Shulou(Shulou.com)06/02 Report--

Under the epidemic, the US retail industry is also suffering from both ice and fire.

The emergence of crisis and the realization of crisis are two different things. In early March, just two months after the United States was "sitting on the sidelines" to the development of the epidemic in China, the American people suddenly found that novel coronavirus infection began to appear around them, which made them aware of the crisis.

As the epidemic continues to spread and worsen, the American people also have a "stress response" to panic shopping.

The iconic places are drugstores and supermarkets, where masks and disinfectants are quickly sold out, followed by frantic buying of supermarket sanitary products, and then food counters are "emptied". It is reported that some people have even begun to reopen the Cold War-era Armageddon.

To this end, Wal-Mart announced in mid-March that it planned to hire 150000 new employees to work temporarily in supermarkets, clubs and distribution centers by the end of May to meet the "hoarding" needs of consumers as a result of the novel coronavirus pandemic.

At about the same time, Amazon, a big e-commerce company, announced that it plans to hire 100000 employees across the United States in the near future to cope with the surge in orders and a shortage of offline delivery staff under the COVID-19 epidemic, to help people shop at home.

In sharp contrast to the crowded large supermarkets is the offline department store retail business. Affected by the epidemic, in addition to people's daily necessities of food, medicine and gas stations and other offline physical stores are still in normal business, other department store retail business is almost wiped out.

Large chain stores such as Apple and Nike have announced the indefinite closure of stores in the United States and other countries, and US states are also requiring stores of various types of services to be closed. At the end of March, US retail giants Macy's, GAP and Coles announced that they would temporarily lay off most of their store staff, and that most of their employees would be forced to take leave without pay.

Recently, Jim Kramer, the trump card host of CNBC (American Consumer News and Business Channel), said that if the United States came out of the novel coronavirus crisis late, then the economic stagnation brought about by the crisis may leave the United States with only three retailers: Amazon, Wal-Mart and Costco COSTCO.

An epidemic has officially shifted the American retail industry from a sound business model to a survival model, and it is the model of Very Hard.

The surge in demand from Wal-Mart and Amazon and the closure of offline department stores occur at the same time, in fact, it is not difficult to understand why. But it is hard to understand why other retail department stores are so vulnerable. In such a short period of time, there will be large-scale layoffs to save themselves, while Wal-Mart and Amazon can expand against the trend.

The severe shock of the North American retail industry caused by the "black swan" of the epidemic only magnifies the problems of the retail industry itself. The reason for this needs to be further studied.

Wal-Mart VS Amazon: head-on confrontation under the epidemic

Were it not for this once-in-a-century COVID-19 pandemic (the last was the Spanish flu pandemic in 1918), offline physical retailing in the United States would not only have no big problem, but also relative to online e-commerce retailing, it still maintains a crushing advantage.

Amazon was founded in 1995, which was also the beginning of the development of the American e-commerce industry, when Wal-Mart, a retail behemoth, had developed for 33 years, and at that time it had set up more than 1300 stores in the United States. like an octopus with flexible tentacles in cities and towns across the country. Due to the sparsely populated geographical distribution of the United States and the population distribution of the middle class living in the outer suburbs, driving shopping has become a typical way of consumption for Americans, and Wal-Mart has become a must supermarket for driving and purchasing daily necessities once a week.

In 2010, e-commerce retailing accounted for just over $160 billion of the 3.8 trillion retail industry in the United States, less than 5% of the total retail market. That year, Wal-Mart's sales were $260 billion, compared with Amazon's $18.7 billion, a wide gap.

Of course, Amazon is chasing the behemoth Wal-Mart at an alarming rate. In 2018, Wal-Mart had sales of $387.6 billion, while Amazon reached a staggering $120.9 billion, making it the second-largest retailer in the United States. But brick-and-mortar retail stores still account for 90% of sales.

Because outside Wal-Mart and Amazon, American owners have the most comprehensive and wide-ranging retail system. This still depends on the accumulation of American physical retailing over the years, including the establishment of a sound supply chain system, offline membership system and long-term offline consumption habits of American consumers.

