Predictions For Retail In A Post COVID-19 World

Written by George Williams, Retail Investment Team
November 25th, 2020

2020 has been quite an eventful year for all of us.  Fortunately, with multiple Covid-19 vaccines on the horizon, there is light at the end of the tunnel.  Here are my predictions for 2021 as we begin to move past this pandemic.

Growing E- Commerce

Data from IBM’s U.S. Retail Index indicate that the pandemic has accelerated the shift away from physical stores to digital shopping. Some brick and mortar stores - fashion, boutiques, department stores, sit down restaurants, entertainment concepts -, are seeing meaningful declines in sales. In the first quarter of 2020, department store sales and those from other “non-essential” retailers declined by 25%. This grew to a 75% decline in the second quarter during the heart of the pandemic. Although these categories are beginning to recover, we will see continued growth in e-commerce.  Retailers success will depend on their ability to implement and execute an omni-channel strategy.

Delivery Is The New Normal

COVID-19 related shutdowns of in-person dining forced restaurants to turn to delivery as the only available source of revenue.  Although delivery had been on the rise for several years prior to the pandemic, many restaurants had to pivot quickly to ramp up or start a delivery program in order to keep serving customers. Many customers got their first taste of delivery options through online ordering and third-party delivery services like Door Dash, Grub Hub, and Postmates.  Those who were not comfortable pre-pandemic have now adapted to these delivery options, making this a new norm.

QSR Will Dominate

Quick serve restaurants have adapted and expanded their take-out and drive-thru business and even begun to offer curbside services during the pandemic.  Moving forward we will see national chains gobble up smaller restaurant spaces, reduce current footprints and staffing but expand take-out, drive thru and delivery options.  The COVID-19 crisis has sped up changes that were already in the works.

Discount, Grocery, And Home Goods Will Maintain Strength

Discount retailers, grocery stores, and home goods retailers have been a bright spot for retail in 2020.  We have seen a shift in spending from entertainment-based retail to physical goods during the pandemic.  Many of these types of retailers have added new customers to their base which will help drive continued growth in 2021 and beyond.

Distressed Assets

As the pain from the pandemic continues to trickle down to retailers, property owners, and lenders I would expect to see more distressed assets hit the market in the latter half of 2021.  If there is not another government stimulus program, we may see these assets hit the market even sooner.  Many small businesses have exhausted federal Paycheck Protection Program loans they got in the spring and are awaiting a final decision on debt forgiveness, other available resources are limited. Owners are beginning to see a handful of tenant defaults and, given that there was no relief for Landlords in the CARES Act and loan modifications are generally coming to an end, the stress on owners is being felt. Lenders are next, which will result in opportunities for buyers. And there will be opportunities.