Exactly two years ago, Europe entered its first lockdown. Shops, restaurants, events…: all public life came to an abrupt halt. Doomsday scenarios predicted that it would be the end for physical stores, independent retailers and city centres. How are these predictions holding up today? And what have we actually learnt?
The new normal in 5 trends
What have we learned from two years of corona pandemic? That retail is more agile than the industry had feared. And that less has changed in two years than you would have thought. If we look back at the past two years, we see five major trends and evolutions.
1) Digital acceleration
It was an inevitable consequence of the lockdowns and it became clear very quickly: e-commerce was the big winner of the pandemic. In the eight weeks of the first lockdown, online sales grew more than in the previous ten years, Professor Scott Galloway (New York University Stern School of Business) calculated. In the Benelux, too, there was an unprecedented growth: even people who were not shopping online before, now switched over as well. This includes both the demand side (like older consumers) and the supply side (restaurants and smaller local boutiques).
Growth was not immediately visible in the online figures, due to the disappearance of the important service economy during Covid (event tickets, travel, etc.), but now we can see that the impact is enormous and lasting. By now, some 50 % of all fashion and electronics purchases are already made digitally. Now that consumers can once again shop physically with peace of mind, a large chunk of the market share has definitely shifted.
2) Delivery commerce
Bicycle couriers and delivery mopeds, almost unheard of before the first lockdown, suddenly were the sole rulers in deserted cities. Today, they remain omnipresent in our streets. In food, home delivery has been the big breakthrough over the past two years. Both in supermarkets and in the catering industry, food delivery is a must. Competition is fierce and new players are fighting for stomachs and market share.
However, this does not detract from the fact that people are again eager to eat out and that food ‘on the go’ is back. Despite repeated lockdowns, new catering and street food concepts are popping up like mushrooms. The prediction that inner cities would be deserted after Covid, now seems risible. Meanwhile, Jumbo opened a city store concept on Antwerp’s main shopping street Meir, especially for hungry commuters, shoppers and… Gorillas‘ flash deliveries, which can use the stores as warehouses.
3) No retail apocalypse
The feared wave of bankruptcies is not happening. In fact, the number of bankruptcies has remained remarkably low up to now and the vacancy rate is not too bad either. More than that: for the first time in fourteen years, retail vacancy rates in Belgium have decreased – both in number of buildings and square metres of retail space. Last year more than 100,000 sqm of vacant retail space became occupied, Locatus calculated.
At the same time, rental prices have finally fallen, which is good news for new shop openings. Inner-city locations are once again feasible, while many retailers – who were forced to move to the outskirts of towns and cities – can once again afford A-locations.
In many countries, the government measures have proved effective – at least, for the time being… Worrisome times may still be ahead though, now that government support is coming to an end and the war in Ukraine is causing new unrest and supply problems. It remains to be seen how things will evolve now, as the support measures may also have kept a number of retail companies artificially alive. These zombies are likely to fall over in the near future…
4) Global fragility
If the coronavirus pandemic has shown one thing, it is the fragility of the ‘just in time’ globalised system. For two years now, the supply chain has been making violent movements instead of following a straight line: it began with toilet paper shortages and will not end with energy prices so high that fishermen no longer sail.
We have not heard the last of the coronavirus: technology city Shenzhen, home to Tencent and Apple supplier Foxconn, is at the time of writing again in lockdown because of the stubborn omicron variant. Yet we are already in the midst of another crisis: the war in Ukraine is not only turning the stock markets blood red, many believe we are also heading for a global food crisis.
Flexibility and agility are the magic words in the ‘new normal’ supply chain management and logistics, because how do you plan for the unpredictable? A world of literally limitless efficiency and “lean & mean” gives way to a world of uncertainty, where buffers, back-ups and “near-shoring” (producing closer to home again) drive up costs and fill the warehouses.
5) Price is unbeatable
Flashback to two years ago: did you start baking bread at home? Did you go and get fresh vegetables and fruit at the farm shop? Did that fruit end up in healthy, immune-boosting smoothies, because taking care of yourself is always the most important thing? And today, how much bread is still baked, how many organic greens are bought? A lot less, if you ask the short food chain retailers and organic shops.
Covid had taught us all how much fun it is to cook and how important good food was – or so it seemed for a while. Unfortunately, the predicted growth of organic and sustainable food has not materialised at all. Not only are consumers caught up in the hustle and bustle of everyday life, but there is also great uncertainty, spiking inflation and falling consumer confidence. Price is back in the foreground, the rest fades quietly into the background.
Who benefits from this? Exactly, the discounters, price-cutters and bargain shops. Although a middle way is increasingly being found: Lidl promising that it is sustainable but not expensive and Delhaize linking discounts to healthy products are just a few examples. They show that a “new normal” has arrived in this area as well.
