Retail and Hospitality Trends to Watch After the COVID-19 Pandemic

By: Robert Banker, Director of SMARTtill and Partner Sales at APG Cash Drawer

What do the next six months look like in terms of the direction retail might go? 

I would expect a slow recovery as more retailers open for business and people look to expand their daily activities to include more shopping trips. A large percentage of the population including the “at-risk” groups will be more hesitant about taking unnecessary shopping trips and might opt more for online shopping. The wild card in the equation is the discovery of a vaccine and/or a cure for COVID-19, which would get people back to their previous levels of activities. A second wave of resurgence in cases would also set back retail’s recovery.

Many retailers are anticipating the inventory “return tsunami.” Some have started to designate areas and aisles for a rush of returns. Retailers could see as much as 200 billion in returns in the first 30-60 days of accepting returns per IHL. With returned merchandise “on hold” for cleaning, it will be hard to account for accurate inventory totals.

The temporary expansion of unemployment benefits may hinder the already suffering retail and hospitality industry. Furloughed or unemployed workers are making more per hour than they were pre-Covid. The speed of confidence in recovery is dependent on workforce labor availability.

Retailers will want to upgrade their BOPIS and e-commerce capabilities to support customer preferences for these “low touch” options. We could see partial store remodels in 2020/2021 to accommodate local delivery and click and collect. Retailers have been closed in some cases for almost 3 months. Inventories are seasonally outdated. Inventory will have to be updated or replenished before the mad rush.

What temporary operational changes in retail do you expect to become permanent? 

Until there is a vaccine and/or cure, I would expect many of the operational changes that we are seeing to become part of the new normal for retailers. Shoppers will be paying attention to a retailer’s store cleanliness, safety protocols and will be looking for safer shopping environments. I would expect continued support of social distancing, mask-wearing, sneeze guards in a variety of locations within the retail store (such as our Retail Guardiant solution), sanitation of keypads for card transactions, cleaning of shopping carts, unidirectional travel in shopping aisles, offering low touch sales approaches including e-commerce and BOPIS capabilities. Public restrooms will be cleaned more frequently, and fitting rooms will be limited for a while.

What temporary philosophical changes do you expect to become permanent? 

Changes to shopping habits will become permanent for a percentage of shoppers, meaning many people have tried online shopping not only for apparel but now for their weekly food supplies, and have experienced the time-saving nature of this type of shopping, and will continue to leverage this approach going forward. COVID-19 has sped up the clock when it comes to online shopping adoption rates. 

I also expect some of the changes to the “clean” store listed above to become part of the new normal. The shift in consumer values can be seen in the evolved marketing messages. Hotel chains are no longer talking about luxurious fine dining and 1000 thread count sheets. Messages have shifted to room cleaning between visits, safety protocols and staff precautions. Other retailers in general are also touting their cleanliness messaging as key talking points in their conversations with customers.        

The hospitality industry has seen the same disruption. Do you expect that industry to recover differently or at a different pace? If so, why?

I would expect hospitality to recover at a slower pace as business travel continues to be curtailed. A percentage of those who now work from home will continue to do so for the long haul. Video meetings will continue to be popular as restrictions continue. Travel for work will continue to lag behind as companies will struggle with liability associated with business travel. This will impact airlines, rental cars, hotels and other travel-related industries. Leisure travel will also be slow to return at least until a vaccine or cure is found. Consumers will continue to hunker down in their homes and take more staycations during their time off.  This lack of travel will also have an impact on specialty retail where “business casual” takes on a whole new meaning.

What long-term effects should be expected due to the disruption of supply chains? 

Supply chains of certain products and categories have been heavily taxed during this COVID period. In the world of “just in time” inventory, product flow was a well-orchestrated process. We all know of the issues around certain products that have periodically disappeared from the retailer’s shelves due to aggressive purchasing by consumers- including toilet tissue, disinfectant products and wipes, rice and beans. We’ve seen supply chain issues related to meat products due to temporary closures at processing plants. Consumers have learned to be adaptive and more flexible when shopping- if their desired brand or item isn’t in stock, then a substitute product is selected vs. leaving with no product. These shortages can lead to psychological issues regarding certain grocery items, which can include some of the hoarding behavior that we’ve seen.

Consumers are also going to fewer retail stores for their shopping. In the past, you could have gone to 2-4 different food-related retailers for different categories of product- today, this is much more limited- consumers are finding a way to fill their product demand using fewer shopping trips and fewer retailers. Limited assortment stores are becoming a consumer’s primary store. Small store formats generally will have fewer people and limited brands per category. This empowers consumers to make quick buying decisions getting them in and out of the store quickly. Grocers are also looking at ways to create a deeper inventory with less variety. For example, does a grocery store really need 40 different types of Bacon when 80% of our sales come from 2 brands? When those 2 brands packages run out, sales fall in that category.

What is going to become of cash? Is the reluctance of some merchants and consumers using cash going to be a long-term issue? 

Cash will continue to be a main method of tender going forward. Contactless payments and frictionless payments both got a boost during these times as some consumers preferred “low touch” approaches to tendering, but there remains a large percentage of the population that either prefers to deal in cash or is necessitated to deal in cash due to the absence of credit or debit cards. 55 million or 22% of American households are unbanked making cash transactions essential to their livelihood.

Is the shift to contactless payment going to cause harm to people of lower economic status? If so, what can be done to prevent that?

People of lower economic status or the unbanked population are large users of cash as they simply have no other tending choices available to them. Retailers legally will need to continue to support cash and cash as a tender method to assure that these consumers can make purchases or risk discrimination.

What will be the impact of COVID-19 on the cash drawer market? There have been studies that indicate it may drive growth over the next 5 to 7 years. 

Cash drawers remain a vital component of a function Point of Sale solution for retailers. COVID-19 could drive the cash drawer market in a positive direction as retailers will add lanes to try to maintain shorter customer queues to minimize exposure. APG has positioned itself as a supplier of best-in-class cash drawers by offering a good, better, best categorization of products. We will be able to meet the retailer’s cash management requirements today and in the future.

Robert Banker, Director of SMARTtill and Partner Sales at APG Cash Drawer, is a retail technology veteran with extensive experience in solution sales of retail technologies. Robert discusses the impact the COVID-19 pandemic will have on the retail and hospitality industries, as well as trends in consumer shopping behavior, supply chains, contactless payments and the future of cash.