What is the impact of the coronavirus on the retail industry?

Table of contents

Impact of the new coronavirus on the retail industry

As a measure to prevent the spread of the new coronavirus infection, the Japanese government issued a “state of emergency” on April 7, 2020. Since the state of emergency was declared, sales at retail stores and restaurants have plummeted as consumers have refrained from going out. It was difficult to continue operating, and many stores were forced to close.

Seven & i Holdings’ financial results briefing materials for the fiscal year ending February 2020 announce the increase and decrease in sales compared to March of the previous year. According to this document, York-Benimaru’s sales increased slightly by 3.9 points, Ito-Yokado’s sales decreased by 5.3 points, and Seven-Eleven Japan’s sales decreased by 3.2 points. Furthermore, it was announced that Sogo and Seibu’s in-store sales were down 33.4%, and Denny’s was down 25.9%.

Within the retail industry, there are some industries that are greatly affected and others that are relatively small. Supermarkets, which sell necessities of daily life such as food, daily necessities, and beverages, have not been affected much by the new coronavirus. On the other hand, department stores and restaurants that handle products that are not included in daily life necessities, such as eating out and clothing, have been significantly affected by the new coronavirus.

Retail industry trends created by refraining from going out

Consumers’ needs for refraining from going out have increased for e-commerce services such as Amazon, Rakuten, and online supermarkets, as well as home delivery services such as Uber Eats and Demae-kan. The refraining from going out to prevent the novel coronavirus has given rise to new trends such as eating and shopping at home.

In fact, even at United Arrows, which sells men’s clothing, women’s clothing, and miscellaneous goods, when comparing April 2020 sales with the same month last year, in-store retail sales have plummeted by 9% compared to the previous year, but online sales This is a strong 125% compared to the previous year.

In addition, the need to enjoy experiences at home has expanded, and sales of products such as home drinking, games, and personal home fitness equipment have expanded. As more and more people enjoy making bread and sweets at home, some supermarkets are now out of flour, even though they have bread in stock.

Changes in customer service in the retail industry

The coronavirus has changed not only consumer needs but also customer service in retail.

Isetan Mitsukoshi Holdings, which has seen a sharp decline in the number of customers visiting its stores, has started a service to introduce products to customers from June 9, 2020, through the online conferencing system “Zoom.” Customers can talk online with in-store staff from their homes, and if they find something they like, they can purchase it online.

The time when the state of emergency was declared also coincided with the time when children and their parents planning to enter elementary school next school year began purchasing school bags. By having staff explain things like the internal structure of school bags that are difficult to convey through text or photos while opening and closing the product, you can achieve almost the same effect as going to a store and receiving an explanation.

Isetan Mitsukoshi plans to offer customer service through an online conference system for women’s clothing and cosmetics in the future.

Challenges for the retail industry in the post-corona era, the arrival of the new normal

The world after the novel coronavirus problem has passed is called “after-corona.” In the retail industry, too, the focus has shifted to how to survive the post-corona era.

After the coronavirus outbreak, it cannot be said that things will completely return to the state before the outbreak of the new coronavirus. It is said that a new business model, also known as the “new normal”, is coming. The new normal means that what was previously seen as abnormal becomes the norm.

Increased purchase rate on EC sites

The overwhelming majority believe that after the coronavirus outbreak, store sales will not return to the same level as before the coronavirus outbreak.

This is because many companies have launched e-commerce sites at a rapid pace to meet demand from people staying at home, and e-commerce has rapidly progressed. During the period of refraining from going out, people who had never used an e-commerce site before had the opportunity to experience shopping on an e-commerce site. It is expected that this new segment will remain as e-commerce site users.

The increasing purchase rate on e-commerce sites is already visible in the numbers. Accenture surveyed consumers in 15 countries around the world, including Japan, on changes in consumer purchasing activities due to the new coronavirus. According to the survey, one-fifth of all consumers purchased groceries online for the first time due to the coronavirus crisis. Additionally, 37% of respondents said they will continue purchasing online even after the coronavirus.

Physical stores require a “customer experience”

After Corona, we will be operating a physical store as well as an EC site. Brick-and-mortar stores need to change from simply being a place to sell products, to being a place to provide experiences that can only be found in a physical store.

A good example is the store opened by Nordstrom, a major department store, in Manhattan, New York. In addition to regular product displays, this store focuses on services other than product purchases, such as shoe repairs and advice from stylists. In addition, seven bars and restaurants within the store offer food and drink delivery services upon request while you shop. In this way, it is necessary to design a store so that the in-store experience itself becomes the purpose of the store visit.

Management using digital technologies such as AI and IoT

In the post-corona era, digital technologies such as AI and IoT are expected to be used to manage the supply chain , which is the process by which a product is supplied to consumers .

When the new coronavirus spread, stores that sell essential products such as supermarkets experienced panic consumption as people rushed to buy long-lasting foods such as toilet paper and canned goods. At this time, the store management side was unable to stock the products because although they had inventory in the warehouse, they did not have enough human resources to handle the display work.

Since there are limits to manual inventory management, we will use digital technology to automatically determine the appropriate inventory level and required human resources based on variables such as inventory level, current news, weather, and road conditions. It is expected that supply chain management will become increasingly automated.

summary

The novel coronavirus issue has created an opportunity for consumers to change their purchasing trends and values. Even after the coronavirus pandemic, it is expected that purchasing on e-commerce sites rather than physical stores will become popular.

In response to this, retailers should consider measures to succeed in the “new normal.”