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Insights / Blog / Business

COVID-19: The ultimate wake-up call for bricks & mortar retail

April 03, 2020

The Corona pandemic has caught the world and global economy by surprise. What comes as no surprise is the continuing decline of traditional bricks-and-mortar retail, which has been ongoing for years now. This decline is now being significantly accelerated by the wide-reaching counter-measures many countries are enacting to help slow the virus, especially closing all but essential retail outlets (supermarkets/grocers, pharmacies/drug stores, post office and banks). As alluded to above, the problems faced by traditional retail are not new, however. Despite numerous industry professionals calling for digitalization, innovative business models and new approaches to selling goods to customers, many – if not most – retailers have been slow on the uptake. Consequently, they are woefully unprepared to meet the current crisis head-on. And some retailers will not survive. 

Kian Gould

Kian Gould

CEO & Founder / AOE
Those retailers that invest in omnichannel solutions early, strategically and sustainably will benefit the most from digital business models.

No Omnichannel, no future

There is reason for hope, though. Small local retailers as well as national providers are finding innovative ways to cope. The crisis has accelerated the trend to home delivery, regardless of which products are being sold. 

Globally, big players such as Amazon will continue to benefit from this revived and heightened interest in creating E-Commerce platforms. The world’s market leader is looking to hire an additional 100,000 employees in the US alone to keep up with demand. In Germany, Amazon’s growth in the second half of 2019 was an astonishing increase of more than 35 percent compared to the first six months of the year (Source: Handelsblatt). 

Before we look past COVID-19, let us take a brief glimpse at current consumer behavior. Today, more and more customers are buying goods online – and many transactions are via smartphone; in China, for instance, 85 percent of all E-Commerce sales are carried out mobile. At the same time, almost all consumers research products or stores online before actually visiting the shop. Contrary to popular belief, this behavior, known as webrooming, is more prevalent that the opposite behavior, showrooming. And almost three out of four millennials agree that this hybrid of online store and physical shop is the ideal retailing combination. 

Impact across all target groups

This behavior will only be reinforced by the current crisis. And consumer behavior will not depend on age. Across all age groups, customers will have become even more accustomed to making many of their purchases online. And it will not only be the Amazons of the world who will thrive in this vastly different retail landscape. Retailers who are already in the midst of digital transformation, especially those who can provide services such as home delivery or local pickup, will see an immediate impact on their business. Perhaps slowly at first, but with increasing drive as we maneuver through the worst part of this crisis. What is clear, however is this: Retail will be forever changed when we start going back to a business that is approaching “normal”. 

The key to a “new normal” in retail is Omnichannel, meaning a holistic approach to business that reaches the customers whenever and wherever they want – and in whatever channel they choose or is most convenient for them. 

Luxury brands, attention!

A special group that should open itself up more to Omnichannel E-Commerce is luxury brand retail. These retailers have been resisting E-Commerce for years. And, even though we shouldn’t expect home delivery for Rolex watches anytime soon, retailers who sell luxury watches shouldn’t let Chronext and Chrono24 dominate the market. This is especially true, as many luxury retailers are reducing highstreet retail locations, begging the question, “How can these retailers even sell their products to their customer base?”

Regardless of whether a product falls into a luxury category or not, this behavioral shift in consumer behavior, which began well before the current crisis, will continue to accelerate. Many customers who turned to online offerings out of necessity will stay online customers after the worst of the crisis is over. 

Those retailers that invest in omnichannel solutions early, strategically and sustainably while addressing their customers in a targeted manner will benefit the most from these digital business models.

Gartner: Leverage digital technologies to mitigate impacts

Gartner substantiates the potential of E-Commerce to help businesses respond in a post-Corona world. In the article “Mitigate Coronavirus (COVID-19) Business Impacts With Digital Commerce”, published on March 26, 2020, the global research and advisory company says, “To respond to the COVID-19 outbreak, organizations can leverage digital technologies to mitigate impacts on operations and business performance. In the long term, organizations should develop digital product extensions and the ability to quickly switch between channels to increase resilience to future disruption. By 2021, organizations with robust, scalable digital commerce will outperform noncommerce organizations by 30 percentage points in sales growth by better using digital channels during the COVID-19 outbreak.”