COVID-19's Lasting Impact on the Mass Retail Landscape 5/20/2020
What will the mass retail landscape look like as we make our way through and past the pandemic? To explore answers to this question, I spoke with Jeff Woldt, VP and Editor-in-Chief at Racher Press, which publishes Chain Drug Review and MMR magazine. Jeff has been covering the mass retail industry for almost three decades and has spoken extensively with top executives at the largest retail chains on the subject.
During the podcast we cover a variety of areas, such as how the instore environment will be impacted moving forward, the role online and delivery will play, new opportunities that have come out of this for emerging brands, and how virtual technologies will have an increasing role in the industry (and speaking of virtual's impact, ECRM this week launched its category-specific Virtual Sessions to enable buyers and sellers to engage with private, prescheduled face-to-face meetings).
Lots of great insights here from someone who has his finger on the pulse of mass retail.
Listen to the podcast (or view the video below)
ECRM: Welcome, everybody. Joe Tarnowski with ECRM here, and I have with me today, Jeff Woldt, who's vice president and editorial director over at Racher Press, which is the publisher of MMR and Chain Drug Review, which I'm sure all of you are very familiar with. And they've done some great coverage, both online and in print about the impact of COVID-19, so what we're going to talk about today is what the future outlook is going to be for retail, based on our observations of what's happening, and what retailers are doing now to address it to prepare for the new normal. So Jeff, thank you so much for joining us.
Woldt: Thank you, Joe. It's a pleasure to be with you.
ECRM: So, I got a few topics that I want to cover, and first I'd like to start with actually the physical store, what that's going to be. But before I get into that, what was interesting, I literally just saw on the news this morning, there was a story about a restaurant in the Netherlands that they're starting to open up over there, and this restaurant rearranged its whole physical space to create individual enclosed seating areas for diners, and they're served by people wearing PPE. I thought that was interesting seeing how that physical space and their processes were kind of changing, and it got me thinking, what do you think or what do you see the actual physical store being like as we kind of start opening up and get out of this?
Woldt: Obviously, in mass market retailing, which is what we focus on, the idea is to serve a lot of customers at once and make a lot of products accessible to a lot of people or products. The kind of measures that you were describing they're taking at that restaurant obviously are expensive and they limit the number of people that can dine. And I think it's going to be a little bit of trial and error to figure out how to manage to get products to people who need them when they need them at a reasonable price and also make sure they're safe in the stores. I think, as we've seen here in New York City, where you and I both live, and across the country, masks are recommended and I think probably will be required of shoppers and store staff. And perhaps gloves.
It's going to be interesting to see how the whole thing evolves. Definitely there will be some adjustments that are necessary. I don't know if mass retailers can go to quite the extreme that that restaurant in the Netherlands is.
ECRM: That's right. How do you shop a grocery store or a drug store in that way? I mean, there's going to be a lot of people in there, just by the nature of the business. By me, in Astoria, Queens, I know restaurants are requiring masks to even just to come in for take-out, and some of them are requiring gloves as well. So, there's still going to be a need to maintain that space. And what I've been seeing is even in those states that are opening up, there was a report that the mobility, meaning the number of people that are out and about and doing things and visiting businesses has still remained the same as the mobility in states that are still pretty much closed, which really shows that even with given the opportunity, consumers are still scared and they're going to take their own actions.
Woldt: I've heard conflicting reports about that. I know some of the healthcare experts, such as someone from the University of Washington who spoke last night, said that they do see some more mobility. Not necessarily in the retail stores, but more mobility among people. As you say, the states opened up, and it'll be interesting to see what impact that has on the curve. And I think if things go well, maybe more people will be comfortable going back into the retail settings. But as you said, I think most consumers have a little bit of trepidation at this point.
