives.
Retail Sales Could Slip: COVID-19 is altering shopping habits in fundamental ways. It could adversely impact the sales of shopping malls and high street retailers, even after the pandemic is over. Overall, retail sales in the malls and the high streets outlets could decline by 20 to 30 per cent post the pandemic, compared to 2019.
The first priority of people who have lost jobs or had their salaries reduced, will be to find gainful employment again. Their savings have eroded. So, they will just buy the essentials that they need to live and save the balance moneys. They will not spend on frivolous items. Quite simply, the retail revolution or therapy, will be on hold for some time, till the trauma of the COVID-19 starts to wear off.
Shopping Malls Will do Well: Once bitten, twice shy consumers will prefer to shop in sanitised malls, instead of the open high streets. Reduced sales in high streets, will lead to a lowering of rentals of shops. Rentals will decline or stagnate, even in the shopping malls, due to reduced turnovers and footfalls. Larger retailers will decrease the sizes of their shops, due to lower footfalls and sales per square foot. This will further depress rentals. Big Box type of retail outlets like Walmart, Target, Ikea, etc., could ache, till consumer confidence returns. Promotions like ‘Black Friday’ will boost sales, but with diminishing returns.
No New Brands: In these frugal times, do not expect any new brands or retail labels to be launched, particularly in the fashion industry. For many companies, the year 2020 will be a write-off in terms of profits. Till the world finds a vaccine and evolves a strategy to inoculate five billion people, confidence will not return to a traumatised world. So, companies are unlikely to invest in new brands for some time. Shoppers, scalded by loss of jobs, have no interest in new brands.
Mom-and-Pop Stores Will Survive: During the lockdowns and the resultant truncated movements, citizens have relied on purchases from supermarkets and e-commerce retailers. This has created an impression that small grocery shops may lose business.
Small groceries render valuable services to their customers. They are located in every street, so there is convenience of shopping. Many of them provide home delivery. They have no minimum limit for home delivery. You can order a bottle of ketchup and it is at your door step within ten minutes. Many of them enjoy a cordial relationship with their loyal customers and provide credit.
Despite the advent of supermarkets and online shopping portals, the small mom-and-pop shops will survive the pandemic. During the fierce lockdown in India, these ten million grocery shops in the streets of towns and villages supplied basics and essentials like flour, lentils, bread, milk, butter, eggs, etc., to their customers. This is indeed a miracle and a great tribute to the resilience of the trade, since the supply chain of many products, was fractured due to restricted movements. Thus, the small groceries, at street corners, cannot be replaced easily, due to the service and convenience they offer.
Continuous Disruption Post Vaccines: The world may continue to face disruptions, for some years, even after five or six vaccines are cleared for inoculation. Vaccines normally take three to five years or even more, to be tested comprehensively. Unfortunately, the impact of COVID-19 has been massive and horrendous. Companies and governments have had to accelerate the discovery and testing of vaccines. The impact of various vaccines on arresting COVID-19 and whether they have any side-effects, will have to be monitored. If any vaccine fails to deliver results conclusively, expect some countries or areas to go into lockdowns again. So, masks, social distancing may last in the post pandemic world for some years, till the vaccines prove completely effective.
Digital Era Will Flourish: Digitisation and artificial intelligence will be deployed increasingly in businesses, to reduce dependence on human labour. Human beings can catch a virus like COVID-19. Machines do not catch viruses. Therefore, production does not stop. Businesses will actively review which functions can be delegated to machines and robots. For instance, expect more security cameras in supermarkets and less human guards. In consumer product factories, expect more automated packing machines, with reduced workmen.
Impact of Work from Home: COVID-19 has compelled people to work from their homes. Since COVID-19 may stay till the middle or end of 2021, remote working may continue.
The trend to work from home will continue even beyond the pandemic. Many companies will review whether they need so many employees in offices daily. There will be a serious assessment of jobs on the basis of what can be done from home. This will impact the sizes of the offices that companies will build or rent in the future. It can also impact salaries. Employees who work from homes, need not be stationed in large metro towns where rentals are high and have to be reimbursed. If employees are to work from home, they could be based in smaller towns where rentals and costs of living are lower.
Hopefully, by the end of 2021, we can return to work in offices, surrounded by our colleagues and exchange thoughts and ideas across tables. There are definite limitations to the Zoom calls or Google teams’ video and the work from home philosophy.
Higher Skilled Workforce Flexibility: Businesses will have to be more flexible in managing highly skilled professionals. Post the pandemic, many skilled professionals may seek incremental elasticities like continuing to work from home or working alternate days at the office, etc., due to the age factor or comorbidities. So, companies will have to review their personnel policies to accommodate their staff.
Health & Hygiene Industries: COVID-19 is sensitising citizens to the importance of maintaining good health, practising hygiene and building immunities. The health and hygiene sectors will flourish even after the pandemic is over. There will be augmented usage of soaps, sanitisers and hand-washes, which will lead to cleaner communities. Reckitt Benckiser producing Dettol and Procter and Gamble producing health care products, have both reported sales improvements of upwards of ten per cent in the year 2020.
Pharmaceutical companies manufacturing medicines and vaccines to treat COVID-19, will also boom. Companies producing immunity building products like Vitamins, will also see steady growth. However, pharma companies should ensure that they do not over-price these products, so as to enable larger numbers of people to benefit from them.
Schools in Asia and Africa should be encouraged to distribute milk and vitamins free to the children, between the classes. Every cloud has a silver lining. So, if the COVID-19 cloud of despair, teaches us to be cleaner and stronger, then so be it.
Customer Preference Change in Apparel: During the lockdown, customers worked from their homes. Dress codes collapsed. A suit or a tie were not considered necessary, even during a formal Zoom meeting. A shirt and jacket were considered adequate, by the guardians of etiquette. The sales of formal apparel took a tough beating during the lockdowns.
As the world prepares for a post COVID-19 era, formal wear is likely to make a gradual comeback. However, customers having survived for months without suits and ties, will calibrate how much formal wear do they need. If business can be done effectively in a T-shirt and shorts, then why squander money on a formal Saville Row suit?
Management of Migratory Workers: Cities in many developing countries are easing lockdowns and permitting industries to reopen. However, many factories are unable to re-commence manufacturing, since their migrant labourers have not returned from their villages.
The migrant workers of India walked from 200 to 1,200 kms on foot, without food, shelter or transport to reach their villages, when the lockdown was declared on 24 March. Many died, on these desperate journeys. There are scalding memories. So, migrant workers are not too keen to return to work. They would prefer working closer home.
In future, employers in cities, may have to adopting the Middle East model of employment. Workers recruited from different locations, will have to be provided them with places to stay, eat, relax and medical benefits. Companies will have to provide a holistic life to migratory workers.
Never Give Up: It is now ten months that the COVID-19 pandemic wrecked the world. It is a matter of global shame, that none of the Nobel Prize winners, intellectuals, research institutes, have even arrived at a definitive set of medicines to treat the infection. Nations have become experts in discovering weapons of mass destruction, like atomic bombs and nerve gases; but are at sea in finding a cure to COVID-19 or a vaccine to halt its ravenous advance.
Economies are expected to shrink by five to ten per cent and even more, due to the economic contraction triggered by COVID-19. Millions of people will become poor. These people will be unemployed and their children will not be able to go to school. So, COVID-19 will deal a severe blow to the health and prospects of the next generation also. So, leaders of various nations should focus on finding treatments and vaccines to fight COVID-19. All else can wait.
The author was the Managing Director of Unilever Tanzania. He is an alumnus of the Harvard Business School and is the author of “Rural Marketing across Countries”