July 2, 2020 | COVID-19 and the Impact of Retail: Part 2 | By: Matthew Wagner, Ph.D., Vice President of Revitalization Programs, NMSC |
This article is part of the COVID-19 Trends Blog Series.
In Part 1 of “COVID-19 and the Impact on Retail,”
we examined what are likely to be longer-term impacts on retail bricks-and-mortar shopping. Part 2 presents an agglomeration of many economic and societal trends resulting from COVID-19 and explores how those shifts may translate into new product/service opportunities.
Here are ten post-COVID-19 business opportunities broken down into four main sector categories for Main Streets to consider:
Health and Fitness
During the past four months of various stay-at-home orders, consumers became much more concerned about their health and immune systems. This translated into a number of new interests and habits that ultimately will make for growth and/or new business opportunities for retailers in this sector.
- Bike and E-Bike Retail. Bike sales have gone through the roof over the past few months, with leisure bikes and electric bikes having the strongest growth according to data gathered by Statista. This growth is coming from new, more casual bikers and as such indicates the broadening of this sector to the mass market. Many of these new riders are linking up with local and regional trail systems and using this form of recreation as part of family “staycations.” With the uniqueness of the E-Bike market, and the number of craft builders in this segment, I would anticipate opportunities for stores dedicated exclusively to this emerging line of bikes. In addition, small scale bike manufacturers should also see great new opportunities in areas ranging from E-bikes to more urban, cargo bikes as individuals seek to shed the cost of transportation and stay healthy.
- Fitness Tech. Over the last few months, consumers that once went to gyms adjusted by creating home gyms, buying technology-infused exercise equipment, and participating in “Exergaming” – a term used for video games that are also a form of exercise. Exergaming has become so popular that Peloton, the tech fitness and equipment maker, has increased sales by 66 percent over the last quarter and virtual fitness gaming subscriptions have rrisen more than 94 percent over the previous year. While consumers are certainly ready to move outside for more reality-based exercise, we should anticipate that the ability to do a “virtual” group ride up a Colombian mountain will remain a part of the new norm in fitness. This can provide new growth for existing bike and fitness accessory stores as well as gyms looking to create new, value-add membership offerings.
- Nutrition Based Products. Consistent with an increased self-awareness of our health is a move to more organic and nutrition-based products. According to recent data compiled by the Organic Trade Association, organic produce sales were up more than 20 percent in the spring of 2020. This is also consistent with recent trends favoring locally grown foods. For place managers, look for continued growth in farmer’s markets, but also for the competition for vendors. Keep an eye out for opportunities to support bricks-and-mortar stores sprouting up (no pun intended) that feature natural and nutrition-oriented products.
Products/Services for the Home
Whether you live in an apartment, condo, vacation, or single-family house, we’ve all become more informed about what we like and dislike about our homes. Stay-at-home orders coupled with remote work has also caused profound shifts in how we use our houses. From home offices to increased kitchen time, the realities of COVID have resulted in new habits and functions of home life.
- Home Office Equipment and Decor. Pre-COVID-19, only 10 to 15 percent of the apartment units Steinberg Hart Architects were building had some type of dedicated office space. Going forward, this company expects that figure will be more like 75 percent. There are similar expectations for home sales, as the home office renews its spot as a need rather than a want. As such, existing furniture and home decor stores should be evaluating growth opportunities through furnishing lines designed for the home office. Consistent with this trend are opportunities for stores that provide home decorations and accessories along with value-add design services.
- Kitchen and Cooking. In 2019, sales at restaurants, bars, and other food-and-drink establishments had surpassed sales at grocery stores. COVID-19 has dramatically reversed that dynamic. This combined with a trend toward frugality and better nutrition will provide for enhanced opportunities for retail stores focused on kitchen equipment and cooking accessories.
- Home Gardening. Aside from toilet paper and hand sanitizer, a third area that experienced hoarding was vegetable seeds. Some of this was short-lived as the virus hit right as the spring planting season kicked off, leaving the supply chains with unanticipated demand. However, another cause for this demand has been the extent to which food scarcity in the U.S. has been exposed during the pandemic. This, combined with high unemployment, is likely to result in a greater percentage of households starting gardens in their yards or balconies post-COVID. This will lead to more business opportunities on niche seed markets, gardening accessories, and tools.
