A WORLD RETAIL CONGRESS PUBLICATION

THE RETAIL WORLD 2020RETAILING IN A TIME OF CRISISISSUE 05

3Issue 05 |2 | Issue 05

A cross the world, retail is gradually re-opening for business. As you

will read from the country reports in Issue Five of our ‘Retailing in a Time of Crisis’ series, retailers are working hard to remodel and repurpose their stores to incorporate the required and necessary safety

measures. What we can see right around the world is that this is what consumers expect as a minimum before they will even enter a store. Where they are confident in entering a store or a mall, people are spending money as we hear in this report from Australia to the Middle East, Europe and Latin America. There is pent up demand and people will spend with retailers and brands they can trust.

Despite this very welcome move towards the re-opening of stores, no-one believes that it is a return to ‘normal’. This is more like the ‘end of the beginning’ phase in this global crisis which is reshaping everything. A strong theme from many of the reports in this Issue is the dramatic shift to online by consumers around the world. With that has come an enormous challenge for retailers to build their capabilities and resources to meet this demand that for many retailers is 100% higher than 12 months ago. But we are also hearing about incredible examples of leadership and also resourcefulness, innovation and skill shown throughout retail organisations of all sectors and geographies as they re-set their business to satisfy the demands of their newly omnichannel customers.

But what has also become dramatically clear in the time between the last issue of this report and this one is that the world has become galvanised by a powerful movement to address racism, lack of diversity and opportunity. As Matt Shay, the President of the National Retail Federation, states in this report, Black Lives Matter is an issue of fundamental importance that the US retail industry is taking a proactive stance on to help tackle the long-overdue issues of racism and inequality. His message will resonate with retail leaders around the world.

This issue also hears from the President of Lane Crawford & Joyce, Andrew Keith. He is leading a global campaign within the fashion industry to take decisive action against the issues around the environmental impact of the sector, its wastefulness and unnecessary discounting that has led to what Andrew describes as ‘a broken model’. All of these issues were seen as top of the agenda before, but he argues that the arrival of the COVID-19 crisis presents the industry with an unprecedented opportunity to bring in real change.

If these extraordinary times are creating unbelievable challenges, it is good to see that retail leaders are working out how best to respond for the good of their customers, their employees but also it seems to the wider societies, economies and communities they serve. We hope that you find the insights, case studies and ideas contained in Issue Five of our reports to be inspiring and provocative. Thank you to all of our contributors for their on-going contributions to this report.

IAN.MCGARRIGLE@WORLDRETAILCONGRESS.COM

IAN MCGARRIGLE CHAIRMAN | WORLD RETAIL CONGRESS

INTRODUCTIONCONTENT

ANALYSIS: E-Grocery: The $200 Billion Opportunity Ahead . . . . . . . . . . . . . . . . . . . . . . . . . . 4

ANALYSIS: Developing Local Responses to COVID-19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

OPINION: A wakeup call to the fashion industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

ANALYSIS: INNOVATION SPOTLIGHT: UNITED KINGDOM | Partnering for success . . . . . . 10

ANALYSIS: Serving the Anxious Consumer after COVID-19 . . . . . . . . . . . . . . . . . . . . . . . . . . 12

INNOVATIONS: Retailers respond to coronavirus through innovation . . . . . . . . . . . . . . . . . 16

COUNTRIES

Walgreens Boots Alliance: Going above and beyond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Spar International: How the West can learn from the East . . . . . . . . . . . . . . . . . . . . . . . . . . . 20GLOBAL

China: Livestreaming becomes a new revenue generator . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

India: Indian markets open up to a tough reality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

ASIA

Europe | EuroCommerce: A crisis affecting 29 million retail workers . . . . . . . . . . . . . . . . . . 32

Germany: Germany’s plan to save more and spend less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Denmark: A feeling of normality for Denmark . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

France: A boom in food, beauty and toys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Italy: Deep discounts fail to lure the Italian shopper as economic fears grow . . . . . . . . . . . 40

Russia: Russian retail adapts and innovates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Spain | El Corte Inglés: Customers returning with confidence . . . . . . . . . . . . . . . . . . . . . . . . 44

Spain | Tendam: The excitement of serving customers again . . . . . . . . . . . . . . . . . . . . . . . . . 46

United Kingdom: Re-open for business at last . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

EUROPE

Saudi Arabia: Adjusting to new retail norms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30MIDDLE EAST

Australia: Waking up from isolation to the new reality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50OCEANIA

United States | NRF: Retail’s role in fighting racial injustice . . . . . . . . . . . . . . . . . . . . . . . . . . 58

United States | Coresight: Coronavirus fallout could prompt sourcing shift away from China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

NORTH AMERICA

Latin America: Tentative steps for Latin America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52LATIN AMERICA

Brazil: Brazil’s digital revolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

5Issue 05 |

C OVID-19 has caused an unprecedented spike in online grocery demand. Almost overnight, the barriers (real or perceived) that had previously limited adoption of online grocery were eliminated.

This resulted in a demand spike that has accelerated online grocery penetration by three to four years across all markets and driven a growth in grocery ecommerce penetration of 2-3x pre-crisis levels. To meet this demand, retailers have rapidly overcome technology hurdles and an unclear path to profitability to quickly launch offerings. The result is an unprecedented evolution in the e-grocery market: adaptation of innovative operational models, new click-and-collect emergency stations, changing over of stores into ‘dark stores’, the release of pre-packaged essentials boxes, and CPG companies and wholesalers launching direct-to-consumer ecommerce offers.

Now that stay-at-home mandates are easing in many markets, grocers are looking to answer two key questions: How much of the current spike in e-grocery adoption is likely to stick, and how much can they afford it to stick?

We analysed three potential scenarios for the future of e-grocery. This illustrative example focuses on the US market:

• Scenario A: Permanent shift – assumes continuous penetration, reaching 3.5x the pre-crisis level, with slower growth but high adoption rate, as 90%+ of current online customers stay online

• Scenario B: Modest demand reversal – assumes penetration reverts to 2x pre-COVID-19 levels, as 50% of converted consumers do not remain loyal to the online grocery channel

• Scenario C: Limited adoption – assumes penetration reverts to near pre-COVID-19 levels, retaining only 25% of pandemic-induced consumer demand

While each market will differ based on customer preferences, competition, and demographics, in most markets we anticipate demand will fall somewhere between the permanent shift to online and a modest reversal scenario.

We believe COVID-19 has caused a permanent increase in e-grocery adoption, and much of the demand surge observed in the past three months will remain online. Our view is informed by:

• Ordering groceries online as habit forming – Experience shows that after customers complete five online orders, they become channel-loyal. Over one in three digital purchases in fresh and packaged foods was from first time users. A survey administered by BCG in May 2020 of 17,000+ consumers globally revealed 25% of consumers consider online shopping a new habit developed during the pandemic.

• Post-lockdown growth – Early results in the US market indicate that as the panic stockpiling period passed, total transactions in bricks-and-mortar stores decreased. However, the number of e-grocery transactions continued to rise.

• Lasting increases in e-grocery penetration following past crises - MERS in South Korea caused a permanent uptake of 4-5% in online penetration, with total online penetration reaching roughly 20%. South Korea continues to be the most advanced e-grocery market in the world.

However, we believe some customers will revert to pre-pandemic behaviours. As confinement measures wane across countries, we expect a moderate reversal in e-grocery sales due to:

• Reduction in online transactions across all segments – Our survey found 91% of consumers plan to reduce or maintain online grocery spend when the mandates lift. The slowdown in expected sales is a mix of overall spend decrease due to economic hardship, poor online experiences, consumer preference, and lack of online presence of discount store formats. In addition, those consumers who have temporarily moved all their food purchases online due to safety reasons are likely to eventually return to a mix of on- and off-line shopping.

• Shift from grocery to restaurant spend – The large portion of the overall grocery demand spike caused by the shift away from restaurant spend will revert over time – impacting both stores and the online channel.

This channel shift may well be the single largest growth opportunity in grocery retail over the next three to five years. Even if only half of new COVID-19 e-grocery demand converts permanently, we will witness an unprecedented acceleration in the online grocery market, with $200bn globally moving to the channel by 2021.

But, that growth can come at a cost. Most grocers struggled to earn profits and a return on capital on their ecommerce business before COVID-19, and the additional volume has not solved underlying business model issues. Retailers must actively seek new strategies to attain sustainable profitability of e-grocery and not dilute margins. There is not a one-size-fits-all model. We expect several ecosystems will co-exist, with new innovative solutions continuously challenging the status quo. Grocers must choose an operating model tailored to the value proposition best-suited to their customer base, and then invest in the right technology to execute that model. They must also evaluate the trade-offs between the ease of implementation, long-term scalability, and profitability.

It is critical that grocers also take the time to re-imagine the role of stores given this online shift and adjust them to rising e-grocery penetration. The challenge is significant, particularly as e-grocery still has unique operational challenges due to the temperature control requirements for perishable products, weight-to-value ratio, and need for in-person hand-off of products in many cases.

With new e-grocery players entering the market and current leaders quickly scaling their capabilities, now is the time to act. Players who act now – understand their customer and market needs, find the right business model to reach profitability, build the right technology – will capture a disproportionate share of this $200bn opportunity.

RANGE OF POSSIBLE SCENARIOS GOING FORWARD

E-Grocery sales penetration(indexed to Feb '20 = 1.0x)

Source: U.S. Census Bureau, Forrester, Brick Meets Clicks, BCG Analysis

Historical actuals

Sept 2019 May 2020

Flatten Fight Future

Scenario A:Permanent shift

Scenario B:Modest reversal

Scenario C:Limited new adoption

2021+

E-GROCERY: THE $200 BILLION OPPORTUNITY AHEAD

ANALYSIS

Chris Biggs, BCG Managing Director & Senior Partner, and Dan Bodley, BCG Managing Director & Partner, offer their perspective about what the future may look like for e-grocery and why retailers should act now.

A WAKEUP CALL TO THE FASHION INDUSTRY

OPINION

Andrew Keith, President Lane Crawford & Joyce

7Issue 05 |6 | Issue 05

Wirestock Images / Shutterstock.com

In an industry renowned to be competitive at best, the high level of sharing and openness across both forums, has been remarkable. Following the announcement of both forums proposals in May within days of each other, industry players from across the Globe have signed on in support. Not surprisingly, the single most uniting element in both forums for retailers is the prevalence of discount. Investing a huge amount of money and resource in travelling the world and selecting and merchandising, is no longer viable because of the amount of product sold at discount. The model is broken.

Both forums have a slightly different approach. Dries’ Forum has focused on highlighting the urgent and critical need to simplify our businesses, making them more environmentally and socially sustainable, and aligned more closely to customers’ needs. We’ve proposed to put the Autumn/Winter season back in winter (August/January) and Spring/Summer season back in summer (February/July); to create a more balanced flow of deliveries through the season to provide newness but also time for products to create desire; and discount at the end of the season in order to allow for more full-price selling – January for Autumn/Winter and July for Spring/Summer. We also agreed to work to increase sustainability through the supply chain and sales calendar through less unnecessary product; less waste in fabrics and inventory; less travel; make use of digital showrooms in addition to personal creative interactions; and review and adapt fashion shows.

The Forum will not police the industry or actions and because of anti-trust laws, we cannot set down or agree to a global approach to discounting. Those who are aligned and who have signed on will take action in their own businesses. We all know each other and are in contact so there will be an organic sharing of the progress we’re each making.

#rewiringfashion is addressing not only discounting but also fashion weeks and show schedules, and looking at ways in which the supply chain of the industry can be more sustainable. Discussions continue with subgroups focused on those areas. At this stage there isn’t an alignment among designers on the fashion week and show schedule – each business is unique and every designer wants to look at how they show and sell most effectively. However, there is an alignment between the young, independent designers – they will show in March and September and sell in June and July.

From the second half of 2020 we will see travel to buy scaled right back; less money spent on extravagant fashion shows; product delivered at the appropriate time in the season; less discount; and designers really thinking about how to connect with their customers in new ways.

At Lane Crawford and Joyce, a significant portion of the Spring Summer 20 merchandise will not be marked down because they are timeless, wardrobe essentials. Though it may sound counter-intuitive, we are encouraging customers to buy better and buy less, and to think about how they use what they purchase. Luxury should last. In

For too long, retailers across the fashion industry have been buying too much, buying product they had no way of selling, and confusing the customer by selling product that had nothing to do with their seasonal needs at that time. As a consequence, customers have been falling out of love with what we do and retail is in crisis.

In late March, when a global ecommerce platform started discounting new spring summer season stock as the pandemic took hold globally, I could see the floodgates about to open on markdowns – and a forewarning from our last global crisis. Yes, we were all suffering - I run two luxury multi-brand retail businesses, Lane Crawford and Joyce, with operations in mainland China and headquarters in Hong Kong, which has had no respite since social unrest broke out in June 2019. But for the short-term gain, the industry would likely suffer irreversible damage.