ECRM: Yes. And in mass retail, what I've noticed is it's a a lot about line management or queue management. It’s a little bit tough. There are some who do it really well, where there's a lot of barriers that kind of force the issue of social distancing. And then some others, they're just not set up. Traditional grocery stores, they'll have all the checkouts, and then they have the aisles, and maybe like 10 feet of space between the two. And then, one place by me, they're doing line management by having everybody wait in one line that goes down the frozen foods aisle, and somebody's there kind of guiding everybody. But on numerous occasions when I've shopped there, it got confusing because maybe they misread that somebody was finished, they sent somebody to over there, and then they weren't, so they send you back. Meanwhile, someone cuts in front of you because they think you left the line... It's just gets a mess sometimes, so I think that's going to be an important factor too.
Woldt: I think we'll see a lot of that type of thing. And as you say, we are seeing it already. I've seen the line management within the stores as you go to check out, I've also seen some other retailers that limit the number of people in a store at any one time. And I think that'll become more common. And also at one of the local Walgreens, they've put up some shipping containers to essentially double the size of the checkout counter. So instead of being two-and-a-half or three feet between you and the cashier, it's double that. It's keeping six feet away from the cashier. And also, we've seen the plastic screens go up around a lot of checkout counters. And I think all of that is going to become quite common until we get a handle on the virus.
ECRM: When this first happened and there was a lot of people going to the stores, the CVS by me did something that was brilliant. It happens to be on a corner, and you have one street and another street. So, they divided it up. They said, "Okay, if you're waiting for a prescription, you go and line up along this street. And if you're waiting to go into the store, you go along this street." Again, markings on the sidewalk for social distancing and then somebody guiding everybody in. We don't need that as much now because it's not as much traffic, but during that initial rush, I thought that was a really great way of kind of managing that crowd.
Woldt: It's a smart thing and I think we'll see more of that. Although, as you do point out, people have calmed down a lot. There's not this sort of panic buying that we saw in the early days of this emergency. And by and large, I think stores are fairly shoppable at this point even if people have to wait outside to do it.
ECRM: Now, there are still supply chain issues. I mean, talking about that big rush of people. Obviously, sure, we all know about the toilet paper, the hand sanitizer, and then a lot of the staples, like food and everything. And it's not the fault of the retailers or the manufacturers, just such a stress put on the whole supply chain going all the way back. But I think that there's been a lot of changes I've seen, you've reported on a lot of ways that retailers have been adapting to kind of help the issue of out of stocks, including some interesting partnerships that have been happening. What are you seeing out there?
Woldt: Well, a couple of things, Joe. I think we really have to say the brick and mortar people have done a pretty good job with the supply chain, even in New York city, even in the epicenter of the COVID crisis. I think supermarkets and drug stores have done a pretty good job of keeping most products in stock. Some of the ones you mentioned obviously are still a little problematic, cleaning supplies, paper goods, things like that. But there's no shortage of food as far as I can see. There's no shortage of medicine or other essential personal care, health care products. So, I think the supply chains held up pretty well under tremendous stress. Now, we haven't talked about e-commerce yet. I think they have had more problems in that regard. Amazon looked like it was invincible for a long time. Suddenly, not so much.
The Amazon Fresh service in New York is overwhelmed as all the online grocers are overwhelmed. And I don't know if you've tried to get a delivery, but it's weeks in advance if you're lucky, and most of the time it just says "not available." So, they have some work to do. Although, in fairness to them, they saw demand probably double or triple or quadruple overnight. And I think they've had more trouble with their supply chain than the conventional brick and mortar guys. And I will say too, that I think Amazon, it's understandable why they're having problems with the Fresh service, but their regular delivery of non-food products has also slipped during this situation.
ECRM: Something like this really maxes out the stress on the whole supply chain. And I've seen, as far as the partnerships, I've seen in several cases, retailers going to different and unique sources of supply to kind of fill in the gaps, like foodservice, for example. A lot of the foodservice distributors and suppliers with the restaurants being closed, they have extra inventory, and some of the grocers have been reaching out to them, even the convenience stores. They're finding new sources of supply.
