Survival of the smallest? Retail's post-COVID-19 future

1 July 2020, Written by Business News Australia

Survival of the smallest? Retail's post-COVID-19 future

A consumer behaviour expert believes large retailers and shopping centres will face challenges as people spend less and make more of their transactions online.

The QUT Business School's Professor Gary Mortimer says Australians are now spending almost $32 billion online, or about 10 cents in every shopping dollar.

"It is estimated 80 per cent of us will be shopping online by next year and e-commerce will reach $35.2 billion," he says.

"Online shopping jumped by 21.8 per cent compared to the same time last year as COVID-19 restrictions took hold in March and retailers shuttered stores."

Mortimer explains this is happening against a backdrop of an all-time low for consumer confidence with soaring unemployment and daily mass staff cuts.

"Consumers are understandably now uncertain and anxious about the future, they are much more price sensitive and value conscious than pre-COVID," he says.

"During economic downturns there is a clear shift to thrift, and simplicity. Economic downturns are stressful events that historically have shaped the mind-set of whole generations and had long-term impact on buying behaviour.

"While most adopt a more financially conservative approach and have no urge to splurge, other consumers splash out - they've budgeted all year for a holiday, and now they can't go anywhere, so they spend it on a motor cycle or jet ski."

The expert says as consumers "cocoon", choosing to stay in rather than go out, they are cautious about their own and their family's health.

"They cook at home, entertain at home, and engage in DIY rather than spending their hard-earned dollars outside the home," Mortimer explains.

He says this will lead to large retailers and shopping centres dealing with challenges not faced by smaller businesses.

"The first challenge retailers face is their online capacity and capability. While retailers have been quick to promote their online offerings, the sudden increase in demand left many floundering, for example Coles and Woolworths had to suspend online home delivery and in-store pick up," he says.

"To increase capability for online customers, retailers may choose to convert some existing stores into 'dark stores', small, decentralised fulfillment centres.

"In contrast, the small and micro retailers that are most likely to survive and thrive after the COVID-19 shutdowns because they were able to pivot and adapt their business operations more rapidly than larger competitors."

He says empty shops in shopping centres are likely to host more services such as medical centres, offices, childcare, and even police stations.

"They either already had an online store, or they very quickly shifted to digital platforms and using every available platform social media, email, SMS and traditional advertising they engaged with customer through regular product and services updates," he says.

"As online channels begin to provide greater revenues, larger retailers may 'right-size' their fleet and close stores no longer financially viable."

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