In 2008 during the Global Financial Crisis, one of the world’s most revered department stores went on discount in the US and every other retailer was forced to follow. The American retail market has seemingly never recovered, unable to sustain healthy, full-price businesses because customers have been conditioned to expect discounted merchandise all season round, no longer just at the highly anticipated end-of-season sale.

Lane Crawford, we are verbally communicating this with our customers in-store. We have marked merchandise that will not be discounted in store with a dot system, so our style advisors can walk their customers through buying better. From AW20, we will only stage an end of season sale on seasonal product from AW20.

We are working on sourcing in more conscious ways: we will be working with more brands in Greater China; we are looking at how we can repurpose existing merchandise with brands; and for the small amount of product we produce ourselves, we are working with manufacturing partners with responsible supply chains.

Our buying teams’ travel will be significantly reduced as we work with partners remotely and digitally with online showrooms and more Zoom calls, with the potential to also include customers. It is clearly important that buyers still have the ability to see and touch product so travel won’t be entirely eliminated but this will also be of huge benefit to buyers around the world whose lives were miserable because they were always travelling and for many weeks at a time - there’s nothing glamorous about it. Our buyers are young, and they are very enthusiastic about the discussions we are having on defining a more sustainable approach to what we do.

Longer term, we are working on how we reduce single-use plastic in our business; reducing our carbon footprint; and recycling waste as part of our efforts to be a responsible business. We have already taken steps to reduce our carbon footprint by shifting from air to sea freight and on-ground to electric and bio diesel. With the objective to recycle our own waste, starting in our warehouse with plastic hangers, polyfoams, Styrofoam, plastic film, bubble wrap, cardboard and plastic, we have established a recycling platform with third party logistics and specialist recycling partners, that other businesses are now leveraging. And we are now piloting a new service for Lane Crawford members to take back used beauty plastic and glass packaging, our own packaging and used electronics for recycling, using our online returns collection logistics, and encouraging customers to drop off at our stores.

Certainly, we are looking at a very different retail landscape whether these two forums drive it or not.

The new world and our customers will keep us on track. The levels of disruption we are facing all around the globe mean that businesses must be quick and responsive, defining new ways of producing and how they flow their merchandise. Brands will work with retailers who will be responsible with their products. Customers will purchase with more conscience and be conscious of how they spend as levels of disposable income are affected.

Clearly there is no business as usual. Now is the time to future proof our businesses. Now is the time to stop producing and buying so much needless product and stuffing it in landfill.

Since then we have seen the rise of ecommerce platforms, driving growth strategies on breadth and depth of product, and discounting continuously through the season before going to an early, deep seasonal sale because they have so much stock to clear. Most are not profitable.

Price and discounting are not a luxury strategy. If customers don’t value what we sell because we don’t value what we sell, we have killed desire. And if we’re producing too much for longtail platforms and people who are not prepared to pay for it, we’ll kill the planet. Forget our businesses. Game over.

Rather than taking the pandemic as the death knell, it is our wakeup call, a time to reset and redefine a new way forward.

Spurred on by that sale flashpoint in March, I found through discussions with like-minded brand partners and retailers, that we were of the same view. Led by fashion designer Dries Van Noten, I participated in a series of discussions with key industry players to determine a proposal for the future, while also participating in #rewiringfashion, facilitated by the Business of Fashion, which set forth its manifesto.

COVID-19 has accelerated the transformation of retail but it is also putting a powerful spotlight on some major industry issues that need to be addressed. The oversupply, the waste, the discounting and the environmental impact of the fashion industry is one of those enormous issues. Andrew Keith, President of Lane Crawford & Joyce, is leading a global campaign driven by a belief that now is the time to fix the broken fashion industry model. Writing exclusively for the World Retail Congress, he sets out the case for change.

If you wish to be part of this movement for change please sign the open Forum letter at forumletter.org and join #rewiring fashion at www.rewiringfashion.org. Or start your own forums within your sector – it has been a very powerful process coming together and if the luxury fashion industry can down its daggers, anyone can.

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1. Displayed R-Rate is a simplified approximation using confirmed cases as displayed, not controlling for risk of infection by social exposure or relative share of immune people2. Incidence refers to new cases per 100k residents over last 7 days

Examples: Sunderland and Enfield

Source: OC&C analysis

TRACKING RISK AT A LOCAL LEVEL ALLOWS RETAILERS TO MAKE MUCH SMARTER DECISIONS ABOUT STORE OPENING AND OPERATIONS

Daily R-Rate1 vs. 7-Day Incidence2 Average Across LTLAs

Both locations are very similar atthe moment Low Risk segment

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Both locations started fromapproximately the same place

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moving through the high risk area

Enfield

Sunderland

Enfield - would beclosed for 1 week(using the Risk matrixwith R>1 and incidence>50/100k)

Sunderland - would beclosed for 3-4 weeks

9Issue 05 |

DEVELOPING LOCAL RESPONSES TO COVID-19

ANALYSIS

Photo by CJ Infantino on Unsplash

The next wave of COVID-19 restrictions are likely to play out locally rather than nationally.

It is becoming clearer that demand will not return to retail stores and brands in the same profile as pre-crisis, and that it will also not return at the same pace everywhere. Consumers will continue to be reticent to travel to and shop in locations that they deem to be riskier, and restrictions on travel (both international and local) will continue to hamper accessibility to certain location types.

Furthermore, infection rates have and will continue to vary substantially across individual areas – as of 18 May, normalised infections (per 100k residents) in some parts of London were twice that in Bristol - and the R rate is strongly influenced by local mobility patterns. There is increasing pressure on centralised governments to empower local authorities and organisations to manage risk at the local level, in an effort to increase the effectiveness and efficiency of outbreak management.

We are already starting to see some retailers planning differential openings and operating hours across their estate as a result.

But we believe that the retailers who will manage this period most effectively will be the ones that go further, step-changing the extent to which they monitor and analyse traffic and risk at a local level.

Retailers are starting to work through the opportunities that can be unlocked through local monitoring and decision making. The potential applications and benefits of this approach are numerous:

Data on expected store-level demand levels and local risk can inform decisions around future opening patterns and operational requirements; opening times,

footfall management, returns procedures and cleaning intensity requirements could all be nuanced, and labour flexed accordingly.

Larger retailers are feeling increasingly empowered to lobby local governments on re-opening strategies and on industry standards and protocols for operation; where retailers are able to point to robust analysis on the level of risk at their site, there may be scope to dial down restrictions and requirements to maximise sales and profitability where risk is inherently low.

Local risk information can be used to drive customer demand, informing outbound marketing strategy and messages, directing customers across channels and locations appropriately and providing reassurance on the real level of risk at sites.

And clear indicators combined with effective communication can provide instant reassurance to colleagues that retailers are actively monitoring and care about the level of risk to their health and that when the doors are open, it is safe to be there.

In the medium-term, better local understanding of traffic flow and risk will enable retailers to make more informed decisions around what the store portfolio of the future should look like – more residential and less commuter sites for example.

As the challenges of the COVID-19 pandemic on the retail sector continue to shift and evolve, we are moving into a local phase – and retailers who adopt a data driven approach will be one step ahead.

By Tom Charlick By Katherine Fiander

One of the effects of the COVID-19 crisis has been a focus on ‘the local’. Consumers in lockdown have rediscovered their local services and retailers too are having to think more locally. OC&C Strategy Consultants’ Katherine Fiander, Associate Partner, and Tom Charlick, Partner look at what this means for retailers.

INNOVATION SPOTLIGHT: UNITED KINGDOM

PARTNERING FOR SUCCESS

ANALYSIS

Matt ClarkManaging Director, AlixPartners

Dan CoenManaging Director, AlixPartners

11Issue 05 |

Photo by Liviu Florescu on Unsplash

NEW PARTNERSHIPS AND PROTECTIONSThere was a tremendous drive in innovative partnerships of the kind that would not be expected in the normal course of evolution, but became the answer when retailers had to move fast and react to the requirements of the extraordinary situation. Various retailers, including Marks and Spencer, Aldi, Co-op, and Morrisons partnered with food delivery company Deliveroo to offer quicker last-mile shipping to customers. Similar innovative collaborations and partnerships as well as new business models are likely to continue to emerge as recovery continues. There were also efforts to support gig economy workers at the frontlines making ecommerce home delivery possible. Hermes was one major example, with the luxury retailer setting up a £1m support fund to assist its couriers in cases where they had to self-isolate.

TECHNOLOGY ADOPTION ACCELERATES Cashless transactions were the call of the hour. Sainsbury’s SmartShop app had existed prior to COVID-19, but adoption accelerated much more rapidly than the retailer could have predicted as it aggressively marketed the contactless shopping service during the crisis. Using the app, customers were able to scan their shopping as they walked around the supermarket, pack their purchased products up on their own, and walk straight out of the store without them or their shopping coming in close contact with anyone. Safe for the customer, easy for the retailer. Ocado, meanwhile, set up virtual queues to help keep its website up and functioning during the surge of online orders. Expect the pace of technology adoption in various areas of operations to rise as the industry continues to emerge from the crisis.

UNPRECEDENTED TIMES, UNPRECEDENTED ACTIONSeveral rival grocery retailers and supermarkets came together to ride out the increased demand for certain products and manage supply chain concerns. In a remarkable move, Morrisons, Sainsbury’s, Costcutter, Co-op, Tesco, Lidl, Aldi, Waitrose, Marks and Spencer, Iceland, Asda, and Ocado, jointly published an open letter that detailed steps they were all taking to maintain both consumer safety and flow of goods. The letter also asked customers to refrain from stockpiling popular items such as toilet paper and canned tomatoes. While the move was coordinated by the British Retail Consortium, it wasn’t something anyone could have predicted prior to the crisis.

In their latest special report highlighting how retailers are developing innovative solutions in response to this global crisis, AlixPartners focus on some outstanding examples of best practice in the UK.

13Issue 05 |

SERVING THE ANXIOUS CONSUMER AFTER COVID-19

By Thomas Harms, EY Global Retail Leader

ANALYSIS

Kapa1966 / Shutterstock.com

W ith the coronavirus pandemic continuing to play out around the world, retailers are trying to anticipate what will come next. How will the attitudes and behaviours that consumers have adopted in lockdown change, as their freedom is slowly restored?

To understand the new consumers COVID-19 is shaping, EY has widened the scope of the EY Future Consumer Index to include consumers in China. By looking closely at China’s emergence from lockdown, we can get a perspective on how the pervasive sense of caution might persist or evolve in other countries, as they remove or ease their restrictions.

OUT OF LOCKDOWN, BUT NOT OUT OF THE WOODSThe EY Future Consumer Index suggests that as Chinese consumers are able to return to ‘normal life’, many remain deeply concerned about picking up where they left off. If we see this trend repeat in a significant way across other markets, organisations around the world will have to adapt to serve a far more worried and cautious consumer. When people make decisions about what they buy and how they spend their time, risk will be front of mind.

CONSUMERS ARE CAUTIOUS, BUT THEY’RE READY TO SPENDOverall, Chinese consumers are now spending more in a wider range of categories. But some categories are rebounding much faster than others.

EY’s Future Consumer Index now surveys consumers in China. As the first country to be hit by the COVID-19 crisis and the first to emerge from it, what lessons are there from the behaviours of China’s consumers? Thomas Harms, EY’s Global Retail Leader, highlights the key findings from their research.

Methodology We surveyed 12,843 consumers across the US, Canada, Brazil, UK, France, Germany, India, UAE, Saudi Arabia, China, Japan, Australia and New Zealand during the week of 4 May 2020. The survey questionnaire covered current behaviours, sentiment and intent.

CONSUMERS IN CHINA ARE SPENDING SIGNIFICANTLY MORE IN CERTAIN CATEGORIES THAN THOSE IN OTHER COUNTRIES

20%0%

% of consumers “spending more” next month China

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Fresh food

Household and hygiene products

Personal care items

Frozen food

Canned and dried food

Clothing and footwear

Beauty and cosmetics

Non-alcoholic beverages

Alcoholic beverages

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IMPERATIVE TWO: ACCELERATE DIGITALIn the heavy lockdown stage retailers showed they could be very agile, creating simple but effective ways to minimise in-store physical touch and proximity, for example. But as we move into the next phase of the crisis, digital will be critical. Companies need to quickly redefine their digital strategies and hit the accelerator. ‘How can we e- everything?’ is the question asked by one of our clients.

What could this lead to? We expect to see greater use of the smartphone as an interface generally. New shopping experiences will become possible as personal technologies become more integral to everyday life, people become more comfortable sharing personal data, and other barriers to adoption fall away. Ideas from the margins could enter the mainstream. Consumers may be more willing to share their biometric data to get clothes that fit perfectly without having to try them on. Haptic technology could allow people to ‘feel’ products without physical contact.

THREE OPPORTUNITIES TO ADAPT TO A NEW KIND OF CONSUMER• Can you create a map of the journey your customer takes, from acquisition to loyalty, and work out how to replace any

physical touchpoints that are no longer possible with digital ones?

• Can you encourage anxious consumers back into a shared physical location like a clothing store by rethinking how that location works and using digital technology to help consumers re-embrace the physical?

• Can you give anxious consumers greater transparency across your supply chain and delivery process, so they know you take their concerns seriously and can feel comfortable about buying from you?

