Expect long-term changes
to retail space and supply chains that will fundamentally alter the industry.
By Thomas
Tunstall 1:31 AM on Aug 23, 2020
COVID-19 represents a sea change for retail services that
will alter the customer experience for years, perhaps decades to come. What at
first appeared to be a temporary aberration is taking on a measure of
permanence. Some have even resorted to reframing the popular aphorism as the
new “abnormal.”
Key to the impending transformation is the concept of space
and its relationship to traditional business models. Developers, for example,
will opt for more open areas and install antibacterial ventilation ductwork
within buildings, among other things — all of which will push up their costs.
It’s very possible that prices will rise or profit margins shrink — probably
both, and on a secular basis faster than increases in productivity.
Rate-of-return expectations by investors may temper when
greater space requirements and wages for front-line workers — long overdue —
increase. Since the 1970s, most of the benefit of rising productivity went to
investors and senior management, while employees got short shrift. Growing
unrest appears primed to boost compensation for workers most at risk.
With so many emerging trends, it’s hard to know where to
begin. Restaurant and public space design will become more, well, spacious.
Take-out, drive-thrus and drive-in movies will win big. In some ways, 1950s
lifestyles will make a comeback.
Large venues and modes of transport will no longer pack
patrons in like sardines to maximize revenue. Drive-up appeal will factor more
prominently as a way to draw customers to the curb, while parking lots convert
to pickup points. Guests will insist on more sanitary hotel rooms and Airbnb
properties. Additional bankruptcies await retailers that cannot adapt.
The reworking of the retail industry is taking place in
earnest, as stores convert to warehouses, and logistics networks morph to
accommodate residential delivery. If brick-and-mortar locations can shift to an
online-only presence, they will close or convert to stockroom and shipping
hubs.
Wholesale purveyors of commodities such as milk, toilet
paper, institutional food services and other items designed around bulky or
high-volume distribution to restaurants or office buildings will adjust to
accommodate household and individual-purchase quantities, or else significantly
reduce their scale of operations. Supply chains will become more local to avoid
disruption and decrease vulnerability of viral spreads from this and future
pandemics.
Supply-chain theory taught in business schools and practiced
by consulting firms will shift its emphasis from near obsessive focus on cost
and efficiency — no matter how geographically far-flung — to resilience and
reliability. They will advise organizations to retain larger quantities of
buffer stock, particularly essential dry goods, nonperishable food, hand
sanitizer and surgical masks. For more expensive items where the private sector
has little incentive to maintain substantial inventories such as ventilators,
the government will step in.
Welcoming concierges will instruct and direct at store
entrances, subjecting visitors to scans or sterilization. Motion- and
voice-activated sensors will provide guidance and dispense information from
product shelves. Smartphones will further integrate with the retail experience.
Plexiglas shields will abound, and sanitary supervisors will make regular
rounds. Fewer displays will reduce clutter on showroom floors.
Hard-hit venues, such as nail and beauty salons, bars and
other close-quarter businesses, will continue to struggle. As socializing and
the exchange of gossip in the 21st century moves from the physical to the
virtual realm, things may never be the same again. Avoidance of close contact
by nonfamily members will establish new social norms, new etiquettes.
Crowded locales of humans in proximity with animals sparked
previous pandemics — the threat of more in the future seems destined to alter
buyer behavior for the long haul. If the joy of the retail experience
diminishes, more circumspect behavior by consumers will result, implying a
completely different meaning for the shop-til-you-drop culture.
Physical distancing — once thought of as the refuge of the
aloof, detached or unsociable — is now positively fashionable. Every economic
upheaval leaves its mark. In this instance, COVID-19 will overhaul supply
chains and buying patterns — and even the nature of human interaction — much
further into the future than anyone ever imagined.
Thomas Tunstall is the senior research director for The
University of Texas at San Antonio’s Institute for Economic Development. He
wrote this column for The Dallas Morning News.
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