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Covid-19 will separate the optimists from the pessimists

I think we can all agree that few people are unaffected by COVID-19, and the impact will last for months or years to come. But one thing is obvious with the ceaseless media and industry coverage. It will separate the optimist from the pessimist. Even in the immediate term, the contrast is stark as I speak to different retail clients. There are those where the talk is still of “crisis management” and their activities are very different from retailers – often in the same sector and geography – where their language is of stabilise the business and prepare for the rebound. Some would say it means the same thing, but when I look at the actions it does not. And personally, I think it is the different between the optimist and the pessimist.

With the International Monetary Fund (IMF) now predicting over 170 countries will enter recession (or even depression) there is a lot of talk of cost reduction. In reaction to the financial crisis in 2008, too many areas in retail ended up in the proverbial ‘race to the bottom’. It became all about price. Retailers lost their ‘North Star’ and what made them different. And ultimately most pundits would say it was the making of discounters ALDI and LIDL (especially in emergent markets for them at the time such as the USA, UK and Australia) where it was above value. 

So, the pessimists will be focused on cost reduction. Range reduction. And risks another race to the bottom. Which is even more risk this time, as online sales are a much greater threat now than a decade ago. According to BCG, in the wake of the pandemic, first-time users comprise 41% of online grocery shoppers. Yes, many will return to bricks-and-mortar retail when they can. But many will be converts to online. So price is not enough.

The optimists will be thinking how they adapt to the new norm. They will see the post COVID-19 world as an opportunity. Shopper’s attitudes towards brands and products are being reshaped. As a result, differentiated own brand offers targeting new and different value are expected to take a significant share. Health is forefront of our minds, and that is predicted to continue beyond the lockdown. How can own brands react to that? COVID-19 has resulted in a new generation of home cooks and home bakers.  What new meal solutions can own brands offer for this space?

At a simpler level, the shortage of flour on our shelves is not due to a shortage of flour. The flour previously destined for restaurants and food service is still there in bulk. So which retailer/brand will be innovative in how they re-pack flour to address the demand? All retailers are working hard to put more products online in response to demand. For the pessimists it is an essential defensive measure. For the optimists they see it as an opportunity to persist beyond lockdown and have a stronger omni-channel business for the future.

I firmly believe that own brand retailers who take a proverbial glass is half full view at this time will find new opportunities to grow own brand customers with relevant new offers. 

Is your glass is half full?

Tags: COVID-19

James Butcher

james.butcher@s4rb.com

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