Unprecedented disruption causes shifts in human behaviour. Kunal Sinha and Manish Sinha explore post-COVID-19 scenario in retail and travel sectors.
COVID-19 has sent us back to the basics. As people grapple with uncertainty and anxiety in their lives, they are focused on fulfilling their most basic needs – food, shelter and protection.
The data from the US (hit hardest by the Coronavirus) is telling. In e-commerce channels, sales of disposable gloves are up by 670 per cent, bread machines by 652 per cent, cough and cold remedies by 535 per cent, soups by 395 per cent (Stackline, March 2020 versus March 2019).
An unprecedented disruption like this causes fundamental shifts in human behaviour. When the storm is over, survivors of the pandemic will, undoubtedly, thank their stars. But they will also reflect on their own behaviour modification that enabled them to stay safe, and tide over the worst of the times. Here, we explore the post-COVID-19 scenario in two sectors – retail and travel.
While the first has had mixed fortunes, the latter has been decimated.
Retail: It’s all about proximity and familiarity
In India, e-commerce marketplaces have floundered as their employees and deliverymen are unable to come to work. With scattered warehouses and restrictions on movement, they are unable to fulfil orders.
Kirana stores (small neighbourhood provision stores) have stepped in to ensure families have enough supplies. Being embedded in the local community, they understand their needs and preferences. Their intimate knowledge of the city’s terrain enables them to obtain and deliver uninterrupted supplies. If anything, it is the gratitude of their customers which will ensure that they are the preferred retail channel in the post-COVID-19 India.
The overhang of vulnerability, which is likely to prevent people from travelling far from their homes and workplaces, and avoid crowded places, will see the emergence of distributed, or mechanised retailing.
Just as one observes all over Japan, we can expect vending machines to dispense packaged foods and consumables in apartment lobbies, offices and factories. E-commerce players should see this as a significant investment area in the immediate term.
Some of these initiatives were already in play. The US department store Nordstrom rolled out a convenient drop-in hub for service and style, offering more personalisation to keep its competitive edge, and cement its reputation for great customer service. The Nordstrom Local mini-store delivers the same experience, but closer home.
While it is a phenomenon that has, thus far, been operating in a niche – pop-up stores, farmer’s markets, shawarma trucks, craft fairs, which showcase local produce and goods – they will expand and reach many more customers, who will seek to buy local. Retailers, who build their neighbourhood clientele, will use office atriums, open spaces in shopping malls, and even bus stops or outside suburban train stations as locations for pop-up style markets.
From a consumption point of view, uncertainty about income and short-term horizons will cause shoppers’ baskets to shrink, as they buy essentials, more of familiar products and less of variants.
Kantar’s study in India shows that 53 per cent of consumers pay more attention to prices now, and 59 per cent buy the same products they did before. This is a huge opportunity to cement loyalty and provide benefits over a period of time.
Cost, health, and environmental consciousness will spur anti-excess behaviour. Expect the Gen Z mindset and behaviour – lower propensity to own – to permeate far more people, as they scale back. They will strive to have fewer items in their wardrobe and homes. Under those circumstances, retailers may not need to have so many different items displayed in-store, with technology displaying the choices and fulfilling orders.
Travel: Small journeys, large experiences – rising from the ashes
Travel has been one of the hardest impacted sectors in the world due to the COVID-19 pandemic. Not just leisure travel, but even business and regular travel has come to a literal halt. And while the operations of locomotion will rise inevitably, and people will – no doubt – want a change of pace after being stuck at home, there is a fear that will permeate their decisions. After all, isn’t it the unfortunate travel that aided the spread of the pandemic?
Here’s the thought, though. There is a shift in the way people are seeing the world, a reality check and inward exploration that these lockdowns have caused. What niche, experiential travellers have always known, many others are now figuring out for themselves. Regardless of whether this is the first global pandemic someone has seen, the global 'press pause' has led to the knowledge of how small the world truly is.
So, just like people’s retail purchases will shift to the local, trusted, small but satisfactory – as will travel. Small journeys, but large experiences. Think of them as investments and loyalty shown towards experiences that will matter in the long-term. Stories starting to matter more than checklists. People might turn to Pragpur over Shimla, and Sittong over Kurseong. Because the small will play the big experience role.
Destinations that are associated with authenticity, old-world charm, and lesser known explorations (treks, views, cultures, festivals) will become the preference. The urge to have hands-on experiences in learning will rise compared to the five-star indoor experience.
Take a look at Arlo Hotels, for instance. It is the perfect example of the emergence of comfortable hotels that are well located and affordably priced. The cost of production has been greatly reduced through clever design and elimination of novelty features, thus creating a well-priced, all round experience for consumers. Hotels that make people want to stay in them.
Intrepid Travel did an interesting analysis of engagement with its social media, to see the interest levels of potential travellers. It found that photos from Iran, Jordan, Morocco, and Patagonia received twice as many comments and likes as more mainstream destinations. The company has added new departures to Belarus, Moldova and Ethiopia. There isn’t a fear of the unknown so much as a curiosity for the lesser talked about.
The small hotel trend, which started in Europe and Japan, could (become) mainstream everywhere. In India, too, expect more postcard hotel, Rosakue and Unhotel. Big chains launching new micro-hotel brands – such as Motto by Hilton and Moxy by Marriott, might just accelerate these offerings.
And this is a pattern that will not limit itself to destinations and stays. Big cruises may not find favour for quite some time as they will carry unfavourable memories! Small ships and cruises may see a rise – floating boutique hotels, if you will. Their flexibility to visit pristine destinations, uninhabited islands, or rugged inlets (inaccessible to large cruises) will make them more enticing.
In the post-COVID-19 world, small tours with a greater degree of customisation and personalisation will continue to see an upward trend. Small group sizes also ensure minimal impact on local communities and environments.
The pattern might seem complex, but it is quite easy to unfurl. People are looking to simplify by digging deeper, to come closer by travelling further, and to expand their minds by going smaller.
There is a reason East Asian minimalism (which takes learnings from Shintoism) also took the world by a storm (a global Marie Kondo effect). The respect for the important and vital over material excess.
Customs and connections – the crux of what is keeping the world together right now – might just overcome mass production and templated travel. The horizon is ripe for a sunrise that is more sustainable, eco-friendly, aware and conscious. Humankind will do well by not falling back to the old ways of the past.
(Manish Sinha is the founder and CEO of The Unhotel Company. Kunal Sinha has over three decades of strategy and foresight experience across India and China.)