The c-store industry was never for the faint of heart. The competition is aggressive, customers have extremely high standards, and any challenges encountered have to be overcome — and fast.
If the COVID-19 pandemic has taught us anything, it’s that retail is evolving constantly to meet customers’ needs. This is not easy to do on short notice or with little planning. Prior to the pandemic, many well-established retailers were already in distress, from pressures like customer shifts toward online purchasing, as well as rent and other added costs of doing business in physical locations.
The impact of COVID has caused many stores to announce that they will not be reopening after lockdowns lift. At the same time, startup retailers are finding it harder to access capital, and a number of these new businesses simply won’t have the cash flow to continue operating, either, and will be forced to shut up shop early.
This of course means that those retailers who do survive can take advantage of reduced competition for the customer’s coveted dollar. In fact, many categories of products, services and offerings will see a spike in demand throughout and eventually coming out of the crisis — lifestyle products and services, and products needed for remote working or simply in spending more time at home, are all seeing a healthy uptick in demand already.
According to McKinsey & Co., the impact of the pandemic on consumer behavior has accelerated five trends in the retail sector that will have lasting impact. These trends include:
Shift to online and digital purchasing. As shelter-in-place orders continue in some states, and consumer anxiety about infection persists, consumers across age groups have already shifted spend to online channels. The longer the crisis lasts, the greater the likelihood that online and omnichannel purchasing will become the next normal.
This will be especially pronounced in the grocery industry. Across food, drug and mass-merchandise players, the shift in consumer spending to online will pose a question about the future — and purpose — of their brick-and-mortar locations. Driving unique in-store experiences will become even more critical than it has been to drive traffic and improve profitability.
Healthy, safe and local. One of the biggest challenges facing retailers is the need to protect customers and employees from contracting or spreading COVID-19. Concerns about health and safety have never loomed larger for stakeholders across the value chain. The retailers with the highest degree of touchless automation, both in stores and in warehouses, may enjoy a clear competitive advantage, as they face lower risk to consumers, employees and their overall operations.
Shift to value for money. As in any economic downturn, a post-crisis downturn will probably lead consumers to demand value for money across retail sectors. This is already happening in essential categories, as private-label sales at grocers and pharmacies are increasing, and pricing and promotion strategies are emphasizing value.
Flexibility of labor. The COVID-19 crisis underscores the need for more flexible resource allocation that deploys labor across a broader range of activities. This could accelerate the move to self-checkout or robotics in the c-store sector.
Loyalty shock. The initial scarcity of products has spurred trial of new brands, as customers trade up and down. The McKinsey report said customers are much more likely now to switch stores and brands due to proximity, availability, ease of use and safety considerations, creating opportunities for new habit creation. The report also found said that many consumers have tried store or generic brands for the first time, with many saying they were satisfied with the product and would purchase it again.
Identifying what works for you is your next great challenge, but this industry is used to taking on great challenges. Despite the difficult economic outlook, there are opportunities for outstanding, financially sound operators to prosper.
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