Under the prosperity of physical retailing, there can be no shadow. Amazon's rapid growth in retail is becoming a visible subversive force in traditional brick-and-mortar retail. In addition to its online retail business, Amazon has also begun to aggressively deploy offline brick-and-mortar stores, including the acquisition of US high-end food supermarket Whole Foods in 2017, and began to invade Wal-Mart's positions.

At the same time, Wal-Mart has been stuck in slow growth of an average of 2.8% since the 2008 financial crisis. Under the competitive pressure of external attack and internal difficulties, Wal-Mart naturally turned to online e-commerce business, speeding up the expansion of online orders and pick-up business. With the advantage of being closer to consumers, Wal-Mart uses its 3000 domestic stores as distribution points and will also begin to expand its door-to-door delivery business.

The aggressive expansion war between Wal-Mart and Amazon in offline brick-and-mortar retail and online e-commerce retail has made significant progress for both sides.

Now, due to the arrival of the epidemic, Amazon, Wal-Mart and other retailers have become one of the few retailers that can go against the trend, and the confrontation between the two major retail models has been raised to a higher level. Retailers, who have always relied on offline stores for sales, face unexpected survival dilemmas. How are they going to save themselves?

North American Retail Industry starts Hard Survival Model

With the closure of a large number of offline retail chains and department stores, almost all enterprises have begun to try to switch to online e-commerce sales, but the prospect is not optimistic.

While firing most of its store staff, Macy's has stepped up its online sales efforts in an attempt to boost online sales by offering free delivery. Nike, clothing retailer Vineyard Vines and some clothing and cosmetics retailers are also boosting online sales through online coupons and extended return and exchange times.

However, for consumers during the epidemic panic period, people have shifted their spending to food and household hygiene products for uncertain expectations of future economic trends and income, and have begun to reduce their purchases of clothing, accessories and cosmetics. In addition, even if the discount promotion is converted into sales volume, it is also greatly reducing the profits of the enterprise, and it is difficult to make up for the loss caused by the offline business shutdown.

Some analysts pointed out that with the current epidemic situation in the United States, more than 15000 physical stores in the United States may be closed permanently in 2020. Store closures and layoffs are the only options for these retailers to weather the epidemic.

In the face of the sudden rush to buy the necessities of life, a few large supermarket chains, such as Wal-Mart, Costco, Target, and so on, have become the most direct beneficiaries of the epidemic because of the sale of drugs and food. Wal-Mart's shares have become a "safe haven" for many people under repeated circuit breakers in the United States.

With the addition of factors such as the closure of restaurants, groceries are now being snapped up by more residents. Now the only retailers in the United States that can keep filling up food shelves are large supermarket chains such as Wal-Mart.

In addition, Wal-Mart's online order business is also improving. Threatened by virus infection, American consumers are also undergoing "structural changes" in their shopping patterns, that is, from "go to the store to choose from" to "place orders online and pick up goods from the store", so as to avoid exposure risks in densely populated areas as much as possible.

Wal-Mart has been using this online e-commerce system for years. Wal-Mart's online sales rose 35 per cent last year, and most of the growth came from grocery orders, thanks to the fact that about 70 per cent of Wal-Mart's 4700 stores across the US offer such services of "placing orders online and picking up goods".

In response to the surge in orders and motivating employees to work during the outbreak, Wal-Mart said it would pay bonuses totaling nearly $550 million to hourly workers. Target has also joined in raising the pay of its employees, spending about $300 million to raise hourly wages for stores and temporary workers.

Amazon's recent recruitment plan of 100000 people also shows that the surge in online orders caused by the epidemic is in urgent need of a number of full-time and part-time jobs, such as warehouse sorting and distribution drivers. Similarly, Amazon will raise the hourly wage of US warehouse and delivery workers by $2 almost until the end of April.

However, hidden dangers also exist. Amazon's hundreds of whole Foods supermarket chains and fresh service businesses, which are mainly concentrated in dense urban areas of central cities in the United States, are now facing the problem of insufficient delivery capacity under a surge in orders. there is also pressure from employees for higher wages and more protective measures. At the same time, employees of Instacart, another supermarket chain that features home delivery and is known as the "American version of Love Bee", have also asked for a pay rise on the grounds of "taking sick leave from work".

