Now that the Dust is Settling – The Future of Retail in a Post-Pandemic World

by Jeff Shaw

By Carlos Lopez, Executive Vice President, Hanley Investment Group Real Estate Advisors

The fears from the COVID-19 pandemic and the accompanying government-mandated shutdowns and social distancing measures transformed the way Americans, lived, worked, shopped, ate, exercised and watched movies. In many ways, the habits formed during the shutdowns have opened up opportunities to radically change many aspects of life.

For the retail industry, the impact of COVID-19 in 2020 was profoundly devastating. For small businesses and restaurants forced to shut down for extended periods of time or quickly modify their business model to accommodate the mandated closures, they were unable to operate and many were forced to close permanently.

Carlos Lopez, Executive Vice President, Hanley Investment Group Real Estate Advisors

On the chain retail front, already struggling from the changing consumer preferences and the forces of e-commerce, the lockdowns and mandated closures by governmental agencies was the final nail in the coffin for many. In 2020 alone, an unprecedented number of retailers declared bankruptcy and by November of 2020, nearly 49 chain and national retailers had declared bankruptcy. The amount was greater than retail bankruptcies occurring in 2009 during the financial crisis.

Some of the popular retailers and household names of these retailers included: JC Penney, Neiman Marcus, GNC, Brooks Brothers, Sur la Table, Ann Taylor, Lord & Taylor, J Crew, 24 Hour Fitness, Golds Gym and many others. Many other retailers remain on the brink including movie theaters, gyms and sit-down restaurants, as well as apparel retailers.

With the cases of COVID-19 beginning to wane, along with a national campaign to vaccinate as many Americans as possible, government authorities are beginning to relax their social distancing restrictions, lockdown measures and mask mandates. The country finds itself reopening and Americans are awakening to a new and familiar routine as they find themselves “getting back to normal.”


While the forces of e-commerce were already present and growing, the COVID-19 crisis expedited and broadened the use of e-commerce by consumers. Amazon’s recent sales figures clearly show the uptick in online shopping and Amazon has been the clear winner from the pandemic. The online retailer’s sales jumped 37% during the third quarter of 2020 and experienced a 44% increase in the fourth quarter 2020. For the first quarter ending 2021 total retail sales continued to grow 44% and experienced a 224% increase year over year to the same quarter 2020.

Many other retailers like Target and Home Depot benefited as these retailers began integrating in-store and online shopping options in 2017 to take advantage of the shifting tide of online shopping for both delivery and pickup.

It is estimated that in 2021, 17% of all retail purchases for retail will be online. Meanwhile, purchases made through mobile devices reached $434.1 billion in 2019 according to JP Morgan and are forecast to hit $729 billion by 2023.

Movie Theaters – Streaming or Movie Theaters

After the pandemic is over, viewers will likely return to movie theaters, but many may be content watching new releases on-demand from their homes instead. Historically the studios have been very reliant on box office ticket sales which rose to 26% of total global revenues in 2000 and rose to 46% in 2019.

During the crisis, premium video on demand (PVoD) or “streaming” has emerged as a viable way for studios to reach movie fans. According to a study by Deloitte, in the first few months of COVID-19 stay-at-home orders, 22% of consumers paid to rent or watch a PVoD movie and 90% said they would do so again. By October 2020, according to a second study by Deloitte, 35% said they had watched a PVoD release movie. Although more consumers are now open to the possibility of streaming to watch newly released films, 68% of those surveyed in the same study indicated they would like to watch some movies in movie theaters once the pandemic is over.

Recently, the release of Godzilla vs. King Kong simultaneously on HBO Max and in movie theaters enabled box office ticket sales for the release were nearly double the forecast, despite 40% of theaters still closed and those open having capacity restrictions. This strong showing caused many Wall Street analysts to reassess the viability of the AMC  Theater chain followed by a 13% increase in the share price of AMC following the upgrade.

The success of Godzilla vs King Kong perhaps is an indicator of the consumer preferences and strong desire to return to movie theaters and having the alternative to experiences both at the movie theater and at home going forward.