Retailers must adapt to a new kind of consumer – one with priorities, attitudes and behaviours shaped by the experience of living through a global humanitarian crisis. This will require digital change at an extraordinary pace. Can leaders implement five years of digital progress in six months?

The bottom line is that retailers have shaped their business strategies, product portfolios, and marketing or engagement around a consumer that values purpose and innovation. But that is not what the Anxious Consumer values. Their buying decision isn’t a trade-off between value and cost, or value and some felt expression of their identity - it’s more about “Is what I’m buying or experiencing worth the risks I’m taking?” This is a new challenge. But it’s one that retailers that act now can turn into an opportunity.

The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.

We see the same encouraging signs when we look further into the future. China’s consumers are far more likely to be in the segments we call ‘Back with a bang’ and ‘Cautiously extravagant.’ And it’s interesting to note how few are in the ‘Return to normal’ segment.

This is further evidence that Chinese consumers feel positive and are looking to a bright future. But the Index suggests they are changing their preferences and behaviours fast, and very few plan to go back to life as they used to live it.

THE ANXIOUS CONSUMER HAS RISK FRONT OF MINDOne critical question is whether the new behaviours and sentiments described by our segments will stick. We think that more consumers, faced with no clear answers about vaccines, will adopt an ‘always-on-emergency mindset’. This is a worldview characterised by a heightened sensitivity to risk, both real and perceived. A new normal emerges as people become accustomed to crisis and are more cautious and pragmatic.

The post-lockdown risk attitudes of consumers in China are an insight into how consumer attitudes elsewhere might change, and what it would take for retailers to remain relevant. There are two standout imperatives we want to share here:

IMPERATIVE ONE: MAKE THE CONSUMER FEEL SAFEConsumers in China are today less worried about returning to certain activities than consumers elsewhere after all they have the longest experience of living with coronavirus and they came out of lockdown first.

Yet in absolute terms they remain extremely cautious about returning to many of the activities that were once part of their normal, every-day lives. This suggests the pandemic has affected consumer attitudes at a deep level.

Will time alone change these attitudes? One encouraging sign is that Chinese consumers are much less concerned about shopping in a grocery store. Like consumers everywhere, they’ve needed to visit such stores to buy food. That means they’ve seen for themselves how stores have changed the shopping experience to make them safe and – critically – to make them feel safe.

There is a learning here for businesses that need to entice consumers back into a communal space: how will you reinvent and communicate the experience you offer so consumers feel the risk has been minimised?

CONSUMERS MAY BEGIN EASING CUT BACKS AND SPENDING MORE AFTER COVID-19 IF CHINA IS A LEADING INDICATOR

Cautiously extravagantBack with a bang

China

Stay frugalGet to normal Keep cutting

Rest of the world

28%

15% 21% 22% 27% 15%

37% 7% 3%25%

LIVING MORE RISK-AWARE LIVES

OF THOSE

52% said they will change the way they shop

70% said they will be more aware of hygiene and sanitation when they go shopping

60% will consolidate their shopping trips into less frequent, but larger purchases

44% will do more of their grocery shopping online.

LESS EXTREME SENTIMENT IN CHINA SUGGESTS THAT CONSUMERS MAY RECOVER OVER TIME

Going to a theatre/cinema

Exercising in a public gym

Going to a bar or pub

Travelling on public transport

Eating in a restaurant

Trying on clothes in a store

Going to a mall

Going to a hairdresser or spa

Shopping in a grocery store

N. America & W. Europe China

Extremely uncomfortable uncomfortable

58%

55%

53%

53%

48%

47%

37%

37%

15%

29%

14%

25%

11%

14%

6%

5%

13%

20%

21%

22%

20%

22%

21%

28%

24%

23%

35%

28%

36%

27%

28%

25%

16%

27%

15%

For more insights and to read the article in full, visit www.EY.com/FutureConsumerIndex

RETAILERS RESPOND TO CORONAVIRUS THROUGH INNOVATION

INNOVATIONS

Justin Sablich, Editor, Springwise

17Issue 05 |

Photo by Ramon Kagie on Unsplash

M any of the retail innovations we’ve spotted via the Springwise community in recent weeks have a particular focus on making the shopping experience less stressful, and in some cases,

more social, for consumers still adjusting to a life affected by COVID-19.

While ecommerce activity continues to spike, a downside for some is that it lacks the comradery that shopping with others provides. This is something one Israeli start-up is aiming to replicate digitally.

Squadded allows users to connect with groups of friends and go shopping together online, chatting through a browser extension as they virtually try on different outfits or discuss what to buy.

Others are making customer service a priority, developing new tools to keep consumers better informed about when to shop, and where. Supermarket chain Lidl recently launched a WhatsApp chatbot in Ireland, where shoppers can converse and be notified of when their local stores are less crowded.

We also spotted the LineScouts app, which takes a crowdsourced and data-driven approach to keep shoppers informed on the safest times to visit various local supermarkets.

As always, Springwise will be tracking which innovative approaches gain traction with consumers, undoubtedly seeing many more bold experiments from all corners of the world emerging over the coming weeks and months.

Squadded

Krisztina Papp on Unsplash

A browser extension called Squadded Shopping Party allows users to connect with groups of friends and shop online together, chatting through the extension as they virtually try on different outfits or discuss items. Once installed, users can go to participating sites and browse. The platform allows users to add items to a wishlist, poll friends for advice and see what other users are buying. Founded by former L’Oréal brand manager Elysa Kahn, Squadded aims to inject a sense of togetherness, trust and transparency into remote shopping.

Takeaway: Even before COVID-19 there was huge growth in social ecommerce, predominantly led by Chinese apps like Panduoduo. This platform allows people to form groups and shop at a discount. Similar social ecommerce apps are expected to sell more than €39bn (£35.5bn) worth of goods in China alone in 2022. For brands, Squadded offers the opportunity for higher conversion rates from the peer-to-peer connection. According to research firm Nielsen, consumers tend to buy more when they shop with friends, because having the decision affirmed by a friend reduces the perception that a purchase is frivolous. Find out more

In the midst of the COVID-19 pandemic, the town of Whakatāne, on New Zealand’s North Island, created a virtual mall featuring local and regional businesses. Customers can choose to shop online by store or product type, and can purchase from several retailers using only one shopping cart.

The virtual mall allows retailers and service providers without an online shopping option to develop one. The platform also links shops that already have ecommerce websites to the virtual mall, while retaining a unique domain name and style.

Takeaway: Even as lockdowns around the world begin to ease, many people are continuing to stay away from retail outlets and other communal services. This may well have dire consequences for small, local businesses that are trying to rebuild. The virtual mall offers these businesses an option, as well as helping shoppers to support their community by making it easier, safer and more fun to shop locally. According to the developers, within an hour of its launch the site recorded more than 300 visits and the first sale was completed within two hours. When the threat from coronavirus recedes, virtual malls like this may well continue to provide a new way to shop locally.Find out more

SOCIAL COMMERCE PLATFORM TURNS SHOPPING REMOTELY INTO A GROUP ACTIVITY

NEW ZEALAND’S FIRST VIRTUAL MALL

19Issue 05 |18 | Issue 05

In an attempt to provide a solution for long queues, grocer Lidl has launched a WhatsApp chatbot in Ireland in which customers can converse and find the quietest times at their local stores. Customers can send the chatbot a message on WhatsApp stating the time and day they intend to visit a particular store. Using real-time data and customer transaction numbers, the chatbot will respond with an automated message.

Takeaway: With grocery demands at an all-time high and the need to maintain social distancing during COVID-19, an everyday trip to the supermarket has become increasingly difficult. Utilising a chatbot that is easily accessible via WhatsApp should lessen the stress for customers while keeping them safer in-store. Post-pandemic one can also see the appeal of such a tool from a customer service perspective. Can’t find the toothpaste? Just ask on WhatsApp. Find out more

OurStreets, a crowdsourced micro-mobility and road safety app, has developed a new supplies feature for retailers and shoppers. The ‘Supplies’ section of the app provides relevant and timely local data that’s focused on which supplies are currently available in area retail outlets.

Retailers who partner with the app can send official updates on levels of crucial items in stock and, usefully, can send alerts when something is back on the shelves.

Takeaway: The most successful innovators are not afraid of a pivot or two when circumstances change. This is the case with OurStreets, which was able to integrate a new tool for a new market into its existing product. Many businesses are contemplating how best to capture the gains from this time away from usual routines. One of the challenges is how to do so in a manner that works in the long term. The OurStreets team sees potential for supporting smaller and local businesses by directing shoppers to stores they may not have previously visited. Find out more

WHATSAPP CHATBOT HELPS CUSTOMERS FIND THE PERFECT TIME TO SHOP

ROAD SAFETY APP PIVOTS TO HELP SHOPPERS FIND WELL-STOCKED STORES

K. Mitch Hodge on Unsplash

OurStreets

Every day, powered by its global community of innovators, Springwise spots and analyses the latest innovations that promote positive and sustainable change from around the globe. For further information and to sign up to Springwise

visit www.springwise.com/newsletter or email them at info@springwise.com.

Slovenian start-up LineScouts has developed an app that notifies users of the congestion they can expect at their local store. LineScouts produces an aggregate ‘busyness score’ based on data from Google and crowd-sourced reports. The queues are then given a traffic light rating – red for very busy, yellow for busy, green for light traffic and purple if there is no data. Users can also help by reporting on the conditions at their local store.

Takeaway: LineScouts is the type of innovation that we are likely to see more iterations of as the pandemic enters the next phase in many regions of the world. The speed at which these tools can be released will be interesting to track. LineScouts was developed at d.labs, a lean innovation studio based in London and Ljubljana, Slovenia. D.labs specialises in incubating digital products to the point where they are ready to scale up market-tested products and services. Unlike previous products put out by the lab however, LineScouts was rushed to market in order to help consumers as soon as possible. Find out more

Amsterdam-based location data and technology platform HERE Technologies is offering SMEs a free tool to help implement its own simplified and efficient delivery service during the COVID-19 pandemic. HERE WeGo Deliver will allow businesses to plan and dispatch a delivery service without paying for software development or implementation costs. Users just upload their order destinations and the number of drivers to the platform, HERE WeGo Deliver then optimises each route and delivery sequence.

Takeaway: Organisations around the world are using digital infrastructure in attempts to continue business as usual. Several other cloud services and companies are also offering their computational services for free to reduce the impact of COVID-19. Recent data by McKinsey shows that it took only eight weeks to launch five years forward in the rate of consumer and business digital adoption. Moreover, it looks like the use of digital services is here to stay, with 75% of people using digital channels – indicating that they intend to continue using them post-pandemic.Find out more

THE APP THAT HELPS SHOPPERS AVOID OVERCROWDED SUPERMARKETS

DELIVERY TOOL HELPS SMES MEET DEMANDS OF COVID-19

Linescouts

HERE WeGo Deliver

21Issue 05 |20 | Issue 05

GLOBAL | SPAR INTERNATIONALBy Tobias Wasmuht

SPAR CHINAFollowing a challenging period, SPAR has successfully expanded its presence in China with six new supermarkets in the provinces of Shandong, Guangdong and Beijing. In these stores, the proximity retailing and in-store measures that are a part of the new normal in retailing have been implemented.

The new stores ensure more communities have easy access to daily essentials. Beyond offering produce, all stores have implemented comprehensive measures – including mandatory face masks – to ensure that the health and safety of customers and team members are safeguarded. 

Tailored to local preferences, the products on offer provide shoppers with all they need, in addition to online shopping and home delivery services – ideal for customers looking to shop from the comfort of their own homes.

SPAR stores across China have infrared thermometers at the entrance, signage to encourage space between customers in the checkout area, as well as ventilation systems to ensure constant airflow.

To further safeguard the wellbeing of staff and customers alike, stores are fully disinfected before and after trading hours as well as throughout the day. Cash registers, weighing platforms, shelves and shopping baskets are regularly disinfected. Both customers and in-store team members are required to wear face masks, and body temperatures are checked before anyone enters a store.

PROXIMITY RETAILING AND CONFIDENT CONSUMERISMGiven the changing social distancing norms and economic concerns around the world, we are seeing a growing importance of community and proximity, as well as a growing focus on value. As stockpiling seems to be coming to an end, customers are buying less, and in some cases lower-margin products. 

Disadvantaged shoppers and communities will need our support. Sourcing locally will be top priority and part of the new normal, as will shortening supply chains. We must empower shoppers and staff to be safe and responsible to avoid a second wave of the coronavirus, which would lead to drastic social and economic effects.

As an industry, we need to be ready and agile to respond to possible future virus outbreaks. In stores, building employee trust as well as consumer trust through additional safety measures and communication is of critical importance.

Here, the retail sector must continue to develop new ways of working. Costs will continue to increase as we need to keep stores and factories hyper-clean while engaging with fewer customers and workers. 

A s a worldwide brand operating across 48 countries and four continents, SPAR has extensive experience in responding to ever-changing global, regional and local market conditions. 

