by Antonis Zairis*
Global effects of the first and second wave of Covid-19 pandemic- as recorded by international statistics, will significantly affect global growth with an -5,3% average rate of decline in 2020, and growth is expected to moderate to 0,7% in 2021.
The decline in developed economies will reach -6,8% in 2020 and -0,3% in 2021, in developing economies -4,1% and +1,5% respectively, in US -5,5% and -0,5%, while the decline in Eurozone will reach -9,5% and +0,2%.
Retail is one of the most crucial economic sectors worldwide that is irreparably affected. The decline is expected to reach -3,5% (the loss in absolute values is 500 billion dollars). The Retail evolution shows that, in terms of turnover, growth from 13,8 trillion dollars in 2014 raised to 15,173 trillion in 2019 and will reach 14,673 trillion in 2020. Forecasts for 2021 project growth at 15 trillion USD, to wit a year-on-year USD increase by 3%, while is expected an increase to USD 16 trillion in 2022 and to 16,2 trillion in 2023. Three (3) retail select sectors (clothing, footwear and household goods) will show tough sale losses that will drop by 500 billion dollars, while e-commerce will increase by 443 billion dollars in 2020. Large hypermarkets, supermarkets, discount stores and convenience stores are expected to increase by 111 billion dollars. In our country, the retail turnover reached 44 billion euros in 2019, while the losses are expected to reach 20 billion euros in 2020- due to the pandemic. Repeated forced lockdowns of commercial stores, weak buying demand and reduced "shopping cart" are some of the reasons for the turnover decrease. The adoption of various alternative methods of sales promotion (e.g. the measures for the implementation of click away) obviously did not replace the physical store operations, but covered a small percentage of 20% -25% of the overall turnover loss. On the other hand, pandemic forced one in ten companies to build their own e-shop in the context of a new digital culture that will be a way out of the current situation for online sales, which at the end of 2020 are expected to reach 15 billion euros in Greece. The current health crisis has acted as a digital accelerator in retail industry. The need to invest in digital transformation finds businesses in agreement largely by 27% and to a moderate degree by 43%. It is worth noting that during this period 3 out of 4 commercial stores (74% of stores) saw an increase in online traffic- compared to 2019, but only the 11% recorded an impressive increase.
However, the effects of Covid-19 pandemic did not only affect the economic, political and social field with declining estimates of business turnover and a negative impact on the economic growth rate, but also caused business process rearrangements, rising inequalities and unemployment, and even changes of politics, governments and leaderships. Effects also concern, firstly, significant changes and fluctuations in the Buying Behavior Profile between representatives of different generations and, secondly, changes in retail sector and in market incentives, which are repositioned at the 2030 time horizon and due to the digital invasion that will impact the future of retail.
According to official research (both in Europe and in our country)- between now and 2030, Generation Z (20- 30 years old) will lead to increases in purchasing that will make the biggest purchases (reaching the higher percentage of 40%) and will affect environmental and social transaction, and other family members in terms of consumer preferences. This phenomenon is international and applies to: US, Australia, Middle East, Asia and Africa.
Businesses should tailor their investment plans to product lines targeting this category of consumers- born between 1996 and 2009 and the so-called Millennials (born between 1980 and 1995), representing a market share above 30%, equally important. Pragmatism, open-mindedness, social responsibility, digital natives and a willingness for personalized service are the generation Z characteristics that should be analyzed and processed by corporate researches.
As for this environment, it changes dramatically without underestimating the role of the physical store- its atmosphere and the experience. This will be continued in the post-covid era with significant changes in the consumer buying behavior, as 46% of them will want to see or try the product before buying it. Other purchasing selection criteria in order of priority are: the direct purchase (45%), the accessibility - location (36%), while the seller proposal - recommendation within a store represents around 20 percent. In-store experience remains an essential factor for a customer to make a purchase- with 57% of "connected" consumers considering that is an important reason to spend money, while 65% of potential consumers use technology to improve their daily shopping. As regards food retail stores, storefronts will play a key role and it will be needed to become more interactive- in order to influence consumers’ decision to purchase (e.g. using their smart phones while passing by the store). Using robots will play an important role in customer service and in issues of logistics management, too. New eras require innovation and dramatic changes. Adaptation to the innovation environment and digital intervention is a key factor for all businesses, regardless of size. Retailers’ identification of buyers’ moods plays a key role. For example, upset or dissatisfied customers would be relieved by a specialist executive or by a musical atmosphere that would change their mood.
Offering personalized products and services is an essential practice of e-commerce, with continuous upgrading and improvement of product-service in an ever expanding product range.
Another particularly important thing to note is that the various alternative methods of shopping (e.g. click away, click in shop and the recent method of click and collect), in no way replace the physical presence in the store, its experience and atmosphere. These are forced changes and solutions due to the urgent health challenges, until the market will return back to "normal" and the situation will be normalized. Of course life will never go back to how it was, as long-term travel will be limited, remote working will remain as a way of working and working hours with physical presence will be reduced by 40%, city centers will be downgraded, rents will be decreased and small regional, local stores will flourish.
*Assoc. Vice President of SELPE, Assistant Professor of Business Administration University of Neapolis, Cyprus and “American Economic Association” member