Restaurants – Mobile Apps and Online Ordering

No doubt the implementation of outdoor / “al fresco” dining by many restaurants was a favored experience by many consumers where able. Utilizing patios, sidewalks, parklets and parking lots enabled many restaurants to survive lengthy indoor dining bans by government authorities. In fact, many districts are seeking to permanently allow outdoor dining and serving as a benefit to the district. Restaurants also took advantage of food delivery services and transformed their menus and packaging products to accommodate a seamless delivery process and the take-out of items on their menu.

While outdoor dining flourished throughout the pandemic, the greatest mechanism for change for the restaurant industry was the continued development and growth of mobile apps and online ordering. The growing mobile app service has flourished during the pandemic providing chains with some unexpected opportunities. The chains and restaurants that made investments in mobile ordering technology were at a prime advantage.

Nekter Juice Bar was an early adapter of mobile ordering with nearly 33% of business coming through the mobile app format. During the pandemic, the figure had exceeded 50% enabling the 174-unit chain to proceed through the pandemic and cut down on labor costs. For Starbucks, mobile ordering accounted for 22% of the transactions in the last quarter 2020 and corporately announced prior to COVID-19 that new store openings will focus on the drive-thru format and the phasing out of storefront retail stores.

At Yum Brands, the operator of KFC, Pizza Hut, Taco Bell and The Habit Burger, mobile ordering rose $1 billion globally in the second quarter 2020 and now accounts for 30% of the company sales. Other chains such as Chipotle Mexican Grill, Burger King and Dunkin are incorporating special drive-thru pickup lanes and curbside pickup exclusively for mobile app ordering. According to Steve Shulze CEO of Nektar Juice Bar, “Convenience has been a huge thing for years – COVID-19 has fast-forwarded the whole idea.”

Grocery Shopping – Online Ordering

The largest change for the grocery business has occurred in online ordering. While many store chains were already building out their order pickup and delivery capabilities, the online trend exploded during the pandemic. In 2019, 81% of consumers had never purchased groceries online but, during the pandemic, 79% of shoppers had ordered online. In August 2019, U.S. online grocery sales totaled $1.2 billion, while in June 2020, the total volume was $7.2 billion. During the same period, the number of online customers increased from 16.1 million to 45.6 million.

With restaurants closed and more people staying at home, more shoppers began trying their hand at cooking more meals. In addition to buying more items and stocking up to forgo any personal food shortages as in the spring of 2020.

In order to accommodate the surge in volume and customer desire for speed and safety, in addition to heavy investment in delivery, many grocery chains have made physical changes to accommodate curbside pickup by dedicating sections in their parking lots for order pickup.

Fitness and Exercise

While virtual workouts were in existence prior to the pandemic, the use has presently increased. According to Mindbody, a technology platform that connects the world to wellness, there was a major increase in consumers accessing virtual content since March of 2020 with 73% of consumers using pre-recorded video versus 17% in 2019. Additionally, 85% are using livestream classes weekly versus 7% in 2019.

Data also showed that since March 2020, consumers are exercising more than before with 56% of respondents exercising at least five times per week. In fact, Peloton the maker of stationary exercise bikes and treadmills along with complimentary exercise media is seeing an astronomical surge in sales in 2020 with a 172% increase in the fourth quarter of 2020 and double the users and subscribers since 2019.

As gyms re-open across the country and consumers seek to return to the gyms for in-person training, gyms will have to address some of the unique shifts needed. Virtual exercise will continue to be in demand for individuals and group training as some seek to continue in having alternatives for scheduling purposes, etc. Additionally, attention to hygiene and social distancing will be the norm within facilities as well as providing access to outdoor facilities for group and individual training needs.

Looking Ahead

During the pandemic, many old habits were changed and many new ones were formed which will forever impact how retail looks going forward. Americans are now shopping, eating and ordering food, watching movies, exercising all very differently and it will be interesting to see how consumers and retailers continue to shift how they interact. Those retailers that continue to be tuned in to their customers’ needs and wants, maintain a close relationship with their customers, and serve them well through multiple channels will be the winners.

Carlos Lopez is an executive vice president with Hanley Investment Group Real Estate Advisors and can be reached via email at [email protected].

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