BUSINESS BEYOND COVID
ISANA CORDIER: How, where and when will we shop in the future?
Working from home may be the new reality after the coronavirus — and shopping from home, across borders and in other currencies may be too
In the Business Beyond Covid series, CEOs and other business leaders and experts in their sectors look to the future after Covid-19. What effect has the pandemic and resulting lockdown had on their industries and the SA economy as a whole? Which parts will bounce back first and which will never be the same again? Most importantly, they try to answer the question: where to from here?
The Covid-19 crisis and its impact on virtually every facet of social and economic life has revealed that moving with the times is no longer just an option for SA’s consumer sector. We will most likely require a re-invention and rebirth of the sector to shape a new normal across all socio-economic classes, as we start to recognise our co-dependencies are bigger than we ever imagined.
Even before Covid-19, SA’s retail consumer sector was lagging international trends in adapting to a new and younger demographic market that is always digitally interconnected, probably with good reason given our socio-economic divide. However, the pandemic might very well be the event that will start leveling the playing field, forcing both the sector and all consumers to change their behaviour more than we can anticipate now.
Covid-19 has revealed, once again, that when times are tough, food and essentials still trump all. Unless human beings learn to again become self-sustainable on a macro-scale — growing our own produce, living off the land, and manufacturing our own soaps — retailers that trade in the essential food and household goods remains best positioned above the rest.
We have also witnessed this in the past, with Black Friday sales via our card acquiring data that shows the biggest portion of spending goes towards food and basic goods. It therefore echoes true that these retailers are most resilient in all economic conditions.
Online and omni-channel buying
There were also other beneficiaries of the pre-lockdown spending outside of the essentials bucket, such as building materials, sports equipment, and gaming, as well as home entertainment. These could have continued trading well (even if only online), if they were allowed, as people potentially have more money and time to spend on home improvement and entertainment, while being locked in their houses.
The unexpected “die hard” sector in all tough conditions — liquor and gaming — for the first time faced a situation in which it has borne the brunt of an economic crisis through government interventions. No doubt a territory it is unfamiliar navigating.
If the consumer’s behaviour was on a slow trajectory towards online and omni-channel shopping, the pandemic has, and probably will, further accelerate this. Social-distancing is most likely here for the medium term and one can presume if online sales are allowed, that such shopping behaviour will take off quite significantly. Most retailers have already reported exceptional increases in online shopping channels even though delivery will only occur after the lockdown.
The best advice to the consumer sector is probably to remain agile, adaptable, innovative, and to find the opportunities amid the change that will most definitely come
It would thus not be inconceivable that this trend will continue past the lockdown and the pandemic, as people become more accustomed to shopping online, and reduce their trips to shopping malls — thus further pressure mounting on department store models and traditional retail could be expected. Edcon is probably the forerunner of this very fact, albeit the history of the retail giant’s struggle has played a significant role in its eventual demise.
The high cost of leasing mall space might be what further entices retailers to reduce their physical footprint and adopt a more aggressive omni-channel strategy to leverage their sales while reducing costs. Co-logistics and co-warehousing models might not be inconceivable either, where retailers share these expenses, as well as leveraging on each other’s supply to market.
To try to understand this potential new economy and consumer we will be facing, we might need to consider things from a different perspective. Perhaps the question should thus rather be about what new trends will emerge from this pandemic, and how our consumer sector could possibly adapt to them. Formulating insights on the back of anticipated trends could, in part, inform a swift strategy for the coming days, months and years to remain relevant to the new consumer.
We should be posing questions such as: What will we (the consumers) value in the future? Will we go back to travelling and how long will that take? Will we value family time and health, creativity and education more than before? And how will this shape our behaviours? What role will technology increasing play in our daily lives and home environments?
As our ways of working are potentially changing for good, we need to consider how this will impact our spending patterns and our needs. For instance, if we do not have to travel to the office, or be bound by office hours or country borders, how will this affect our behaviour with regards to when, where and how we shop? Will our houses be turned into home offices and, again, what role will technology play when less time and travel is required to do our jobs?
Additionally, we need to consider how the global resourcing of talent might be impacted by this change in the ways of work, and even the currencies people will be capable of earning as a result of a potentially borderless resource talent pool. We are effectively not only recognising our co-dependencies as South Africans, but that our global co-dependencies could quite possibly drive significant change as a result of this pandemic.
Buying for good
I believe the success of the future is going to have a lot to do with collaboration between corporates, public enterprises and across sectors, both locally and globally. In this respect, it is imperative that we start partnering with each other to leverage our competencies, strengths, and resources, which will enable SA retailers and other companies to find ways to adapt to a “new normal”. Only time will tell who will survive and how this will play out in the future.
As the power shifts in economies, chasing after profits might no longer be enough for organisations. We are most likely entering an era where everything we do would be to have an impact for the greater good of all in this interconnected and co-dependent reality. If ever there were a time to build a company strategy around social and environmental sustainability, it certainly is now.
In this new world we will have to navigate, the best advice to the consumer sector is probably to remain agile, adaptable, innovative, and to find the opportunities amid the change that will most definitely come. True resilience will have a lot to do with innovation and partnerships. It has been said more than once that Covid-19 has effectively pushed a worldwide re-set button — we can only start to imagine what the world will look like as we start back up.
• Cordier is consumer sector head at Absa Corporate and Investment Banking.