I believe many people are going to come out of this feeling that they want in their lives and need … [+]
It was reported Wednesday that Wells Fargo retail analyst Ike Boruchow said 5 percent to 10 percent of pre-Covid-19 demand could be decimated permanently, as “lost store volume can’t entirely be made up online.” Additionally, he stated it could take at least nine months for sales levels to reach their “new normal.” That is both shocking, and (I’m afraid) overly optimistic at the same time.
We are all experiencing perhaps one of the most transformative episodes of our lifetimes. One that has affected every aspect of lives. We’ve heard and read how key events in our country’s history have reshaped society, such as the Great Depression, the pandemics of 1918, WWI and WWII, 9/11, and the financial crisis. They led to a reduction in consumption and a consumer mind shift.
While it may be too early to predict major cultural shifts, I believe many people are going to come out of this feeling that they want in their lives and need less. More, in terms of family, self-determination and well-being; and less in terms of things. As we are all experiencing bluer skies, cleaner air, and more quality time together, this may become a catalyst for a major reprioritizing, a consumer change wave.
Many people will wish to continue working from home, and employers will accommodate them based on a rise of employee efficiency, during the shelter-at-home, thanks to Zoom, and other such video conferencing tools. Already the list of corporations that are planning to indefinitely if not permanently extending “work from home” is growing longer by the day. Nationwide Insurance’s CEO Kirt Walker reported that the pandemic experiment has worked so well, that for many of their employees the arrangement will be permanent.
On Tuesday of this week Twitter employees received an email from CEO Jack Dorsey that the entire staff would be able to work from home, permanently, with the exception of a few employees maintaining servers. Turns out that overall job satisfaction, along with a rise in worker efficiency dovetailed nicely with the opportunity to cut some significant overhead from company balance sheets.
Economic Winners and Losers
Getting one’s head around the cascade effect that these work from home edicts will have on the already disruptive retail cocktail that has been shaken and stirred, leaves one breathless. The positives are phenomenal, starting with the opportunity for more, and higher quality family time. Working from home means saving fuel, wear and tear on autos, roads, along with eliminating wasted commuting time. Additionally, it should aid in curbing greenhouse gasses.
The other side of the economic ledger is equally substantial. While we have all gotten more casual at work, our wardrobes will become even more single purpose. This is yet another big hit for fashion retailing which was already on the mat, before the pandemic outbreak.
Then there are the anticipated effects on central business districts of mass work-day dislocation. What happens to the bars, cafes, salons, laundries, delivery services, gyms and workout facilities, that would likely be impacted? This is on top of the mass exodus that we know will continue in shopping malls and centers due to the contraction in specialty retail and department stores. This well likely cut deeply into the value of commercial real estate investment trusts (REIT’s) that are already suffering.
Industries on the Receiving End
Given that some level of social distancing will impact our lives for a year or longer, one might imagine several industries that could benefit. Products and services that cater to individuals and families around recreation, adventure, and leisure time will likely benefit. This will cause many Netflix fatigued families to become reacquainted with the great, but close-in outdoors. Early indications suggest that camping, boating and RV’ing will see a bounce.
“It’s a trend that’s playing out nationwide” LCI Industries’ CEO Jason Lippert told Fox Business. “RVs and boats provide attractive alternatives to vacation more safely as families are eager to get out of the house.” He added “air travel, cruise ships and hotels are likely going to be less popular, at least in the near term. As a result, the outdoor recreational products business is expected to accelerate.”
Many of us foodies and Food Network devotees that only occasionally cooked before, have been spending considerable amounts of time in kitchen and at grills. According to a AMC Global Survey 60% of people have been “scratch cooking” more often, and a significant share plan to continue even after social distancing restrictions are lifted. Additionally, home baking has seen a big boost with flour flying off grocery shelves. I would expect a whole range of culinary and cuisine arts to benefit, including planting herbs and vegetable gardens, increased grill sales as well as food processors, mixers, utensils, etc.
Stores are Re-opening, but Will Consumers Come?
It is amazing how quickly the conversation has shifted away from “retail experience” to “safety, security, and trust” as the new watchwords of retailing. Retailers, municipalities, and state governments have all invested a great deal in creating “reopening roadmaps” as a means of marrying shopping and social distancing, while keeping both the retail workers and customers safe.
Both the National Retail Federation (NRF) and the Retail Leaders Industry Association (RILA) created “check lists” with highly detailed plans for occupancy limits, customer distancing, health screening, disinfecting, protective gear, even contactless payment, to make “reentry” as safe and trustworthy as possible. Even third-party retail-as-a-service (RaaS) pioneer b8ta created a rather inclusive “ShopSafely” list which reviewed 128 retailers, creating A-F value scores around 14 different sanitation factors to assist consumers in the reentry decision process.
But like the famous line from the movie “Field of Dreams”, If You Build It, They Will Come, there is a great deal of uncertainty around consumer demand. According to investor Mark Cuban, in a CNBC interview, he feels “demand is down…customer consumption has fundamentally changed,” he added “It’s almost impossible to predict where consumer and corporate demand is going to come from”.
The Wells Fargo survey again, suggests a pent-up demand tempered by weariness of physical stores. They reported that 40% of people will not apparel shop for at least three months after the lock-down while another 20% say it will take even longer. A national survey conducted by Fast said 29% of respondents say they may never be comfortable buying in person again.
Never is a long time; essentially on-line is just fine.