As highlighted in Part 1 of this blog, experiential shopping that features locally made/grown products provides a unique purchasing experience (the ability to take a class, watch someone make a product, etc.) and speaks to the consumers’ lifestyle will remain an important and growing portion of the retail environment.
- Small Scale Production. As highlighted by the recent robust growth of Etsy, the online marketplace for artisans, artists, and makers, small-scale producers in all categories will have opportunities for growth post-COVID. This lies not only in the demand for unique and locally-oriented products, but also in the fact that small-scale producers are less dependent upon local foot traffic and can leverage the growth in e-commerce and “staycation” visitors. From a place management perspective, small scale food producers may be leveraged to fill the unfortunate losses in restaurants by using commercial kitchen facilities.
Odds and Ends
While less industry sector-specific, there are a number of new business products and service-related opportunities likely to emerge as permanent fixtures of the American consumerism demand.
- Restaurants. Yes, restaurants will remain a critical part of our post-COVID culinary/foodie culture that was so prevalent on Instagram feeds. However, what we have seen during a number of reopening situations is that social distancing and indoor circulation remain key concerns for restaurants. Aside from design shifts and reclaimed streets options, restaurant business models should also consider greater focus on value-add services like delivery and pick-up, as well as evaluating prepared foods and providing in-house recipes with ingredients to make at home.
- Food Truck “Food Courts.” Consistent with changes and potential losses in the restaurant industry, food will remain a highly important experiential sector of downtown and commercial district shopping. As such, we see opportunities for the continued growth of less-fixed food options—like food trucks—that can leverage regional markets. In addition, place managers should examine food truck “food courts” like Orlando’s A la Carte food truck pavilion (located in Orlando Main Street’s Milk District neighborhood) that features an open air pavilion with covered indoor seating, a bar highlighting local craft beers, and rotating food truck operators for a constant change in menu options. This additional opportunity is perhaps coupled with small scale food producers needing a shared kitchen facility.
- Small Town Business Services. Given consumer shifts in the use of delivery for everything from food to books, it is likely that demand could be filled at scale. In other words, either as a social venture or for-profit venture, the creation of regional rural delivery services should be evaluated at scale. Much like businesses in downtowns and districts have banded together in co-op advertising and marketing efforts, the demands on delivery services may necessitate a similar effort in order to run more cost-effectively… Think of it as Rural Grubhub. A similar effort may arise with community e-commerce platforms sites that could be co-op/membership based as well.
While I’m not much up on fashion, it has become obvious from the hundreds of Zoom calls I’ve been on during this time that we have not settled in on what defines the new norm of business attire in a remote world. From the “just rolled out of bed” look to wearing a dress shirt with shorts, what is known is that there will emerge new opportunities to define a unique “Zoom-attire” look as we evaluate the casualization of apparel in the new norm. Much like colorful or patterned face masks, this new norm in attire will likely revolve around our need to define our personal style and interests, akin to the backdrop options on Zoom that give the appearance of your office on a beach in the South of France.
For place managers and business owners alike, new growth opportunities in a COVID recovery will require a renewed entrepreneurial spirit that is open to and embraces changes in consumer habits. While there will be many unfortunate business losses along the way, I am confident in the creativity and innovation of our small businesses that will continue to drive our collective revitalization efforts.
Disclaimer: This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for legal, insurance, liability, tax, or accounting advice. You should consult your own legal, insurance, tax, and accounting advisors for guidance on these matters.
Meet the Author
Matthew Wagner, Ph.D., Vice President of Revitalization Programs: Matthew Wagner, Ph.D. serves as Vice President of Revitalization Programs at the National Main Street Center, Inc. In this role, he is responsible for driving the Center’s field service initiatives including the development and delivery of technical services for Main Street America and Urban Main programs, directing the Center’s new research agenda, as well as professional development programming through the Main Street America Institute.
Read Matthew's bio.