 The COVID-19 pandemic has presented the retail industry and society at large with an unprecedented set of challenges. As a global retailer we have had the unique vantage point of the pandemic’s impact on the sector as it moves from East to West. 

As the first country to implement decisive measures to reduce the spread of the coronavirus, China offered key lessons on dealing with the COVID-19 outbreak. SPAR partners in Asia have successfully continued to serve

Social distancing norms are shaping shopping trips with a preference for proximity retailing on the rise. The implementation of digital or frictionless technologies has become even more pertinent, prompting more stores to explore cashless, self-checkouts and other self-service options to facilitate social distancing. 

Ecommerce continues to show strong growth as consumers shift their purchasing patterns from in-store to online, with growth numbers as high as 150-300% in Italy. Social distancing guidelines are prompting more customers from different demographic backgrounds to explore online grocery options. 

E-grocery platforms have been on the rise throughout the SPAR network for several years, with full-service operations in 12 countries before the COVID-19 outbreak.

Since March 2020, the number of these solutions has grown even stronger, offering more communities easy and convenient access to groceries. E-grocery is now available in more than 25 countries where SPAR operates, and the importance of this channel is likely to remain after we settle into the new norm.

WORLDWIDE VIEWFor the first time in our almost 90-year history, SPAR retailers across the globe are tackling one common issue. The response to the pandemic has proven the true worth of the SPAR ‘Better Together’ strategy – from procurement, buying and supply chain to sharing strategies to help mitigate risk and prepare for the future.

Throughout the pandemic, SPAR retailers have achieved an exemplary standard in serving its respective communities by providing shoppers with their daily necessities in a safe and convenient environment. 

As we move forward, the year ahead will not be without its challenges. Shifts in consumer confidence and the negative impact on household incomes will see consumer spending move toward health, sanitation, value and online further, and SPAR well-positioned to respond to each.

One of the key lessons from the ongoing pandemic is the essential and proven role that local proximity retailing plays as a critical lifeline for local communities. Many SPAR stores perform a function well beyond the sale of products or services. The stores are community hubs, meeting points and communication platforms supporting the broader needs of the people they serve.   

customers amid measures by the authorities that had a dramatic impact on business operations, providing valuable lessons as the outbreak started to affect other regions. 

Now that more countries start to ease lockdown measures and we move towards the ‘new normal’, we are again taking stock of developments in Asia, where retailers are charting a new course in their communities with adapted business practices and trends progressing at a rapid pace.

Tobias Wasmuht, Managing Director, Spar International

HOW THE WEST CAN LEARN FROM THE EAST

23Issue 05 |22 | Issue 05

GLOBAL | WALGREENS BOOTS ALLIANCEBy Sebastian James, Boots UK & ROI

GOING ABOVE AND BEYOND

B oots has been at the heart of healthcare in the United Kingdom for 171 years. It has operated throughout many crises, some as life-changing as the one we are facing today, but each time it

has been our duty at the company to step forward and do all we can to care for the nation in its time of need. The COVID-19 pandemic is no exception.

We at Boots are incredibly proud to be working together on the frontline with the National Health Service (NHS) during this extraordinary time. Working to support the UK Government, our fantastic teams set up the first drive-through testing station for NHS workers in just five days.

Now there are multiple sites up and running across the UK, supported by hundreds of Boots colleagues who selflessly stepped forward to perform swab tests on those with suspected COVID-19 symptoms. Their extraordinary effort has meant that Boots played a vital part in meeting the UK Government’s target of 100,000 daily tests by the end of April this year.

With so many of our own colleagues on the frontline, we have been inundated with stories that show just how resilient, courageous and compassionate our teams really are. Emma, one of our dedicated pharmacists, befriended a lonely and isolated 96-year-old patient by setting up a weekly virtual quiz for him to take part in.

Similarly, Mick, one of our warehouse colleagues, voluntarily postponed his retirement after 50 years of service to help ensure essential products could be delivered to homes up and down the country. Our exceptional colleagues really are going above and beyond to prescribe kindness in the face of adversity, and I continue to share my most sincere and heartfelt thank you to every one of them for their tremendous efforts.

As a true friend and partner to the NHS, we wanted to offer further help at this time of national need. Some of our isolating pharmacists are now helping to boost the NHS 111 triage service.

Patients who call the service will be able to receive expert support from one of our very own pharmacists to help relieve some of the pressure on the NHS. We have also donated over 500,000 toiletry products to local NHS trusts, hospitals, care homes and community groups. We hope it will help patients feel just a little bit better.

Caring for the most vulnerable has remained our top priority throughout the pandemic and our pharmacies have long been a place that people can turn to for help on their local high street. In response to the desperate situation facing victims of domestic abuse during lockdown, we are incredibly proud to be working alongside Hestia to turn our pharmacy consultation rooms into safe spaces, where victims can contact specialist services for support and advice.

Ensuring that everyone has access to the essential medicines they need is also critical, so we have welcomed over 500 additional drivers to support our prescription delivery and collection service – many of whom sadly found themselves unemployed at the start of the crisis.

New colleagues like James, a former airline pilot, are making a difference on the frontline by delivering vital medicines straight to our patients’ doors.

Now more than ever, we are trusted by the nation to do the right thing and like many businesses, we have had to make some adjustments. The safety of our colleagues and customers is of great importance, so we were the first retailer in the UK to order Perspex visors for our stores. We also procured as much PPE as possible, marked our floors with social distancing guidelines and updated our opening hours to factor in time for deep cleaning.

Exploring new ways for our customers to access our products, services and essential items has also been key. Our own skincare brand, No7, now offers personalised virtual beauty services, and vast numbers of our customers now prefer to shop online. Boots.com is our largest flagship store and since the pandemic began we have sold over 50% more products online than we did during the Black Friday sale in November last year.

This is exactly what Boots is about, and in years to come, these stories will be our enduring memories of the COVID-19 pandemic. We have and always will be more than just a retailer. For nearly 200 years we have supported our communities, kept our pharmacies open and been at the frontline of healthcare.

These are strange and difficult times for us all, but we will come through stronger than ever by continuing to put the health and wellbeing of our nation first.

Sebastian James, Managing Director, Boots UK and ROI

Yau Ming Low / Shutterstock.com

25Issue 05 |

ASIA | CHINABy Yuchuan Wang, JD.com

LIVESTREAMING BECOMES A NEW REVENUE GENERATOR

JD Health doctors

5 0,000, 80,000, 120,000, 210,000… Looking at the skyrocketing number of viewers, Fengju Qin, the head of Baishui county in China’s Shaanxi province, couldn’t believe there were so many people

interested in watching his livestream selling local apples. He acted like an experienced sales assistant, saying: “Baishui apples, juicy, crispy and sweet. You’ll certainly not be disappointed!”

In two hours, his livestream on JD.com’s app attracted more than 210,000 shoppers and sold over 100 tons of Baishui apples.

Not only farmers, but many brands and retailers have turned to livestreaming during COVID-19 to help reduce the impact and losses from the epidemic. According to China’s Ministry of Commerce, there were more than four million ecommerce live broadcasts hosted in the first quarter of 2020.

“The epidemic is devastating bricks-and-mortar stores, but it also brings opportunities. Ecommerce giants like JD.com have used livestreaming as a new revenue generator for businesses.” says Guowei Zhang, head of JD Live, JD.com’s livestreaming business.

Livestreaming was already becoming a phenomenon in China, and the outbreak of COVID-19 has only accelerated the trend. According to iiMedia Research, the number of livestreaming users increased 10.6% to 504 million in 2019, which accounts for more than half of China’s total 854 million netizens.

THE RURAL EXPLOSIONBaishui is the first county in China to be honoured as the ‘Hometown of Apples’, and has been selling to European and US markets. The outbreak of COVID-19 resulted in nearly 200,000 tons of unsalable stock which should have been sold out during the Chinese New Year sales season. To rescue the farmers, Qin contacted JD and went on the livestream himself, together with influencers introduced by JD.

Qin is not the only local official to pick up livestreaming during the period. Over 120 mayors, county heads and other civil servants joined JD’s livestreams during the epidemic to act as anchors and promote local agricultural products. Total cumulative viewers has surpassed 100 million.

“Rural livestreaming is a more intuitive and transparent way for consumers to shop online. But in fact, many farmers don’t know how to use it at all,” says Zhang.

When Wenfeng Wang, the boss of Shouguang vegetable base in Shandong province, did his first livestreaming on JD, he did not have any professional equipment, like a microphone. “Farmers like myself and my family had never done a live broadcast before. We just watched how other merchants do it and tried to imitate,” he said.

JD started to help farmers like Wang as early as during the Chinese New Year holiday to get their businesses online.

On 13 February, JD announced special support mechanisms for merchants and influencers doing livestreaming ecommerce to better support the rising demand for online shopping. For example, JD Live reduced the take rate to as low as 1%, provided extra traffic support, 24x7 training and quick access to JD Logistics, which is among the few logistics companies still operating at the height of the epidemic.

For projects specifically aimed at helping farmers, JD Live also provided special policies like fast enrollment and subsidies. Many influencers volunteered to provide free services to help farmers do lives too.

Wang benefited from this policy and his livestreams began to attract more and more traffic. “Gradually, we’d make 1,000 to 2,000 orders each time. The influencer JD introduced helped us reach a larger fan base, and then the local county head also joined us.”

Sales of Wang’s farm skyrocketed to RMB 200,000 (£22,000) in February and to RMB 1m (£112,000) in March. The online channel accounted for almost 90% of Wang’s total sales during the epidemic when offline wet markets were closed and other logistics companies were suspended.

“I’ll keep doing livestreaming and working with the influencers,” said Wang. He hopes he can bring more neighbouring farm heads to join him to enjoy the benefits brought by livestreaming.

Fengju Qin livestreaming on JD

27Issue 05 |26 | Issue 05

BRINGING LIFESTYLE ONLINEOne of the negative impacts of social distancing is the closure of physical entertainment spaces. But livestreaming provided a way to cure loneliness, and parties, concerts and more all held online are going viral. It also provided a way to help brands – especially alcohol brands who traditionally relied heavily on offline scenarios put on pause by social distancing. JD’s ‘online clubbing’ initiative was developed just for this reason – simultaneously benefiting customers and helping brands drive alcohol sales.

Teaming up with multiple international alcohol brands including Budweiser, Rémy Martin, Carlsberg and Pernod Ricard, JD’s online clubbing initiative invites musicians and DJs to perform online, coupled with professional introductions to different kinds of alcoholic beverages.

Usually the live show will last three hours, during which time shoppers are able to purchase corresponding products directly from the livestreaming page.

“45 brands joined the first online clubbing, but by the third show, over 200 brands joined,” said Zhang. “We now host such shows twice a week, and the schedule has been booked by brands to August.”

Several wine brands have cooperated with Cynthia Yang, a professional wine purchaser from JD’s wine business team who has become a top influencer on JD Live. During her show, Yang typically holds a bottle of wine in her hand and introduces its unique characteristics and attributes.

Her expertise on wine and deep understanding of Chinese consumers gained from working at JD have made her livestreams popular, often attracting tens of thousands of viewers. During one of the shows, sales generated from Yang’s livestream accounted for nearly 40% of total sales for the day.

Entertainment companies are also exploring new avenues to earn during the epidemic.

Modern Sky is China’s largest independent record label. After streaming its past musical festivals online with China’s leading video sharing website Bilibili, it collaborated with JD to host ‘Modern Sold Out!’ livestreams in April, participated by bands and independent musicians. While playing and singing their new songs, the musicians introduced their personal experiences of using selected products.

Different from influencers or celebrities, these musicians are recognised by their fans as ‘ideal defenders who are equipped with endless imaginations’. This creative way for them to do ecommerce livestreaming is no doubt a wonderful experience for their fans.

“I think it’s creating a new entertainment front, and a new model of business,” said Liya Wu, Vice President at Modern Sky.

Art is enjoying immense popularity in China especially for the younger generation. According to the National Cultural Heritage Administration, museums across China held about 26,000 exhibitions and 260,000 cultural events in 2018.

JD kicked off livestreams for cultural experiences collaborating with leading museums and galleries during COVID-19. The livestreams invite curators to conduct online tours for housebound consumers. A small section of the livestream will sell cultural products from those institutions.

Cynthia Yang’s livestream on JD

Musicians from Modern Sky on JD Live

A tour of the Guanfu Museum

On 10 March, Guanfu Museum’s session attracted over 200,000 visitors in just two hours. Sales of the Guanfu Museum flagship store increased by about 460%. In another session, sales of the UCCA Center for Contemporary Art’s store doubled compared with the day before.

BOOSTING SALES FOR INTERNATIONAL BRANDSWith travel restrictions imposed, it has become difficult for Chinese consumers to buy international brands via personal travels or overseas buyers. The temporary closure of bricks-and-mortar stores also greatly affected the sales of international brands.

On 22 April, brands including Clarks, TUMI, Philips and Havaianas executed a two-hour cross-category livestream on JD, releasing spring and summer 2020 products and invited actor Sun Jian to interact with visitors.