The online orders under the epidemic undoubtedly give large retailers such as Wal-Mart and Amazon the opportunity to grow against the trend, but the increase in personnel costs, the increase in the cost of epidemic prevention and disinfection in stores and the risk of liability that may be faced are also a big burden.

For a long time to come, American consumers will have to adapt to this "online order, store pick-up or delivery" service model. This will have a very important impact on the future of American retail.

In the post-epidemic period, the upheaval of the retail industry in North America may be

If the COVID-19 epidemic ends in the middle of this year or even later, the obvious result will be a handful of large supermarket chains represented by Wal-Mart and online ecommerce Amazon taking a larger share of the market. And most offline department stores, chain retail stores, there will be a sharp decline in performance, and even as analysts predicted, there will be a large number of small and medium-sized brand retailers to close.

With job losses and falling incomes caused by the epidemic, it will take a long time for US consumers to recover their willingness and ability to spend, making it longer for retailers trapped in non-essential goods to recover.

These effects are only short-term direct effects, and we need to see long-term and inherent changes in North American retail under the impact of the epidemic.

First, the retail service mode has changed from offline entity dominance to online and offline collaboration, and online e-commerce has gradually become dominant.

Unlike China's offline retail industry, which goes hand in hand with online e-commerce, North American retailers still exist mainly in the form of physical stores. At present, although American online sales and catalog sales account for 17% of total retail consumption, traditional retailers rely on stores to support online e-commerce sales.

Chinese consumers, who enjoy free e-commerce delivery services that arrive the next day, may not be able to experience the slightly extravagant "door-to-door" delivery service in the United States. Because of the distribution distance and expensive delivery manpower, traditional retailers encourage consumers to drive to the store to make purchase choices.

Under the special circumstances of the epidemic, Wal-Mart and other supermarkets are vigorously promoting "pick up goods at stores", "pick up goods by the roadside" and "drive-in" delivery services, which will now become the most important means of transaction under the epidemic.

Traditional retailers will also pay more attention to the construction of e-commerce business. Online retailing is no longer a market that Amazon can support on its own, and Wal-Mart, Costco and Target will also take advantage of their stores across the United States to build their own online service platforms.

Second, with the change of the shopping experience mode of physical retail stores, unmanned supermarkets and non-contact services will increase.

Affected by the epidemic, in places where the flow of people is concentrated, those boutique supermarkets that focus on organic and fresh experience are bound to face the risk of contact infection by shop assistants and customers, and the scene of cooking and dining on the spot will be completely terminated in the epidemic. It will be replaced by online orders and the launch of nearby distribution services.

In the future, these shopping places that provide experiential services will provide more unattended services, no access to cooked food and takeout services. Amazon's unmanned convenience store Amazon Go and whole Foods will be leaders in this area in the future.

Third, the change of the manpower structure of retail services, unmanned, automation will become a trend.

Henry Ford once said, "I just want to hire a pair of hands, how can it give me a person?" Enterprises have endless demand for manpower cost control. Although large retailers hire temporary workers on a large scale because of sudden "hoarding" demand, after the test of the epidemic, companies will consciously reduce their dependence on labor costs as much as possible.

The application of automatic unmanned sorting and autonomous tallying robot based on standardized warehousing, the introduction of non-contact and self-service unmanned supermarket services, the large-scale use of unmanned distribution vehicles and drones, and the increase of vending machines imitating the Japanese model will become the main means for retailers to reduce labor costs in the future.

From historical experience, crises often bring about major changes in the industry, as does the retail industry.

Just as the US financial crisis gave birth to supermarket chains in 1928, the collapse of Japan's bubble economy in 1995 led to the development of Uniqlo and convenience stores, while SARS in 2003 accelerated the evolution of Chinese online retail giants such as Taobao and JD.com.

The COVID-19 epidemic also seems to be the catalyst for the change of the physical retail pattern that has lasted for nearly a century in the United States. Of course, offline physical retailing will still recover slowly after the epidemic, but online e-commerce business will occupy a larger market share, and many major changes have taken place in retail formats.

In fact, the process of change in the retail industry in North America has already begun, and this sudden epidemic has only added to the fire.

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