The COVID-19 pandemic has impacted US commerce in an unprecedented way. In March 2020, the majority of the country engaged in social distancing and most states mandated non-essential businesses to close, leading to retail activity coming to a halt. The fall-out has been staggering as retailers furlough employees in the millions and close stores indefinitely. Essential retailers, like grocers and drug stores have remained open, temporarily benefiting from people stocking-up. Grocery delivery services have surged as people stay homebound, and a lot of non-essential retail has moved exclusively online. The shift in consumer behavior and retail operations has led to a landscape vastly different than the one that existed prior to COVID-19. In order for retailers to reopen, they are developing data-driven playbooks to optimize their footprint, updating their operating and business models, and looking to secure their financial position to carry them to success in the new reality.
In the following report, KPMG surveyed a panel of top retail executives across channels to understand how retailers are preparing for re-opening.
Three-stage phased impact from COVID-19
Adopting a more flexible and faster planning process
To manage through the high level of uncertainty, retailers need to manage four interdependent activities:
- This report provides insights and recommendations for retail companies based on a survey of 27 retail executives on their responses to COVID-19 driven changes and a KPMG Consumer Pulse survey conducted with 1,000 consumers.
- Retail executives reacted to mandatory store closures by taking actions to improve liquidity, with 74% of respondents taking some action on lease expense; 96% on mitigating store labor cost; and 93% on limiting corporate employee cost.
- E-commerce has accelerated and is expected to remain a larger portion of sales in the “new reality”. 81% of executive respondents have seen an increase in e-commerce, and consumers expect to continue to dedicate a larger share of spend online after recovery.
- While store reopenings have begun, a majority of executives are concerned over a second-wave of closures. 48% of respondents have already begun to reopen stores, and an additional 33% have plans ready, but more than half of executive respondents (54%) expect stores to close again after reopening due to a second wave.
- The three most important conditions for reopening (outside of government mandates) are store safety protocols being in place, local infection rates, and store workforce availability, followed by demand-linked considerations like foot traffic at other local retailers and modeled store profitability.
- COVID-19 has triggered long–term cost reductions, with 63% of surveyed executives planning to or considering permanently closing stores that were underperforming pre-COVID-19, 26% pausing new store openings, and 63% of respondents planning to reduce cost structure in response to a recession environment.