The livestream attracted an astonishing 1.35 million online shoppers. Transaction volume of Clarks increased 2,178% on a monthly basis while transaction volume of TUMI increased 2,368% compared with the daily average of the previous week.

On 19 March, luxury fashion brand Ports did a nine-hour long livestream gathering over 10 brands’ products from the group, featuring Jeffrey Dong (the nephew of Jackie Chan) and the fashion editor of Elle. Over 1.3 million customers visited the livestream and Ports’ sales surpassed RMB 10m (£1.1m) on that day.

Although nine hours sounds exaggerated, Zhang said: “We always recommend merchants doing longer than two hours. Usually the influencers will live three to six hours with a prepared script determining what to do and what to sell each time block.” This way brands can reach a wide variety of users since consumers on ecommerce sites differ each hour.

“We have seen an increasing number of brands doing livestreaming on JD this year, especially the big ones. They are quite sensitive to the latest market trends and have a higher requirement for their shows in terms of idea, process, etc.” added Zhang.

POST-COVID-19At a time when acquiring new customers is progressively costly, livestreaming helps retailers and brands rapidly obtain quality traffic at a low cost.

Zhang mentioned that compared with 2018, the Gross Merchandise Volume (GMV) of ecommerce livestreaming in 2019 increased at least six times, the number of users increased at least 10 times, and the number of broadcasts increased five times. “A single broadcast generating RMB 10m (£1.1m) in sales has become quite common, even RMB 100m (£11.2m) is typical.”

“I’ve seen sales generated from livestreaming increase from negligible to 2%, 5% and to nearly 10% of ecommerce’s total sales,” said Zhang. “But merchants should do it in a long-term way, and care more about customers than about pure sales data, and make sales a natural result of brand marketing.”

In February, as people in China gradually returned to work, JD and Procter & Gamble (P&G) jointly launched a one-week-long series of live broadcasts called ‘Science Lab’. Not focusing on sales, it invited internet celebrities, P&G’s scientists and doctors to introduce personal protection guidelines. Both companies believe ecommerce livestreaming should not be just a sales channel, but a brand marketing scenario.

In about one hour, the Science Lab attracted 1 million people, and viewers were quite active interacting with the hosts. “Most of the people are potential buyers who recognise and favour P&G’s brand image. Through livestreaming we made purchasing part of a natural process,” said Zhang. “Brand marketing will no longer be difficult to quantify, but more efficient and sensible.”

“Ecommerce livestreaming will certainly generate greater value for commerce,” added Zhang. “Not 10% or 20%, it could be much higher. But I dare not predict as it’s developing too fast.”

Yuchuan Wang, Global Corporate Affairs, JD.com

JD x P&G Science Lab

INDIAN MARKETS OPEN UP TO A TOUGH REALITY

29Issue 05 |

ASIA | INDIABy B.S. Nagesh, Shoppers Stop Limited

Dinesh Hukmani / Shutterstock.com

S tate-by-state governments are giving permission for the re-opening of stores and shopping centres, but with a range of restrictions that are justified while others don’t seem to make sense.

For example, some states have banned the use of in-store changing rooms and therefore the trying-on of garments, which takes away one of the key benefits of bricks-and-mortar retailing.

Shopping centres are still not able to provide their full offerings as multiplexes and food courts remain closed. I feel many of these restrictions will go away with the passage of time and as the number of COVID-19 cases decline. The most serious impact is going to be with the change in consumer behaviour.

A very large number of consumers are going to move to online shopping, particularly as many people are probably going to avoid physical stores for the next six to nine months. A good number of customers are also likely to reduce their spending as they have lost their income or would like to secure themselves by increasing their savings as shown in a new survey by the Retailers Association of India. Click here to view the full report.

This change in behaviour has a big impact on the current business models of all retailers who are predominantly selling through their bricks-and-mortar stores. The first two weeks of opening have seen customers coming back, but the recovery is very slow. Retailers have only achieved 15-25% of their last year’s sales. See RAI’s retailer business survey here.

With the numbers bleak and the reality striking hard, retailers have started taking decisions to close stores or make redundancies with their employees both in stores and back offices.

Unlike their western counterparts, Indian retailers do not have any support from the government, and therefore have to rely on their balance sheet, past performance and credibility to get financial support from banks. This will undoubtedly lead to the closure and the collapse of many retailers and retail chains.

I believe in the next three to six months we will start seeing the impact of store closures on the total supply chain, with factories closing down which could mean artisans and small entrepreneurs lose their business and livelihood.

In these tough times, resilient leaders who can make tough decisions with compassion will lead their businesses out of this crisis and emerge successful in 2021.

B.S.Nagesh, Founder, TRRAIN Non- Executive Chairman, Shoppers Stop Limited

jishnu2602 / Shutterstock.com

ADJUSTING TO NEW RETAIL NORMS

31Issue 05 |

MIDDLE EAST | SAUDI ARABIABy Muwaffaq M Jamal

Noushad Thekkayil / Shutterstock.com

T his year’s Eid period was a milestone in Saudi Arabia’s fight against the coronavirus. The country went into complete lockdown for five days on 22 May. That is because Eid is known for high levels

of social activities and extended family gatherings. It was the first ever Eid where everyone had to stay at home.

Unfortunately the number of COVID-19 cases started to increase significantly immediately after Eid when lockdown was eased to take place 8pm to 6am on 27 May. Clearly social gatherings must have taken place and as a consequence, infection cases were driven higher.

As of 9 June, the total number of cases reached 108,571 with 76,339 recovered and 783 deaths.This leaves active cases at 31,449 with 1,683 of these classified as critical and in intensive care units.

Given the spike of critical cases and the sudden pressure this put on hospitals particularly in Jeddah where authorities extended the lockdown to start at 3pm to 6am. Prayers were stopped again in mosques in Jeddah. In addition, Riyadh is being reviewed on a daily basis for potential changes to lockdown hours.

Domestic flights resumed operations to five major cities by all local airlines, although borders are still closed with no international flights into or out of the country. Strict measures are taken before boarding, on flight, and after arrival to ensure control over any spread of the virus. The operation of repatriating stranded citizens around the world is still taking place as the number of citizens abroad are expected to be in the tens of thousands.

Through a phased approach, employees in both the public and private sectors are back to work. Apart from Jeddah, employees returned to work the first week after Ramadan in late May with just 40% of the workforce to begin with and the remaining employees are returning in phases over the coming weeks.

With Ramadan and Eid over, the retail landscape is slowing down although shopping centres are reaching peak capacity outside of lockdown hours. Shopping is limited on select items, although trips to retail outlets are often being used by consumers for entertainment rather than just shopping. This is not unusual for the time of year.

The new normal for retail is taking shape in a predictable way. The major online players are rapidly growing their market share. Amazon is gearing up to offer groceries online within the next couple of months. Noon is also picking up the pace and fixing operational issues that every online retailer was taken by surprise with during the surge of consumer volumes. Recently a number of retailers were able to take stock to reorganise and move forward in expanding online and seize opportunities for growth.

Small retail players however – particularly in the grocery and food sectors – are struggling to cope with the higher volume of customer demand. As these small retailers provide everyday convenience, demand has remained high despite the post-Eid slowdown period. It is clear that delivery and logistics operators are getting increasingly efficient as they learn from the period of high spending volumes seen during Ramadan.

New online service providers are emerging to set up operations in the grocery retail sector with help from angel investors. Those are small-to-medium size with the potential to grow and compete with the larger online retail operators. This emerging trend will put added pressure on the established retail operators.

During the beginning of Ramadan in April existing operators moved to address this and to try and capture volume by acquiring online service providers or investing in their own online services. Going forward, the fast movers providing the quality service of online retail will be winners.

Retailing in Saudi Arabia will be very interesting over the coming months as retailers continue to review how best to reach and serve their customers.

Muwaffaq M JamalManaging Partner, Retail & Marketing Consultancy Group and former CEO, Panda Retail Group

ibrar.kunri / Shutterstock.com

Alexandros Michailidis / Shutterstock.com

Christian Verschueren, Director-General, EuroCommerce

33Issue 05 |

EUROPEBy Christian Verschueren, EuroCommerce

A CRISIS AFFECTING 29 MILLION RETAIL WORKERS

I n my last article, I said that Europe was gradually getting back up on its feet again: countries are relaxing their strict lockdown conditions, and shops in most countries are able to do business again, albeit with

strict social distancing and other rules which restrict the number of people coming in.

However, this process has been uncoordinated and not always in line with the real level of remaining cases of infection. Countries, and even regions within them, are applying different rules, including some exaggerated measures of how many square metres of floor space is needed for each customer.

Where people may have to wait a long time to get in and shop, this has acted as a deterrent. Non-food shops are still reporting low sales, and clothes shops are also having to enforce differing rules on whether customers can try on clothing and if so how long to put the item in “quarantine”.

Cafes and restaurants are starting to re-open, and we hope that this return to some level of normality will help make going into town to shop a more enjoyable experience. In contrast to these positive changes, COVID-19 is leaving many shops on the verge of bankruptcy, with government help and in many countries, rent holidays or deferrals offsetting the worst effects. But in most cases this will not be enough to see many go to the wall.

The European Commission has made a proposal for an ambitious recovery programme of €750bn of grants and loans, of which the lion’s share will be given to member state governments to distribute to sectors hit by the crisis. We and our members will be seeking to remind governments that while high-profile manufacturing industries are crying out for help, retail and wholesale in Europe employs 29 million people and in every member state represents the largest private-sector employer. If jobs in our sector go, it will have a direct effect on the buying power of a sizeable portion of the population, and if shops and wholesalers close, a vital link to consumers, whose purchasing makes up at least 50% of GDP in the EU.

Peter Husted Sylvest is the founder of pH value Aps, a consultancy working with Scandinavian home interior design companies and gourmet food businesses and restaurants. He is based in Copenhagen, Denmark.

35Issue 05 |34 | Issue 05

By Peter Husted Sylvest

BigDane / Shutterstock.com

EUROPE | DENMARK

A FEELING OF NORMALITY FOR DENMARK

Photo by Razvan Mirel on Unsplash

S ince 8 June, Denmark entered a new phase in its programme of re-opening. Groups of up to 50 people are now able to meet and indoor sports and fitness centres can re-open under strict guidelines.

The borders with Iceland, Norway, Faroe Islands and Germany will open – but not as we knew it before COVID-19. Instead it will be for tourists that have booked hotels, summer houses or similar for a minimum of six nights in the same place. However, no reservations can be within the city limits of capital city Copenhagen.

Residents of Copenhagen, with a high concentration of hotels, will have to live with locals or day tourists coming into town from hotels in the surrounding areas and with a 10km drive. But I am not sure how many people dream of visiting Copenhagen as just a day tourist.

This move has ensured that the majority of rental houses on the west coast of Denmark will be filled this summer and the little towns and businesses linked to the massive intake of guests from primarily Germany and Norway will not be destroyed.

The borders to Sweden are still closed for Swedes entering Denmark, whereas Danes can travel to Sweden. The more liberal approach to COVID-19 in Sweden has been the main reason why we cannot welcome Swedes here just yet.

Major advertising campaigns have been launched, telling Danes how wonderful our home country is and how you could relive the experiences of your childhood holidays this summer.

The only real estate agents who are busy are those selling summer houses, now that people are either forced to stay at home or feel more comfortable about holidaying in close proximity to your house.

When summer hits Copenhagen, outdoor life always seems to explode and when you drive around town, the parks are full and the outdoor services are in operation. But when you look closer there are restraints and social distancing between groups. When the guidelines have not been followed these areas have been closed by the police.

When shopping in retail outlets customers are still not allowed to try on clothes, so it is best to do this at home. This will surely encourage more people to shop remotely with home delivery and the ease of returning goods if needed.

The intimacy of visiting your local coffee shop has changed. The social distancing measures and floor markers to maintain this distance are pulling a group of 15 people into a 30-metre line.

Life in Denmark looks and feels almost normal, and the headline news now reports on big weather changes and COVID-19 figures are not as high on the agenda as they once were. But stories of unemployment and political arguments on how to re-open and how to settle the costs of stimulus packages are increasing in significance.

Those companies that are still forced to remain closed have been given an extra month of salary compensation to keep staff furloughed. This has prevented the unemployment rate from exploding for the time being. With a national summer holiday on the horizon there will now be a delay of business until mid August.

For companies to be fully operational, the market has to expand and the borders need to re-open. An economy at the scale of Denmark is very dependent on exports and the open market of both the EU and the rest of the world. There is still a limit as to how effective the digital platforms can be for brand building and sales efforts in new markets.

Anne-Sophie Fernandes, Reporter, Global Retail News and Content Manager, the Institut du Commerce Connecté

Michel Koch, Managing Director, Institut du Commerce Connecté and Publisher, Global Retail News

37Issue 05 |

EUROPE | FRANCE

martinbertrand.fr / Shutterstock.com

A BOOM IN FOOD, BEAUTY AND TOYS

By Michel Koch and Anne-Sophie Fernandes

One month after stores re-opened in France, what has been the effect on retail? In the food and consumer goods sector there has been growth by value of 12.4% and 7.4% in volume for the week of

25 to 31 May 2020.

