Clearly, the new normal won’t look like the old-normal.
I think the gorilla in the room is unemployment. The numbers vary but about 25 million people, 16% of the population, are unemployed. The implication is reversion to the traditional recession hierarchy of needs: shelter and food at the top with luxury and discretionary purchases at the bottom. What’s more, the implications are mental more than economic: “a recent KFF poll, nearly half (45%) of adults in the United States reported that their mental health has been negatively impacted due to worry and stress over the virus.” (Source: t.ly/6lfA) Social isolation, mental health, stress, anxiety, and depression will have a lasting impact on the pharmaceutical, cannabis, and liquor businesses as well as treatment facilities like addiction clinics.
The pandemic has forced certain changes that should go away such as product shortages (rice, beans, pasta), hoarding of certain goods (toilet paper), and long wait times in-store and for delivery windows.
What I think will stick and continue to grow is “omnichannel” retail where people can use any device (mobile, apps, web) to engage and buy almost anything from the top retailers — not just Amazon, but Walmart, Target, BestBuy, Lowes, Macy’s and others are making it easy and I think customers want that convenience. For big-box retailers, this will put a squeeze on margins, and smaller local retailers will not have an ability to compete at all — I’m not sure that buying local is going to stick.
Alongside this omnichannel buying is ordering online and either picking up in-store or having it 2-day delivered to your home, free. For the foreseeable future a lot of people, particularly those at high risk, will insist on the service. I think this will shift some of the market strength and momentum from Amazon back to Walmart. However, the restaurant industry is due for a huge economic correction as services like Uber Eats, DoorDash, GrubHub, etc. are bleeding the margin and forcing restaurants to change pricing and service behavior.
Substantial improvements to the back office — warehouse, supply chain, POS and transaction systems — have increased accuracy and reliability such that consumers have very high expectations in the shopping experience and will insist it continues to be improved. “The last best experience anyone has anywhere becomes the minimum expectation for the experience they want everywhere” — IBM collateral.
As the meme goes: “Half of us are gonna come out of this quarantine as amazing cooks and the other half is gonna come out with a drinking problem.” I think many people will shift some portion of their time and spending to cook at home, practice farm-to-table, and overall pay attention to better nutrition. The losers might be bars and restaurants, but maybe not since so many are closing or operating with reduced service. There is no doubt that new construction and renovation of restaurants will have a drive-thru and people will find comfort in having minimal contact. I’m fascinated by the outcome in a couple of sectors like Buffet restaurants (can self-service survive social distancing and shared utensils) and Chinese cuisine (will people continue to avoid them as the President calls it the Chinese Hunan Virus).
I think the fashion and jewelry industries (excluding very high-end luxury brands) will remain slow as people have become comfortable wearing their cozy clothes, skipping make-up, and generally dressing down. It also continues the business trend of casual attire, where even banks like Goldman no longer require suit and tie. After 9/11/2001, I stopped wearing my Rolex to meetings as it felt ostentatious given the attitude of New Yorkers.
On a random parting note, the biggest winners in the coronavirus pandemic are dogs: they see their owners all the time and get to go out several times a day. I think we will see spending in the Pets category grow and more adoptions of rescue dogs.
