Covid-19 forcing innovation in consumer and retail sector

Covid-19’s impact on consumer behaviour is driving innovation in consumer industries – including retail, consumer goods, and travel and hospitality – according to a recent study from Accenture. The consulting firm surveyed 22,000 consumers in 19 countries between November 2020 and March 2021.

The Covid-19 pandemic has greatly affected how Canadians work, shop, and socialize – putting severe pressure on consumer industries to reinvent their business models, repurpose physical locations, and innovate on their products and services. Many consumer-facing companies have moved to the cloud, accelerated e-commerce offerings, and had to address cost pressures. The most damaged industries have included bricks-and-mortar retail, restaurants, and hotels and resorts.

Many of the changes that consumers have made in their behaviour are expected to linger beyond the “end” of the pandemic. These include a preference for more e-commerce, eating out less, and traveling less.

"The lasting impact of the pandemic will be felt well into the future and Canadian consumer-facing companies have learned all too well why they must be agile, resilient, and responsive to change," said Jeffrey Russell, president of Accenture Canada.

One avenue for innovation is creating new “third spaces” for a large group of telecommuters. Sixty-nine percent of Canadian respondents who will continue to work remotely after the pandemic subsides said they would like to occasional work in a third space that isn’t their home or place of employment. Approximately 30% said they would pay out-of-pocket to work from a café, bar, hotel, or retailer with dedicated space.

"We have seen hotel rooms converted into pop-up restaurants while others have created a 'third space' for those looking for a temporary office setting outside of their home,” said Daniel Bunyan, managing director and travel industry lead at Accenture Canada. “While there has been experimentation with innovation in select pockets, companies need to scale these new services and address travellers' renewed focus on health and safety, for example, by using the cloud to help enable fully contactless interactions.”

Business travel, a central source of income for full-service airlines, will continue to be depressed for some time. According to an Oliver Wyman study, corporate bookings remain 85% below their 2019 levels in the US, as businesses have shifted to teleconferencing. That segment isn’t expected to rebound soon.

In Accenture’s survey, 55% of Canadians who normally travel for business expect to reduce this activity in the future.

Leisure domestic air travel was hit less hard, remaining at about 40% of 2019 levels through 2020 and early 2021, according to Oliver Wyman’s US study. It will also be the quickest segment to rebound, according to analysts.

As such, Accenture indicates that carriers will have to adapt to the stronger leisure market and cut costs further. This will be easier for low-cost airlines, who focus more on domestic leisure travel.

Retailers will have to also continue their online shift. Among previously infrequent e-shoppers, the proportion of online purchases for products such as food, fashion, luxury goods, and home décor has grown 316% since the pandemic started. Accenture expects the dramatic elevation in e-shopping to remain or accelerate further.

“When we get past the pandemic, across retail sectors, companies will need to continue to meet consumer demand for online shopping but also increase the efficiency of the channel to enable profit growth. This next retail transformation will require new investments in micro-fulfilment and supply chains, stores of the future, and the future worker, who will drive new experiences," said Robin Sahota, managing director and head of the Canadian retail practice at Accenture.