Among the strongest departments, beauty and hygiene stands out with +51.2% in value and +30% in volume growth. Nearly a quarter of the sector is made up of sales of face masks.

Ice cream and frozen desserts have also proven to be a big winner with a jump of 38.8% in value and 39.6% in volume. Post-lockdown we have also seen a real increase in organic products.

According to a study conducted by Spirit Insight among 1,000 people from 20-25 May, organic is now a preference for 70% of French consumers, of which 8% are new buyers and 90% of consumers say they will continue to favour organic.

Looking at the retail channels, hypermarkets remain the preference (57% of shoppers), while local shops and organic specialists are almost equally represented (24% and 26% of shoppers respectively).

What is also of interest is that since the end of the lockdown on 11 May, the toy sector has recovered 44% of its turnover losses caused by the crisis and closure of specialist stores.

On the other hand, the health crisis has shaken up channels. While online sales already represented 28% in 2019 (+7% compared to 2018), NPD has forecast double-digit growth for the channel this year, which should easily take online beyond the 30% mark in sales this year.

And in a dramatic announcement, the French Minister of the Economy Bruno Le Maire confirmed that the start of the summer sales has been postponed from 24 June to 15 July in order to meet the demands from certain retailers whose stores have been closed for a long time because of COVID-19.

Angelique Lbd / Shutterstock.com

Axel Bueckert / Shutterstock.com 39Issue 05 |

EUROPE | GERMANYBy Mirko Hackmann

GERMANY’S PLAN TO SAVE MORE AND SPEND LESS

T he effects of COVID-19 are reflected in the latest figures from the consumer barometer of the German Retail Federation (Handelsverband Deutschland – HDE) which recorded the second-

lowest figures since 2016. However, with the gradual loosening of lockdown restrictions, consumer mood has lifted. This is also reflected in HDE’s consumption barometer, which is showing a gradual recovery in line with the easing of lockdown measures.

June figures show that consumer sentiment has stabilised and the recent downward trend appears to have stopped – for now. However, with the uncertainty of COVID-19 over the coming weeks, it is difficult to foresee that there will be financial improvements. According to HDE: ‘negative fluctuations could quickly lead to a more pessimistic consumer mood again.’

Recently however, consumer propensity to make purchases has increased slightly. Overall the figures are still significantly below the previous year’s value. Consumers in Germany are still a long way from spending like before the pandemic, and, according to the HDE’s consumer survey, are still sceptical about medium-term developments, preferring to focus on saving and financial security.

In the light of these conditions, retailers have welcomed a comprehensive stimulus package that was passed by the federal government. The package includes lowering energy costs, reducing VAT and providing more aid for struggling

industries and families. With this comprehensive stimulus package, the German federal government is hoping to boost its economy during COVID-19.

The coalition is also striving for a ‘modernisation push’ and wants to promote technologies – particularly those that are green. The economic stimulus package is expected to amount to €130bn (£116.7bn) for 2020 and 2021. The funds are being allocated as a result of what is forecast to be the worst recession the country has seen in 70 years.

The temporary reduction in VAT is the core takeaway. From 1 July to 31 December 2020 the regular VAT rate will be reduced from 19% to 16%, and the reduced rate from 7% to 5%. Elsewhere there will be funding for the increased use of electric vehicles and as from next year, the Renewable Energy Law (EEG) will be reduced through federal budget grants. Families will also receive a €300 bonus per child.

Aimed at strengthening the domestic economy by easing the financial burden on private households, the federal government is also providing additional support for business sectors affected by COVID-19, including retail.

Bridging loans amounting to a maximum of €25bn (£22.4bn) are planned. This is to prevent small and medium-sized companies filing for bankruptcy. There will be further tax relief measures to help company liquidity and to encourage investment. This is to prevent small and medium-sized companies, including in the retail sector, filing for bankruptcy.

katjen / Shutterstock.com

Mirko Hackmann, Editor-in-Chief, Handelsjournal

Richard Simonin is a Turnaround Retail CEO – Luxury, High-Street & Discount, Apparel, Shoes, Accessories & Perfumery. He is also the Vice-Chairman of AlTayer, one of the leading Luxury-Retailers in Dubai.

41Issue 05 |40 | Issue 05

EUROPE | ITALYBy Richard Simonin

DEEP DISCOUNTS FAIL TO LURE THE ITALIAN SHOPPER AS ECONOMIC FEARS GROW

Richard Simonin, veteran retailer, Vice-Chairman of Al Tayer, long-time supporter of the World Retail Congress and French citizen living in Bologna since 2011, answers questions about the current situation in Italy and contrasts it with his experience in the UAE.

How are Italian consumers responding to the further easing of restrictions? In particular, are people returning to shops as well as bars and restaurants? As it was the case three weeks ago, consumers are more socialising than shopping. Bars and restaurants are extremely busy, despite the fact that the health and safety measures are limiting the number of customers that can be served.

Shopping on the other hand, even with aggressive discounts almost in all sectors, is still slow.

Are the health and safety measures still being strictly observed and do you believe that consumers are prefering to visit those shops where they believe safety is being taken seriously? Health and safety measures are still strictly observed by bars, restaurants and retailers in general. They take it very seriously but it is also enforced by frequent police patrols.

On the other hand young consumers are taking these measures less and less seriously. They are aware that older people are much more at risk than they are, and they are encouraged by day-to-day pandemic data which are consistently trending well.

Is this dangerous behaviour which could trigger a tough second wave? At this stage, who knows.

nathanhazel / Shutterstock.com

What are people buying mostly and what are you seeing and hearing from retailers about how business is rebuilding - if it is?As far as bars and restaurants are concerned, activity levels are at -40% to -50% like-for -like. This is mainly due to the impact of health and safety measures on footfall, combined with the absence of tourists.

We will probably start to see some businesses announcing that they are going to have to permanently close.

In apparel, shoes, perfumery and cosmetics, activity level is between -30% and - 60% like-for-like. The mood is still not there and we must not forget that buying power has been and is still significantly affected.

So, it is far too early to talk about business rebuilding at this stage.

As a director of Al Tayer, are you seeing any similarities in the pattern of post-lockdown business and consumer behaviour?It is definitely very similar. Activity levels in retail in UAE are comparable to what we observe in Europe. This is a little better than what retailers were expecting after lockdown and Ramadan. But this is not going to improve further until tourists come back, particularly in Dubai.

When will this start to happen? Nobody knows.

The situation is extremely challenging for retailers as like-for-likes in the range of -30% to -60% are not going to be sustainable for months.

What would you observe about consumer psychology and consumer behaviour in Italy at this stage in the crisis and as the lockdown eases?When the lockdowns were first introduced, European Governments made big announcements on how workers, despite being temporarily unemployed, will be sheltered economically. Unfortunately the gap between announcements and reality is huge.

Most of the workers, who were forced to stay at home have been receiving only 50 to 60% of their net salaries during the two to three months of lockdown.

Projected forward for the full year, this will mean that average workers will have lost between -8 and -12% of their net income. For those on low wages this is significant.

In addition, in Italy, the first payments from the State, due at the end of March, were not received by beneficiaries until between May 15th and June 1st.

Last but not least, the vast majority of people are only just starting to understand that we are just at the beginning of the economic downturn.

In retail, the Inditex Group has just started what I think will only grow for other retailers by announcing the closure of up to 1,200 shops, which accounts for 16% of its overall store network. This is sadly confirming my personal assumption of shop closures in the range of 25 to 30% in apparel, shoes, perfumery and cosmetics. The same is likely to happen with bars and restaurants. Not to

mention other industries which have been badly hit such as automotive being just one example.

As a consequence, the unemployment rate is going to rise very sharply.

Less buying power + lack of cash + high unemployment = low consumer confidence and reduced appetite for shopping. These are the ingredients of a potentially hard and long-lasting social crisis in developed countries which could prove to be a much bigger threat to our economies and societies than an hypothetical second wave of the pandemic.

What is the mood of retailers? Are they fearful of a second wave and how are they able to plan ahead into the next season? I believe the mood of retailers is not very different from what it was two to three months ago. Most of them have been understanding the potential magnitude of this crisis at a very early stage. They have been, and still are, very responsible for their staff and customers.

As far as business is concerned the main issue from day one has been planning.

This is more than ever our biggest challenge, strategically and operationally.

Being fearful of a potential second wave is becoming less and less of a priority. Despite conflicting forecasts about a second wave, it seems unlikely to happen before September or October.

Until then, most retailers have to address much more important existential issues like cash, omnichannel acceleration, network resizing, supply chain as a whole, flexibility at all levels, strategy redefinition. Nothing new, nor very original.

The key-issue, every single day, being “how to manage this?”

Personally, being “back to work” with a few retailers in the past four weeks, I would just recommend hard work, adaptability, humility, listening, communicating, trusting the teams and being loyal to them.

I consider it almost irrelevant to give general advice as each situation and company is different and we are also in completely new territory.

Maria Mironovskaya is based in St Petersburg and is an omnichannel executive and former chief customer officer and member of board at Rainbow Smile, a leading Russian health & beauty retailer.

Geshas / Shutterstock.com

43Issue 05 |

EUROPE | RUSSIABy Maria Mironovskaya

RUSSIAN RETAIL ADAPTS AND INNOVATES

Anti-virus police at the entrance to the main famous shopping mall GUM, Moscow @Moscow Agency

W ith Russia recording well over 500,000 COVID-19 cases and rising, retailers seem to have got over the initial shock and are gradually adapting to the new landscape.

And what is clear is that in just a few months of the coronavirus pandemic, the Russian retail industry has delivered more innovation than seen over several years of organic growth.

Since 9 June, shopping malls and many non-food specialist retailers were allowed to re-open in many Russian regions, including Moscow. However, Muscovites did not rush to the malls despite the long-awaited quarantine relaxation. During the first and second weeks of June, like-for-like traffic was about -40%. The low shopper activity is due to two factors: COVID-19 health concerns and decreased consumer confidence.

The buying power of Russian consumers has declined significantly this spring and is likely to stay that way for a long time. 40% of economically active Russians saw their income decrease due to the pandemic (according to a survey by Sberbank), while unemployment rates may jump further to 7%-8% from the current high of 4.6%, as forecast by the Labour Ministry.

On top of that, the popular opinion has it that the weakening of anti-virus measures is good for the economy but quite risky for public health. People are reluctant to go back to their pre-pandemic social habits.

One of the winning models for the savvy and cautious consumer is video shopping consultations. Electronics giant M.Video launched the new remote video advice provided by the trained assistants in-store. Customers can make on-demand video calls, watch product demos and receive personalised offers. The retailer claims 30% conversion rate for such consultations.

The federal sports apparel and equipment network Kant saw its bicycle sales double year-on-year in May, despite going 100% online. Kant links these results to the speedy implementation of video sales as well as the timely renewal of the loyalty program.

A money-saving pilot project was launched last week by Leroy-Merlin in collaboration with Hilti instruments. Now Muscovites can rent professional DIY instruments instead of paying the full price upfront.

A fresh innovation from the X5 Retail group is a food delivery service from its online darkstore perekrestok.online and its postal services spin-off fivepost.ru. This food delivery option addresses the popular post-COVID demand of safety and value and allows for refrigerated pick-up points as well.

It’s back-to-work time for 300,000 sales staff in Moscow alone @Moscow agency

Safe and impersonal: the new food shopping style from perekrestok.online

45Issue 05 |

EUROPE | SPAINBy El Corte Inglés

SweetHour / Shutterstock.comMlle Sonyah / Shutterstock.com

CUSTOMERS RETURNING WITH CONFIDENCE

F rom 8 June, Madrid and Barcelona moved to Phase Two in the Government’s phased stages back to normality. This means that we now have all our stores re-open throughout Spain which means

everyone in the business is back at work and everyone is very happy. The first response from customers has given us great confidence with sales performing much stronger than we had thought. Customers were really waiting for stores to re-open. Although traffic is down and is also restricted by the guidelines, the conversion rate is very high. We are seeing the same amount of sales as before the closure but from far fewer customers. In our stores that have been open longer such as in Galicia for example, we can definitely see business building back each week.

It is clear that customers are looking for reassurance that there are good safety measures in place and once they have that confidence they are returning and spending. The safety measures we have are working well. The wearing of masks is mandatory everywhere and social distancing has been reduced to 1.5 metres. We closed every other changing room in the stores and any garment that has been tried on and not bought is cleaned in a special steam machine. Customers can also purchase and take home but return anything they don’t want to the store. This all seems to be working well and isn’t causing any queues in the stores.

Customers seem to be returning to their normal behaviours and also going to those bars and restaurants that are open.

Only those with outside terraces can open in Phase Two.

The Government has stated that it is hoping to lift the State of Emergency on 21 June which will mean the start of a new normality.

Fashion remains slow though except for childrenswear which is one of the strongest categories. Children will have grown during the lockdown period, so parents are keen to buy new clothes for them. But it is really pleasing to see sales picking up across most categories. We have brought the start of our Sale forward five days earlier, but we hope business continues to build as it has been.

