Retailers Prepare to Re-Open and Early Insights From Germany

Retailers have shifted into recovery mode as Governments start to lift lockdown conditions in certain Western Markets (see last week’s blog for a broader discussion of the 3 phases retailers will go through during the COVID-19 crisis: respond, recover and renew).  However, with lockdown approaches varying significantly from country to country and even state to state (for my U.S. based readers this is useful tool from the NYTimes showing state by state approaches), retailers need to be extremely agile in their approach.

Some are getting onboard with the re-start such as Dick’s Sporting Goods who have re-opened select stores across 9 states in the U.S. However, others such as Gap Inc are taking a more conservative approach and do not as yet have plans to re-open stores, although they are “closely monitoring the situation” and will re- open when they “feel it is safe to do.”

For retail leaders this raises a key question – how distorted will sales be given the wide variance across markets, the huge disruption lockdown has caused to consumers lives including significant increases in unemployment and the potential for a second wave of COVID-19?

Many are looking for directional insights from China which started to re-open in early March and businesses are focused on U-, V- or W-shaped recovery curves (I’ve previously discussed China’s post-lockdown recovery in a blog here and Gartner clients can see a more detailed analysis here). However, with retail stores in Germany that are 800 square meters or less (roughly 8,600 sqft) allowed to re-open as of last week, leading businesses are closely tracking how quickly German consumers return to stores.

Germany – Early Directional Insights 

• Analysis by the Kiel Institute for the World Economy found that in the south-western city of Mannheim foot traffic is now 56 per cent of normal levels, compared with 28 per cent during the shutdown. However, in Munich, which had much higher Covid-19 infection rates than other regions, foot traffic is at just 13 per cent.
• Ingka Group, a related entity to Ikea and owner of a German shopping center where 40 out of 57 stores are currently trading, stated foot traffic levels to these stores is at 63% of 2019 levels. This contrasts with shopping centers the company owns in China where foot traffic has returned to between 70-80% since retailers started re-opening in early March.
• Kaufhaus Ernst Ganz, a department store in the west German town of Bensheim, indicated that sales were “Sales are at a third to 40 per cent of what they were before the shutdown.” 
• In the same article referenced above, Nils Busch-Petersen, head of the Berlin-Brandenburg Trade Association, suggests Germany is “..entering a long, lean period which could end up being even worse than the shutdown… At least when shops were shut they were entitled to government aid. Now they’re on their own.”

My personal takeaways from the above:

• Anticipate a stronger rebound in sales in those markets that have seen lower case loads of COVID-19 as shown in the example above of Mannheim vs Munich.
• Just as we’ve seen in China, when stores start to re-open they can take a few weeks to gain momentum and build towards a strong recovery. H&M in China took 5 weeks to go from sales down 79% with 89% of stores open, to sales down 23% with 99% of stores open.
• When we talk about a V-shaped economic rebound, as early indications from China suggest, this is hopefully occurring over a period of 1 to 3 months. The key question is, how does demand respond over the medium term rather than just the next quarter?

Food For Thought

Below are this week’s selection of interesting reads from across the web:

• For retailers wondering where to start when it comes to the practicalities of getting stores open post lockdown this blueprint from grocery giant Kroger could be a worthwhile place to start.
• Abu Dhabi and Dubai have announced guidelines for the re-opening of shopping malls here.
• This is a useful dashboard from the folks over at Convey with insightful last-mile shipment trends.
• While it is extremely early days, could last week’s $5.7 billion investment by Facebook in India’s Reliance Jio Platforms be the first step in turning WhatsApp into the WeChat of India? With WhatsApp reportedly already the most popular smartphone app in India this investment provides the opportunity to get into commerce via JioMart, an e-commerce joint venture between Jio and Reliance Retail (the largest retail chain in India). It’s definitely one to watch over the coming decade.
• U.S. mass merchant Target provided some useful insight into how COVID-19 as been impacting their business. Specifically: (1) In March the retailer saw “mid-single digit growth in stores and more than 100 percent in Target’s digital channels” and (2) “Month-to-date in April, comparable sales have increased more than 5 percent, as store comparable sales have declined in the mid-teens while digital comparable sales have increased by more than 275 percent.” This significant shift to online, despite no Target closures is a fascinating shift. A key item to watch – how impactful has Target’s Shipt acquisition (and specifically it’s same-day fulfillment offering) been in driving online volume to the retail giant?

Finally, Gartner continues to produce a wide array of content in all our usual areas while also providing focused research on COVID-19 with a significant volume of this made publicly available here. For Gartner retail clients, one of the best, most useful documents published in recent days is by my colleague Tina Hu and I: What Western Businesses Can Learn as China Comes Out of COVID-19 Lockdown

Until next week – stay safe, look after your family and social distance.

Best,

Thomas

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