Woldt: Absolutely. And Sysco is one, a great example of that. As you know, Kevin Hourican, the former president of CVS Pharmacy has now gone and become CEO there. And to give him credit, he has a lot of connections in the retail world, and I think he shifted that business. And most of their business, the vast majority of their business, around 90 percent, was directed at restaurants and cafeterias, and other non-retail food settings. And they pivoted, and made a lot of alliances with brick and mortar supermarkets, and are sending products there. And they've also helped some of their restaurant customers convert some or all of their restaurants into sort of neighborhood markets, and are bringing in product there, which restaurants are selling almost as a convenience store or a small supermarket. And that obviously helps the restaurant customers stay afloat and helps people in those neighborhoods. So, I think Sysco deserves a lot of credit for pivoting quickly. And that's one good example of what you're talking about.
ECRM: Do you think that's going to continue on, like these relationships that were built kind of temporarily as a stop gap? What do you think is going to happen with those relationships moving forward?
Woldt: I think we'll see some shifts in the marketplace. I mean, again, to use the Sysco example, if these restaurants managed to start selling some products to people in neighborhoods, especially in food deserts, for example, I think you might see a new type of business model emerge where they obviously continue to do some of their restaurant business, but maybe keep selling some of these products as well.
ECRM: I agree. And I have a restaurant by me that actually, within the first week of the shut down, on the 16th of March, there's an Italian restaurant around the corner that within a few days flipped into a marketplace. And instead of selling meals, they started selling their homemade spaghetti or pasta, their homemade sauces batched up as grocery items. And they changed their seamless account to reflect that. And some restaurants were doing that as well, essentially making themselves wine and liquor stores as opposed to a restaurant.
I think one additional impact that this has had with some items going out of stock, is that I think emerging brands have kind of played a role of filling those gaps. It's almost like a forced trial for consumers. If they can't find their brand, their normal brand, but you have this emerging brand here, they're going to try it anyway. So, I think it's opened up opportunities for emerging brands. Have you seen a lot of that?
Woldt: Yes, we're seeing some of that as well. And you've also seen products that were in the food service channel suddenly showing up on shelves of supermarkets. So yeah, there's a definite opportunity. I think the small brands have the challenge though, that if a major retailer calls up and says, "We want this" can they produce it fast enough? So, I think that's a little bit of a challenge for them.
ECRM: Definitely. It would be hard for them to ramp up to do 10,000 stores, but maybe on a regional basis, it can work.
Woldt: Absolutely, yeah.
ECRM: And I've seen and heard stories of retailers just really searching for items, like one retailer ran out of rice in their stores, but they found this artisanal rice company that had plenty of supply and actually was willing to work with them on a price to just help them get to stuff on the shelves. And I've seen a lot of cases of that.
Woldt: I have seen some of that more in the supermarket than the drugstore, but absolutely. Maybe some of these guys will break through this way, as you say, consumers will try the products and like them and opportunity for them.
ECRM: That would be great. That would be nice to see if some of these guys get some play that way, even though it's not for a great reason with this whole pandemic. So back to online, I think another thing that we've seen, whereas, a lot of retailers that weren't doing curbside pickup or e-commerce in a big way, they have had no choice to really, but to really focus on it. And I know when Wayne did his interview with Derek Gaskins from Yesway, Derek had a great saying that I think it really captures what's going on, that “innovation becomes expectation.” So, now these retailers have been forced to really up their game on online and with curbside pickup. And I think that's going to be an expectation down the road. Would you agree with that? Or are you seeing that?
Woldt: Yeah, I am seeing that definitely. I mean, if you are buying at Walmart, and now you want it delivered, they'll do that. You want to pick it up at the store, they'll do that. Obviously, you still can come in and shop if you choose. Walgreens is using its drive-through windows for pickup and CVS is doing home delivery. I think all the retailers understand that the rules of the game are changing here and that they're going to have to really live up to that omni-channel promise of giving consumers what they want, how they want it, and when they want it. So, absolutely. It's going to change the equation quite a bit.