Our online business is up 200% on this time last year and we can see it still growing but now that the stores have re-opened there is a slowing up in that growth and the balance between on and offline will change. But there is no doubt that online is more relevant than it was before.

Our food stores continue to perform really well and are helped by the fact that most households are continuing to eat and cook at home rather than in restaurants. Many people are also working from home and aren’t eating out at bars and cafes as they would normally have done. This is true of our business too where we operate restrictions on how many people can work in the offices.

As a business, I think the whole company has learned a lot. The big lesson has been that with things changing so fast, every day, you have to confront situations, adapt quickly and to find solutions.

Veja / Shutterstock.com

Ignacio Sierra Armas, Corporate General Manager, Tendam

Tendam Chairman & CEO outside the first shop to re-open

mediamasmedia / Shutterstock.com 47Issue 05 |

EUROPE | SPAINBy Ignacio Sierra Armas, Tendam

THE EXCITEMENT OF SERVING CUSTOMERS AGAIN

A s of 12 June, 90% of our stores in Spain and more than 80% worldwide are now open. And we are nearly open in all of the 80 countries where we have stores. It is proving slower in Mexico and

Russia but from 15 June we do expect to open more stores.

The phasing of re-opening in Spain has caused some confusion which makes it difficult as a business to plan. But on the other hand, being cautious and prioritising safety is critical. Everyone has worked hard to reduce the terrible impact of COVID-19. If there is an area of criticism by the retail sector it is the discrimination by store size and the postponement of the shopping mall openings despite the plans that were in place to guarantee strong health and safety measures.

In terms of the next steps, the infection numbers are now very low and Spain is now a safe and healthy country again and with a strong healthcare system that has not only proved itself to be excellent in fighting the epidemic but which has also learned a lot about how to combat the COVID-19 virus. That should encourage the authorities to re-open the borders and return to normal as soon as

possible. It looks like this will happen before the end of June. We will need a flexible environment from authorities to gradually recover activity and get people back to work in order to preserve jobs and the economy.

I would say that consumption is still weak and there is a fall in footfall but what is really interesting is that conversion rates have sharply increased so when customers come to the stores they do buy. Online is growing strongly and we are even duplicating sales in the last weeks through this channel. The important factors that consumers are looking for are trust, enthusiasm and friendly service and with that we can see confidence returning fast.

As we move into this next phase, the leadership team remains cautious but optimistic. We are working hard to implement the strategy that we already had in place and which we continue to believe is the right one. The biggest concern of course for all retailers is the effect of high unemployment and low consumer confidence. We will have to continue focusing on value and our brand values in order to succeed in this new environment.

A recently opened Springfield store in La Zenia in South East Spain

49Issue 05 |48 | Issue 05

EUROPE | UNITED KINGDOMBy Luke Tugby

I. Salci / Shutterstock.com

RE-OPEN FOR BUSINESS AT LAST T here was a strange juxtaposition in the minds of

the UK’s retail leaders as they prepared for a 15 June re-opening.

While there was a clear and obvious desire to get businesses, high streets and shopping centres up and running again, retailers with store estates understandably want to put those assets to good use, in conditions that are safe both for staff and shoppers.

But there is an overriding sense that the challenges ahead during a return to an environment resembling normality could be tougher than those that have already been navigated during the coronavirus crisis.

For many retailers, 15 June could mark the start of an even tighter financial squeeze. As many store staff return to work, UK Government aid through its furlough scheme will cease, leaving businesses with reinflated payroll costs.

Retailers that have been lucky enough to secure rent reductions or payment holidays from their landlords – or have simply refused to pay the cash they owe during lockdown – will suddenly have larger property bills landing on their desks.

As those outgoings increase, the pressure will mount on retailers to make their physical assets work harder than ever to bring in customers and drive sales in the new normal of social distancing measures.

Undeterred, plenty of retailers – including JD Sports, Primark, Sports Direct, Lush and Mountain Warehouse – were poised to open all of their stores on 15 June.

Others, such as John Lewis, Next and Ted Baker, were expected to take a more phased approach to their re-opening plans. Whenever stores plan to re-open, all retailers will be learning about how they can better operate in a socially distanced environment – and what may need to be done radically differently to be fit for retail’s new normal going forward.

Metro Bank, for instance, has just opened a new format store in Cardiff, Wales. It is the company’s first ever drive-through bank, providing customers with contact-free access to its services from the comfort of their cars.

Dixons Carphone is implementing a ‘zero-contact’ model, introducing its ShopLive technology (which connects shoppers at home to store colleagues through video chat) and has also brought in a drive-through service, where purchases can be delivered to a customer’s car without them having to leave their vehicle.

The retailers that ride the next wave of upheaval will be those that have the agility and foresight to face the new normal in similar ways – ripping up the retail rulebook and doing things differently.

In Mike Coupe’s final interview as the boss of Sainsbury’s, the grocery veteran told Retail Week that the reason he landed the role in the first place in 2014 was because he “convinced the board that the world we were living in and the formula that had driven organisations like Sainsbury’s for a long period of time was very rapidly running out of energy”.

Six years ago, that meant putting the brakes on opening large out-of-town supermarkets and increasing the retailer’s focus on its digital and non-food propositions.

The coronavirus crisis presents retail leaders with a similar opportunity to move the strategic dial in their businesses – and many will have no choice but to.

The re-opening of brick and mortar stores merely marks the end of the beginning for retailers as they navigate coronavirus. It is the coming months, the strength of leadership and the strategic steps taken that will define retailers’ futures.

Luke TugbyEditor, Retail Week

Liam.Jones / Shutterstock.com

51Issue 05 |

OCEANIA | AUSTRALIABy Bernie Brookes

Jackson Stock Photography / Shutterstock.com

WAKING UP FROM ISOLATION TO THE NEW REALITY

A ustralia is returning to normal with restrictions easing each day. With only a handful of new COVID-19 cases daily and under 400 active cases across the country, a positive but cautious

outlook is building.

Weddings, funerals, restaurants and other indoor gatherings will be able to host bigger functions, while the government today has flagged thousands of people will be allowed in football stadiums and outdoor festivals from July in one of the biggest changes to the easing of restrictions.

Consumer confidence is building and with schools fully open and all shops permitted to trade, we are returning to a new normal, whatever ‘new normal’ means.

It is a ‘new’ normal not only because of social distancing rules, which are still in place or because of rigid cleaning regimes, but rather a ‘false bottom’ in retailing.

Propped-up by government wage subsidies and tax breaks, assisted by legislation, forcing rent relief and benefiting from ecommerce sales, many retailers have re-opened. They have re-opened to a consumer looking to get out to the shops. They are ‘over’ being at home, they are bored and they have been waiting over three months to get out and buy. Maybe they need it, maybe they don’t, but there is no doubt they need to get out of their homes to go shopping! Initial intel is showing that most retailers are reporting a return to normal.

However, the ‘façade’ of business, that normal is pre- COVID-19 is exactly that. Many retailers are finding supply lines poor and early demand faltering. Some retailers in fashion categories, such as jewellery, fashion and accessories are reviewing their store footprints and focusing on lower cost bases in full knowledge that once

the government subsidies fall off, rent relief eases and the ‘pent up’ consumer demand falters, the new normal will present itself.

The final quarter of the calendar year is when retail will have no ‘crutch’ to prop up sales, wages and rent. This will be the new normal. We are seeing early signs of the new normal with accessory chain Colette, fashion chain Pas Group, homewares MyHouse, fashion retailer Tuchuzy and the local division of G-Star all entering into administration.

We are seeing what the new normal looks like with chains announcing reductions in store footprint, including Harris Scarfe, Michael Hill Jewellery, Target and David Jones.

The new normal is the juxtaposition of capital to online rather than store refurbishments. Retailers such as Kmart and Bunnings are investing heavily in ecommerce.

The new normal is getting recession-ready by freezing hiring, reducing operational costs and collapsing marketing budgets.

As hospitality and entertainment facilities re-open, retail spend will again be thwarted. The ski fields have opened up online bookings today and the websites collapsed with a tripling of volumes, the best ever.

People have woken from isolation with a need to travel and holiday locally and a desire to enjoy a sporting event or night at the pub. Once expenditure shifts in that direction and disposable income is limited, retailers will feel the ‘new normal’ even more.

As unique as the current situation is, the picture developing is post a honeymoon spending period, there will come a harsh reality of a smaller and depressed retail environment – ‘the new normal’.

MasterPrince / Shutterstock.com

Bernie Brookes AMRetail Chairman, Consultant and Advisor

53Issue 05 |

LATIN AMERICABy Jorge Lizan

L atin America is the new epicentre of COVID-19, with infections and deaths across the region rising faster than anywhere in the world. Nearly 1.2 million cases and over 60,000 deaths have been reported

in the region. According to The World Health Organization (WHO), Latin America has not reached peak transmission yet. Health officials warn against re-opening economies too soon, even as countries are getting ready to ease restrictions or have already done so.

The Pan American Health Organization (PAHO) warned that June will be a crucial month for COVID-19 in Latin America, a region that despite having had more time to prepare is feeling the effects like almost no other.

Lorenza Ochoa / Shutterstock.com§

TENTATIVE STEPS FOR LATIN AMERICA

ARGENTINAAs of 7 June, the country had 22,794 confirmed cases and 670 reported deaths.

Argentina’s government announced the start of a new phase of social distancing as of 8 June, where social and economic activity can begin again but people must follow strict health guidelines imposed by the government.

Clothing and footwear stores allowed to open are ones that are not located in high pedestrian traffic centres. Large shopping centres however, will continue to be restricted. In shops, strict protocol must be followed, similar to retailers of essential products. Employees and customers must clean their hands before entering the premises and clothing is not allowed to be tried on. Retailers are also to streamline payment methods.

BRAZILAs of 7 June, the country had 691,758 confirmed cases and 36,455 reported deaths.

Brazil’s hospitals are on the brink of collapse, cemeteries are burying people in mass graves, and still, President Jair Bolsonaro refuses to take COVID-19 seriously. And just like President Donald Trump, Bolsonaro has also threatened to cut funds to the WHO.

Brazilian authorities allowed some economic activity to resume in São Paulo on 1 June, including the re-opening of shopping centres, despite a high number of daily COVID-19 cases being recorded. Retail outlets along with offices, car dealerships and real estate companies will be allowed to re-open as long as government guidelines are followed.

The relaxation of restrictions comes despite the country recording a daily death toll of over 1,000 across five days in early June. However, according to Governor João Doria the stay-at-home recommendations will continue to be in effect until 15 June.

While stores and shopping centres in São Paulo are opening for the first time in three months, a number of cities have already relaxed restrictions. Rio de Janeiro, for example, approved shopping centres to re-open on 11 June.

Retail shops re-opened on 10 June after a two-month shutdown in Brazil’s biggest city, leading to crowded buses and subways and with many people ignoring social distancing rules. 283 shopping malls had re-opened in Brazil as of 8 June, representing 49% of the total.

BR Malls Participacoes – Brazil’s largest mall operator – will offer partial rent concessions on a case-by-case basis at the shopping centres it has re-opened by discounting the normal rent rate, said its Chief Executive Ruy Kameyama, adding that all of its malls should be re-opened by July.

CHILEAs of 7 June, the country had 138,846 confirmed cases and 2,264 reported deaths.

Chile’s Health Ministry extended closure measures in 38 districts in the Santiago metropolitan area until 5 June, officials announced on 27 May, two weeks after the measures took effect. On 13 May the Ministry reaffirmed the quarantine for Chileans aged 75 and over.

The closure of shopping centres due to COVID-19 is strongly affecting the financial sustainability of its stores that were already affected, after the ‘social explosion’ of 18 October 2019.

Although most shopping centres are currently closed and only maintain essential services, quarantine measures currently affect 79 of 150 shopping centres nationwide. These cannot be opened by mandate of the health authority, except for essential services, such as banks, pharmacies, supermarkets and medical centres.

Large shopping centre operators like Cencosud (owned by Horst Paulmann); Parque Arauco (controlled by Grupo Said) and Pasmar (linked to the Mosa family) have announced new adjustments to their commercial terms in the leases, and some have even projected some re-openings won’t take place until March 2021.

Natalia Di Marco / Shutterstock.com

Nelson Antoine / Shutterstock.com

abriendomundo / Shutterstock.com

55Issue 05 |54 | Issue 05

COLOMBIAAs of 17 May the country had 15,574 confirmed cases and 574 deaths.

After a national quarantine that lasted from 24 March to 31 May, certain parts of Colombia began to re-open on 1 June, including Barranquilla, Cali and Medellín. Meanwhile, Cartagena and Bogotá remain in full quarantine until at least 15 June.

President Iván Duque Márquez refers to the new phase of re-opening as “smart distancing,” where certain institutions, including shopping centres, museums, libraries, and lounges may open to 30% capacity and public transportation to 35%.

The country’s borders will remain closed, national flights suspended and intermunicipal travel prohibited until 30 June. Under quarantine, bars, clubs, churches and parks remain closed. Public schools and universities will continue to teach remote classes until July. On 19 May the president extended the national health emergency, in force from 12 March to 31 August.

