Retail Industry: Online shopping booms while Covid-19 dooms physical stores

Tailwind brings you Covid-19 insights from GlobalWebIndex, a leading market research company operating in 46 markets inclusive of MENA. Tailwind, a TDG Company, is the exclusive partner for GlobalWebIndex in the region, bringing local businesses powerful consumer insights.

Four months ago, if someone said that the need for physical stores or malls is limited and everyone would be shopping online, we would call him crazy. Yet, Covid-19 gave us a new reality where even the worst scenarios are possible. Our data shows that not only the majority of the respondents shopped online while in a lockdown, but also globally, over 40% say they will continue this habit after the outbreak. Although, some countries like Japan and France are notably less enthusiastic about this, nevertheless the global figures remain high and consistent by gender, income, and age. Let’s dive in deeper into what that might mean for the retail industry.

Brick-and-mortar vs. E-shop: Covid-19 loves online shopping

So, is the momentum of online shopping going to last? Or it is just a pandemic side effect? Our findings indicate that not only will people continue their online purchases after the pandemic but almost 50% are not in rush to return to shops. This figure jumps over 60% when it comes to large indoor venues. The data paints a dark picture for the future of malls and the traffic in them, especially for cities like Dubai where more than 70 shopping centres are located and is a robust $55bn industry (source).

What also predicts the domination of online shopping are respondents’ priorities; safety and convenience are integral for them. For those planning to increase their e-purchases, home delivery is around twice as popular as in-store collection. Convenience will be a big driver of this, but safety is paramount too: significant minorities want to reduce the time they spend inside stores as well as visit stores less frequently. Companies take note of this shift of behaviour and come up with plans that provide a similar experience as their physical stores. A good example is Apple which recently launched an online hub where consumers can do anything that they would do on their store by the convenience of their home: ask for assistance, talk with an expert or simply see the new Apple products (source).

Everyone loves to (virtually) shop

To be fair, online shopping was gaining ground long against the physical store before the Covid-19 pandemic. Only in 2019, major US retailers such as Nordstrom, Sears and Forever21 collectively closed more than 9,300 physical stores (source).  And if the closures weren’t enough to demonstrate consumers’ change of heart towards physical stores, take a look on the sales growth in 2019: ecommerce saw an 8.1% YoY growth compared to 1.4% of brick-and-mortar sales (source). Covid-19 only made things worse for physical stores, where consumers’ choice of online shopping has translated from a desire for convenience to a need for safety.

So, what is the situation in UAE?  So far, retailers in the region seem better prepared than in other countries where amidst Covid-19, the Dubai Mall is co-operating with noon.com, the largest e-commerce company is the GCC to sell online brands’ goods with physical locations inside the mall (source). As our data shows, consumers’ tendency to shop online is here to stay, and as approval rates of selling no-essentials products via their website is high on 62%, retail shops and malls should consider to go fully omnichannel on a permanent basis. This approach is backed up with retailers’ testimonials who have already migrated to e-commerce and see a 700% growth on sales (source).

Our findings suggest that due to the pandemic, nowadays consumers are skeptical to shop in physical stores and even more, they are hesitant to do their shopping on large indoor venues. This indicates that online shopping will likely be consumers’ preferred way of purchasing goods. As respondents agree that they continue their e-purchases for the foreseeable future to manage their safety concerns, it seems Covid-19 could be the tombstone of physical stores.  It’s certainly possible, if retailers don’t adjust their offering to the current needs of consumers to include both a meaningful, multilayered consumers’ journey and a truly omnichannel experience.

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