ECRM: Prescription delivery, too, has picked up.
Woldt: Way up. And mail order scripts are up. People want to avoid going into public places, so if they can get stuff otherwise, definitely. As you say, it will change expectations even when this crisis is over, although that likely won’t be until when the vaccine is done, and that's probably at least a year away.
ECRM: So, because of all of this and the fact that I'm interviewing you via virtual platform right now, I mean, obviously virtual is really becoming a normal part of the way they're doing business, it's actually getting into every aspect of the business. What areas are you seeing that retailers are adapting virtual to better serve their customers and to engage with each other as well?
Woldt: Well, I think these trends were happening already even prior to the COVID situation, but now you see great growth in ordering online, of course, telemedicine, where people will consult with a pharmacist or a doctor or nurse practitioner as you and I are talking now. I think the value of cell phone communication or text messages or emails or whatever is really important now in light of the current conditions. And I think you'll see personalization efforts directed via these digital channels to a growing degree. And I will say this, I mean, I don't think stores are going to go away. I think they're going to remain important. I think the value of stores has been demonstrated here in the city, I think you'd agree with me, during this situation, but I think they're going to have to change what they do. It's going to have to become more experiential. They're going to have to give you a reason to go to the store more than "I need to pick up paper towels" or whatever it may be.
They're going to have to make some service and expertise available to the consumer or make a sort of a theatrical experiences if you will. So, I think this will accelerate the process that was already underway there, and an experiential focus will have to emerge to a greater degree than it has in the past.
ECRM: It certainly has with us. We've, with all of our in-person sessions, now we've really flipped to a virtual model, and down the road, it's going to be a combination of both, even when the pandemic is over. We've seen that people are just so used to it now, and they're kind of realizing some of the benefits of it. Less travel, a little more convenience, better use of their time. And I think everybody's just going to have to find that sweet spot of virtual and in-person, regardless of what it is, whether it's retail, whether it's communications with each other, all of that.
Woldt: Right. Joe, let me first say you were kind enough to give me a preview of what your new virtual tool looks like. It's quite impressive. I think it'll be very productive for the retailers and suppliers that use it.
ECRM: Thank you.
Woldt: I'll also say though that, I mean, there are some things that can't be done virtually as I was alluding to before. I mean, I think the face-to-face interaction with a pharmacist, for example, you can do it virtually, but it's not quite the same, you know? And I think there will be some things, whether it's in trade shows or retail, that will still bring people together and need to bring people together, but you're correct. A lot of things people will get used to doing this way and it will become a more digital focus in retail.
ECRM: I agree. I mean, as much as I'm excited about our launch next week, I still miss the in-person. I went to 48 of our sessions in person last year. And there is that in-person thing is always going to be my favorite. That being said, I have liked switching over to this podcast and the video interview format. Just for me personally, I've actually loved it because I get to have these deeper conversations and I learn so much more. And then it gives me a lot more content assets to work with. If I'm interviewing someone for a half an hour or 20 minutes, not only do I have the long form content, but I can segment that into different pieces for social media. So, for me personally, too, this whole thing has really opened me up to other possibilities and it's been a great experience.
Woldt: I think that everyone is going to have to learn how to adapt and change their thinking and try new things. And the companies, the retailers, and the suppliers as well who don't, are the ones that are going to have problems. I mean, it's the old Darwinian survival of the fittest, and adapting to changing conditions. And that's what the conditions have changed radically and suddenly, and now we'll see who has the wherewithal to adapt.
ECRM: Yes. And speaking of digital, everybody's spending so much more time on social media these days. Are our retailers embracing social media a little more because of that or trying to get their messaging across through those channels?
Woldt: I think so. I think they have to, they have to try to seize all of the digital tools that are out there and to make more pf them. Some companies are obviously way ahead of others, but I think if anybody wants to stay in the game, they need to develop those capabilities at this point.