Around 15,000 of the 41,000 retail stores operating in the country’s 250 shopping centres re-opened during the week of 8 June, and, according to the Colombian Shopping Centres Association (Acecolombia), about 85% of the profits were affected by the quarantine. As of the week of 8 June, 60% of Colombia’s shopping centres would re-open.

Bogota’s Mayor Claudia Nayibe López confirmed that commercial activities may be carried out in shopping centres after several months of closure and they must comply with a biosafety protocol.

ECUADORAs of 7 June, the country had 40,966 confirmed cases and 3,486 reported deaths.

After 78 days of closure, Ecuador’s capital Quito dropped to its yellow alert level and began re-opening on 3 June, Mayor Jorge Yunda announced on 27 May. Members of the municipal council and representatives of the Quito Chamber of Commerce asked Yunda to change the level of blockade of the capital from red to yellow, given almost $1bn lost in just the two first weeks of national closure.

Guayaquil, the largest city in Ecuador, began re-opening on 20 May after becoming a yellow zone based on the country’s traffic light re-opening system.

While Guayaquil has been the epicentre of the country’s outbreak and has seen more than 9,000 coronavirus-related deaths, on 17 May the city recorded just 34 deaths, below its average of 38 per day before the pandemic hit. Mexico began to loosen some restrictions and move from social isolation to social distancing on 4 May through the three-colour system based on the levels of contagion in a given municipality.

The red zones are fully closed, while in the yellow zones public and private sectors can re-open with 50% of staff. In green areas up to 70% of workers can return to work. President Lenín Moreno said that local mayors will determine how much their respective municipalities will open.

Activities in Quito’s shopping centres have resumed with a maximum capacity of up to 30% in food courts.

MEXICOAs of 7 June, the country had 101,238 confirmed cases and 11,729 reported deaths.

Quarantine in Mexico has different criteria according to geographic region. While in some states and cities it is mandatory, in other places such as Mexico City, it is voluntary.

According to an announcement on 30 May, schools will re-open on 10 August with a phased attendance system alphabetically by last name where children will only be physically at school two days a week. While Mexico began its re-opening on 18 May, Mexico City Government announced on 20 May that the capital, which accounts for about 30% of confirmed cases in Mexico, would begin a multiphasic re-opening on 15 June. If infections do not exceed 200 per day, shopping centres, stores and service places such as parks and sports clubs, will open on 10 June in Monterrey.

Felipe Mahecha / Shutterstock.com

Esmaragdo Camaz / Shutterstock.com

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PANAMAAs of 7 June, the country had 14,609 confirmed cases and 357 reported deaths.

Panama entered the second phase of its re-opening process on 1 June. With a night curfew in place, restrictions on movement are also based on gender and a citizen’s national identity card number or a foreigner’s passport will be lifted after almost two months.

The re-opening of the Multiplaza and Metromall shopping centres are in Block III established by the National Government for the restart of operations, which is why a comprehensive action protocol is already underway that includes more than 30 measures grouped into five different categories.

To facilitate purchases in shopping centres, tenants will be able to rely on the social platforms of the centres for their online sales. The establishments that are part of this initiative will make new channels available to customers, such as online sales, mobile payments, home delivery or collection while parked in centres to avoid crowds and promote sales by making facilities a safe place to pick up products.

PERUAs of 7 June, the country had 178,914 confirmed cases and 4,894 reported deaths.

While President Martín Vizcarra announced on 22 May that both the state of emergency and the national quarantine would be extended until 30 June, around six million Peruvians – approximately a third of the workforce – returned to work on 25 May when the country entered the second phase of its re-opening plan.

At the end of April, only one in four Peruvians were working during the national closure, and low-income Peruvians were disproportionately affected.

Starting this month shopping centres, laundries, hairdressers and restaurants will be able to open as long as health regulations are followed, such as a 50% reduced public capacity with the aim of avoiding crowds and the spread of COVID-19.

The shopping centre industry in Peru has been badly affected by the crisis as more than 8,500 non-essential retail tenants have ceased operations during the government-decreed quarantine.

According to the Peruvian Shopping Centres Association (ACCEP), this year the shopping centre industry had planned to invest about 950m Peruvian Soles (£218m) across openings, expansions and improvements, but the pandemic has stopped this.

URUGUAYAs of 7 June, the country had 828 confirmed cases and 23 reported deaths.

On 25 May, President Luis Lacalle Pou announced new measures agreed with his Brazilian counterpart to contain the spread of COVID-19 in the border city of Rivera. Uruguay’s interior and defense ministries will establish four control points to reduce movement of vehicles and people across the border and will conduct 1,100 random tests.

Uruguay’s shopping centres re-opened on 9 June as part of the measures to reduce the spread of COVID-19, which has declined in the country. The measures will allow 1,400 commercial establishments to re-open and of more than 9,000 people to return to work.

The only shopping centres that will continue to be closed are those located near Uruguay’s border with Brazil.

Jorge Lizan,Managing Director of Lizan Retail Advisors (LRA)

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Myriam B / Shutterstock.com

Bernd Zillich / Shutterstock.com

57Issue 05 |

LATIN AMERICA | BRAZILBy Roberto Meir

Luis War / Shutterstock.com

BRAZIL’S DIGITAL REVOLUTION

Leonidas Santana / Shutterstock.com

F or the past decade Brazil has been shaped by political affairs. After surpassing the worst recession in its history while most other countries were enjoying impressive growth,

those in power had to find ways of reforming its economy, tackle bureaucracy, high taxes, poor services and income inequality.

What COVID-19 and lockdown has shown is how adaptable Brazilian business leaders have become in order to take a more digital approach to survival. And by all measures, Brazilian ecommerce is skyrocketing.

According to Associação Brasileira de Comércio Eletrônico, more than 100,000 new ecommerce stores - one new ecommerce store launched per minute - have been created since mid-March when lockdown in Brazil began. Bricks-and-mortar businesses adapted quickly and became more efficient, using advanced delivery systems to meet demand safely.

Fast-growing delivery companies like iFood, Loggi and Rappi led these facilities, connecting all types of businesses to consumers.

There have also been great retailers that have enhanced their brands and reputation through the crisis. Magazine Luiza, Grupo Boticário, Carrefour and Mercado Livre have shown their commitment to help and protect customers while also supporting and promoting good companies and donations. More recently, Via Varejo also began to support local businesses and McDonald’s donated 100,000 meals for workers in essential services.

The Brazilian stock market – which had until May been one of the worst performers among global markets – is recovering fast. Magazine Luiza continues to show impressive growth with a market cap of $20bn (£15.9bn), from less than $100m (£79.8m) in 2015.

After three months of quarantine and lockdown policies in major Brazilian cities (especially São Paulo), the pressure for businesses and retailers to re-open has been huge. But a lack of COVID-19 testing and social distancing measures on public transport means that Latin America’s chances of returning to normality anytime soon from an economic standpoint are quite low.

The first phase of re-opening in São Paulo was on 8 June, and 25 de Março – the city’s most popular shopping street – was crowded with people. Shopping centres were also allowed to open soon after under detailed social distancing measures and four-hour maximum working time for retail employees.

But despite the incredible digital transformation of some leading retailers that have delivered double-digit growth during lockdown, it will take time before the rest of Brazil’s retail sector will recover.

Increased federal government spending, rising debt, low consumer confidence and 12.6% unemployment will make it harder for its government to reignite the economy.

Despite this tough backdrop, there is much hope to be taken from the country’s innovative and fast-moving digital platforms that leading businesses are creating to embrace the changing retail landscape.

Roberto Meir, CEO and Founder of Grupo Padrão and publisher of Consumidor Moderno

Matthew Shay, President and CEO, National Retail Federation

59Issue 05 |

NORTH AMERICA | USABy Matthew Shay, National Retail Federation

RETAIL’S ROLE IN FIGHTING RACIAL INJUSTICE

Michael Emmanuel Reighley / Shutterstock.com

Hiram Rios / Shutterstock.com

G eorge Floyd’s tragic and unjustified death on 25 May 2020 has brought to the forefront, once again, the USA’s shameful challenges with race and social injustice. To stop it, we must

work together to create a greater understanding of the challenges that are faced by black people of all ages in communities large and small.

It requires leadership in the municipal, state and federal levels of government, in our schools, our places of worship, our businesses and our homes, so we can work together – honestly, transparently and inclusively – to find solutions.

The retail industry will play a significant role in healing these divides and implementing the changes we need. Retailers serve every community across the country, where one in four people are employed by the industry. We are committed to the values of diversity, inclusion and opportunity and that has always been at the heart of our industry.

This is a shared journey. We are working closely with PwC on programmes to advance diversity and inclusion within the workplace. In 2017, the National Retail Federation (NRF) was the first trade association to sign PwC’s pledge to support a more inclusive workplace for employees, communities and society at large. The pledge now has over 1,000 corporate signers.

Our leadership at NRF is committed to proactively moving forward with an actionable programme that is resourced and robust. We pledge:

• Virtual support groups, town hall forums and training for colleagues to listen to, learn from and connect with one another.

• A Diversity and Inclusion Council for NRF staff to address and advance equally within our association.

• Up to one week of service opportunity for staff to volunteer their time throughout the year.

• Employer-matched contributions for employee donations to social justice causes or organisations of their choice, up to $100,000.

• Juneteenth observance, in which the NRF will close on 19 June every year to commemorate the ending of slavery in the US.

• Identifying opportunities to boost the retail industry’s position of power through thought leaders, sharing best practices and instituting measurable outcomes.

Racism and social injustice in the USA are a tragedy. The NRF and the retail industry will play an important role in bringing people together to find solutions that will result in lasting and sustainable change.

61Issue 05 |

NORTH AMERICA | USA

CORONAVIRUS FALLOUT COULD PROMPT SOURCING SHIFT AWAY FROM CHINA

By Deborah Weinswig

At Coresight Research, we have been monitoring consumer sentiment and behaviour week-by-week throughout the COVID-19 pandemic. Our weekly surveys of US consumers provide valuable and timely insights into how America’s shoppers are acting and their post-lockdown intentions. Here, we pick out findings from our recent data and consider their implications for retailers. We focus on questions about consumers’ attitudes to products made in China in the wake of COVID-19.

Deborah Weinswig, Founder and CEO, Coresight Research

A lmost half of respondents think retailers from the USA should reduce China sourcing as a notable number of them have a negative attitude toward Chinese products due to the

coronavirus pandemic.

• Some 47.8% of all respondents agree or strongly agree with the statement that ‘US retailers should source fewer products from China’. Alongside heightened political rhetoric, this is further indication that retailers from the USA should review the extent of their reliance on China as a manufacturing hub – and whether that is evident to their customers.

• Some 39.7% said that the pandemic has made them less willing to buy ‘Made in China’ products, indicating a mistrust among US consumers about products made in China and a backlash over the coronavirus.

The 8% mismatch between these two figures could be explained by some consumers already holding negative views of sourcing in China pre-crisis – so their willingness to buy products made in China has not changed.

Despite heightened negative perceptions, in terms of willingness to buy China-made products, the most popular response is ‘no change’.

The crisis could accelerate diversification of sourcing.

Tension has been rising between China and Western countries including the USA, UK, European Union and Australia. US-China relations cooled amid the 2018-19 tariff conflict. Mistrust started to build up again due to the COVID-19 pandemic and the related controversy about China’s influence on the World Health Organization (WHO).

Subsequently, China approved a national security law regarding Hong Kong. USA President Donald Trump responded by planning to revoke Hong Kong’s special trading status with the USA.

Against this background, we have seen some international companies moving sourcing out of China – although none so far appear to have attributed moves to the fallout from COVID-19. This follows a general trend toward sourcing in other countries in recent years, as labour costs have risen in China and in the wake of the 2018-19 US-China tariff conflict.

Some Asian countries have been keen to offer policies and subsidies to incentivise multinationals to relocate. The Japanese government has offered financial subsidies for Japanese companies to move sourcing back home or diversify production bases to Southeast Asian countries.

India has launched a scheme to attract electronics manufacturing. On 9 June, Indonesia was reported to be in talks with the US government to lure US companies operating in China.

Should political rhetoric continue to ramp up and consumers retain or even increase negative sentiments in Western countries towards China, we could see many more companies follow in moving some or all of their production out of China.

Retailers and brands must not only pay attention to politics and ease of trade on supply but also consider demand – what their customers are thinking and whether they are paying increased attention to the subject of sourcing.

Tracking of consumer sentiment could become a more important input into the sourcing decisions that consumers do not see.

Don't know

Strongly disagree

Disagree

Neither agree nor disagree

Agree

Strongly agree

3.2%

6.3%

13.6%

29.1%25%

22.8%

Don't know

Made me more willing to buy Made in China products

Made me less willing to buy Made in Chinaproducts

No change in willingness to buy Made in China products

45.9%

39.7%

5%9.5%

US Consumers: Whether they agree or disagree with the statement ‘US retailers should source fewer products from China’ (TOP); the effect of COVID-19 on their willingness to buy ‘Made in China’ products (Bottom) (% of respondents)

Base: US internet users aged 18+ | Source: Coresight Research

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