Covid-19 has changed the global landscape and the world of retailing and ideas of expansion may never return to what people were used to previously. In the next few pages RLI takes a look at the retail sector and how companies are approaching international expansion in a new world.

Arecent venture backed by apparel-licensing firm Authentic Brands Group LLC and mall owner Simon Property Group Inc. together called SPARC Group LLC, has agreed to buy the famous, 200-year old retailer Brooks Brothers Inc. for $325M. Another example of this is the same partnership acquiring the Lucky Brand Jeans, the American denim company founded in 1990 for $140M.

This is just one example of many companies, even heritage brands with decades of history such as Brooks Brothers, who have struggled in recent months with the onset of Covid-19 and all the accompanying troubles and restrictions it has brought to local, regional and international retailers.

‘The Realities of Retailing in a Covid-19 World’ report by René Vader, Global Sector Head, Consumer & Retail, KPMG International; Paul Martin, Chair Global Retail Steering Group & Head of Retail UK, KPMG in the UK; and Jessie Qian, Country Sector Head Consumer and Retail, KPMG in China highlights that as entire countries came under quarantine orders and consumers around the world began to shun human contact, retailers scrambled to adapt. They recognised the global response to the novel Covid-19 virus will have a significant impact on their business, they understand the situation is changing daily and they know they have little time to respond.


The report offers five key areas where retail executives should be focusing their attention in this new world of retailing and these are, manage demand fluctuations, shore up the cash reserves, protect the people, think about the long-term supply challenges and talk to customers. It is clear that the virus has fundamentally changed the reality for retailers; it is time to face that fact and start adapting.

Retail is one of the sectors most affected by Covid-19, in both positive and negative ways. Grocers, pharmacies, and e-commerce marketplaces are sustaining consumer access to essentials – food, medication, toiletries, and selected “at home” categories – while striving to protect customers, employees and suppliers. This statement comes from ‘The next normal: Retail M&A and partnerships after Covid-19’ report by Harris Atmar, Steven Begley, Jane Fuerst, Stefan Rickert, Rodrigo Slelatt and Madeleine Tjon Pian Gi. The report also highlights that store closures and sharp declines in discretionary consumer spending have crippled nonessential retail (other non-food, apparel, fashion and luxury products). Many retailers have already had to make tough choices, including temporarily or permanently closing doors, furloughing employees and more.

The Covid-19 outbreak has forced enterprises to revisit, and relook at, their existing operational and business models. The World Trade Organisation (WTO) expects global merchandise trade to decline by as much as 32 per cent in 2020 due to the direct impact and fallouts from Covid-19, according to Amitava Sengupta in his article ‘The Tale of Retail: Preparing for a post-COVID World. With the epicentre shifting toward major economies such as Europe and the US, the chances of a full recovery in 2021 are uncertain. The shifting dynamics of socio-economic interactions have also created an unexpected rift in supply and demand patterns, one of the many retail challenges in this scenario. As a result, there have been simultaneous supply and demand shocks across the retail sector. These shocks are expected to slow down the economy further.


What does this all mean for the retail sector?

The fashion retail sector has been one of the hardest hit by the effects of the Covid-19 pandemic. Most major fashion retailers have underperformed the MSCI World index since the mid-February market peak, with a not insignificant number being forced to file for bankruptcy.

This being said, reports of the demise of fashion retail and suggestions that the sector is in structural decline are overplayed, according to Mark Nelson’s Industry Insight – ‘Opening Up – Fashion retail in a post-COVID-19 world’.
This is partly due to the so-called “frequency illusion”, where in this case a stream of negative headline regarding underperforming (and often smaller) fashion retailers obscures the overall picture.

‘The State of Fashion 2020’ report put together by McKinsey and The Business of Fashion estimates that 56 per cent of companies within the fashion industry destroyed value in 2018, as measured by economic profit. Yet, several of the top 20 producers of economic profit in the fashion industry were retailers, including Zara owners Inditex; TJX; Fast Retailing, the owners of Uniqlo and Next.

The intensely competitive nature of the fashion retail sector makes having a differentiated business model is essential; however having a clear and focused strategy is no guarantee of success.

Meanwhile the beauty sector has weathered waves of uncertainty during the ongoing coronavirus pandemic, and pop-up stores or curb side pick-up locations could be the key to a much needed business boost, according to retail experts, Florence Wright, Senior Retail Analyst at e-commerce consultancy Edge by Ascential and Michelle Smith, Business Director at retail design consultancy firm Fitch.

With worldwide store closures and extensive nationwide lockdowns for months during the Covid-19 crisis, swathes of beauty brands and retailers turned to e-commerce. But now, as lockdowns continued to ease and retail slowly reopened, could pop-up stores and pick-up locations be beauty’s next smart move?

“The format is particularly relevant to the uncertainty surrounding retail and consumption in a post-Covid-19 landscape as they are a relatively low-risk and low-cost testbeds for trends and experiences, which can then be applied to the wider store estate if successful,” Wright explained to CosmeticsDesign-Europe.

In the last few months, grocery retail has changed fundamentally, for the short term at least. The in-store experience has evolved as retailers have put social-distancing measures into place. Customer numbers have been limited, flow is being manged and the checkout experience has been transformed. This is according to Stewart Samuel, Program Director IGD Services Canada in his piece ‘What will grocery retailing look like in a post-Covid-19 world?’

Samuel expresses that the trading environment has already adapted to the coronavirus pandemic and many of the changes put in place to support physical distancing are expected to remain, with retailers starting to consider the implications for future store design. Physical stores will need to be more agile and flexible to accommodate extreme trading cycles and a stronger focus on operational efficiency versus retail theatre could be a legacy of the pandemic. Online grocery retail is expected to remain at an elevated penetration, relative to pre-crisis levels and retailers are investing in expanding fulfilment capacity and new operators are attracted by the enhanced growth opportunities.


Life After Covid-19:
What’s Next for Retail?

Brands have had to adapt and learn over the lockdown period and throughout the coronavirus outbreak. An example of this is Hotel Chocolat, who have adapted as demand grew online as stores shut. The brand was forced to close its shops and shift stock – and transactions – online for the Covis-19 lockdown, will inform its future strategy. Angus Thirwell, Co-Founder and Chief Executive of Hotel Chocolat said: “The challenges of Covid-19 have pushed us to accelerate many of our existing plans and strategic initiatives, helping to; strengthen our financial position, improve our multichannel capability, deepen customer engagement and loyalty, and accelerate the rate of product innovation, whilst continuing to make good progress in our two new sizeable markets of the USA and Japan.”

In a separate example, Card Factory has stepped up its multichannel investment in the last few months, launching a new e-commerce website, trialling click and collect and planning a mobile app as it looks to differentiate itself from online-only competitors. It is also pausing new store format trials as it looks to understand where shoppers will want to buy in the future. The steps came after online sales growth of 120 per cent during the Covid-19 lockdown helped Card Factory offset the effect of shutting its more than 1,000 UK shops.

The future of retail may look very different by the end of this year, a stark contrast from the start of the year, and a key example of this is humanless retail, highlighted by H&M Group who has launched its first automated-retail store using smart vending machines in Paris. The retail experience is centred on a huge interactive touch screen with a custom software interface; the machine features beautifully presented illuminated display windows showcasing a curated selection of the brands scented bath and body products. The Paris unit is just the first step, as there are big plans for humanless retail with a widespread rollout of the machines set for 2021.

The fallout – and recovery – of the retail industry will vary by sub-sector, all of which will be facing different challenges and obstacles in this new world of retail.