ECRM: Definitely. So, I think one side effect of all of this happening is it's kind of brought the industry together in a very positive way, and there's an overall kind of feel of everybody wants to pitch in. And I've certainly seen that in what you're reporting.
Woldt: No, I mean, I think you're right. And I think, particularly in the healthcare and food sectors, you see that a lot. Unfortunately, because of the circumstances, some other categories suddenly are not doing well. You think of a lot of beauty products, for example, you think of different GM categories, the climate is very challenging for them at this point. So I think, while those companies certainly have the right attitude and certainly want to contribute, we're so focused on the essentials of food and medicine at this point. That's where I really see a lot of activity.
ECRM: And I think it's going to change the way consumers think about what is essential. I think me personally, I know I've learned from this experience that there are a lot of things that I can live without and do differently, and that's definitely going to impact the way I shop. I've also been shopping a lot healthier. This whole thing makes you think more about wellness and health. And in fact, I was just talking to Elizabeth from WSL Strategic about that, that whole wellness way of life, and how this is really, really bringing that to the forefront.
Woldt: I think people's priorities have changed. They see what's, as you say, essential to them, to their wellbeing, and what maybe is a nice thing to have, but not necessarily essential. And there probably will be some reshuffling of priorities in consumer's minds in light of this experience, but also just the economic difficulties that so many people have. I mean, we've got more than 30 million people out of work, and I think that's going to have a profound effect on retailing for several years to come. It's going to be probably a fairly slow climb back to pre-COVID levels. And as you were saying, I think it will maybe change people's priorities as they go into the store.
ECRM: Definitely. It definitely has mine. I shop completely differently now. I still go to stores. Most of my shopping is in the store because I have so many little markets all around my neighborhood. I will go online for some things, usually the things I can't find in the stores. And then for things I would typically get online beforehand, books and ... But I still, whenever possible go to the markets in my neighborhood. One, I want to support them, and two, the speed. I mean, I could go to the organic marketplace across the street and get what I need relatively quickly during the day, and it's not too crowded. So it's definitely, I think this is going to last for a while.
Woldt: Oh, absolutely. I think as I said, until the vaccine is developed, we're going to just be in this situation for a while. Maybe we won't be locked down at home, but we're going to be taking all sorts of precautions and not moving around like normal until there's a vaccine. And then even after there's a vaccine, it's going to be a little climb back economically and getting these 30 million people back to work. And I will say in terms of personnel, which sometimes we take for granted, the people who are in the stores, and operate the stores, and stockers, and cashiers, and the supply chain people deserve a lot of credit for what they've done during the situation. They go to work every day, they're putting themselves in harm's way, and I think everyone, the retail community, but everyone owes them so thanks.
ECRM: They certainly are heroes. I mean, when you think about how many people are exposed to it, how many are getting to work in public transportation a lot of times, they're taking a big risk every day. So, you're absolutely right. I mean, they deserve so much credit for that, and your coverage of that has been great.
Woldt: Thank you, Joe. And one more thing I'd just like to add. I think that the major retailers who've been asked by the federal government and state governments to lend a helping hand have been exemplary. And those would be Walmart, Kroger, Walgreens, CVS, Rite Aid, Target. They've answered the call, and I think also deserve some credit for stepping up and trying to do whatever they can.
ECRM: Yeah. I think that that whole goodwill and efforts is part of that whole coming together thing. And I think if anything continues ongoing after this whole thing, I hope it's that spirit of we're all in this together and let's just help everybody out. That is one thing that I hope stays forever after this whole pandemic is done.
Woldt: Yeah. Well said. I couldn't agree more.
ECRM: So, thank you very much. I really enjoyed this, but I will enjoy more when we can get together again in person, and we're long overdue for a dinner.
Woldt: We are.
ECRM: So, we have to do that. So, thanks again and stay safe.
Woldt: You too. My pleasure. Thank you.