The Business Implications of a Post-Pandemic World

As evident across nearly every industry of business and every aspect of life, the COVID-19 pandemic has had rippling effects that will influence the world for years to come. More than a year after the initial lockdowns, cancellations, and spread of infections, the world is a completely different place, and consumers have starkly different preferences. In the small business setting, the retail and restaurant industries have faced major changes and industry shifts, as established customers are changing the way they approach shopping and dining. While vaccination rates look promising, the effects of the pandemic will inherently become a part of the business world. Understanding altered consumer tendencies will allow for effective brand exposure, higher customer retention levels, and ultimately, increased revenues. This blog utilizes primary and secondary research to investigate the changed consumer behavior of college-age students (at Indiana University) in the retail and restaurant industries during the COVID-19 global pandemic.

2019

The Restaurant Industry

Before the pandemic, the perception of the restaurant industry was very routine and established. Outdoor dining was a second option for most customers; restaurant space was the primary attraction for hosting high numbers of customers, oftentimes meeting maximum capacity. As recent as 2019, outdoor dining was highly contingent on the seasonal weather and noise levels in the restaurant. With no restrictions on customer proximity and mask wearing (given the lack of a pandemic), restaurants were never inclined to prioritize online platforms. Forbes notes that the primary driver of the restaurant industry before COVID-19 was human interaction. Whether it was between waiters and customers, customers inside the restaurant, or even the chefs and waiters, face-to-face engagement drove establishments forward. All menus were printed on paper, further suggesting how the integration of technology in restaurants was little to none.

Looking at a sample of college students from Indiana University, Candy Stripe Consulting (CSC) was able to uncover these similar trends among a younger, sociable generation. In 2019, students reflected that they did not have a preference between dining indoors versus outdoors; their decision was likely based on situational factors. Similarly, the overwhelming majority of students ordered takeout from established chain restaurants or franchises as opposed to smaller local businesses. Food delivery services were not prominent among the student body; 66% of students had no food delivery service downloaded on their personal phones during 2019. Essentially, large corporate restaurant chains profited off of high-volume foot traffic, with minimal resistance. Consumer preference was limited to established routines and customer interaction.

The Retail Industry

Before the pandemic, the retail industry was experiencing a different dynamism than the restaurant industry. The shift from brick and mortar stores to online shopping was happening at a dramatic pace with giants like Amazon. Other online outlets were also becoming a primary channel for shopping purposes. However, despite this rise in technology, customers were still at the core of physical retail locations’ operations. In-person interaction formed the foundation for real success. As a preliminary example, hundreds of employees worked in warehouses packaging, handling, and distributing clothes, while countless other employees remained in stores helping high volumes of consumers at cash registers and customer service desks. In a study conducted by KPMG, it was found that long-term sustenance of the supply chain was not a primary priority before COVID-19; distribution and restocking was a regular occurrence, with very rare/minimal fluctuation in consumer demand.

In another survey conducted by CSC, it was found that 61% of Indiana University students shopped more in brick-and-mortar stores as opposed to online settings in 2019. Similarly, 61% of students claimed that visiting physical stores locations was a primary method of discovering product information in 2019. These trends translate to a willingness to be “on-site” for many purchasing decisions, in settings ranging from grocery stores to clothing department establishments. While the retail industry was rapidly transitioning into an online setting, the presence of physical stores played an integral role in consumer behavior and ultimate purchasing decisions, as the face-to-face interactions between customer and company were at a high level. 

2020/2021

The Restaurant Industry

Food spending patterns drastically changed as a result of the COVID-19 pandemic. Restaurants took a big hit in early 2020 as a result of consumers eating at home, whether the food came from takeout orders or home-cooked preparation. The National Restaurant Association aggregated statistics on the implications the pandemic had on the restaurant industry during 2020 and 2021. The 2020 industry report shows 2020 restaurant sales at $659 billion, which is $240 billion lower than pre-pandemic projected sales. The rise in unemployment as a result of small business closures led to a 3.1 million-person decrease in restaurant employees. It is clear that restaurant operations faced huge obstacles as a result of the pandemic, but they have also been forced into using new tactics that are likely to continue, even in the years following the end of the COVID-19 pandemic.

While the pandemic decreased overall sales in 2020, there was a significant rise in takeout sales. Initially, consumers were ordering takeout to avoid face-to-face interactions, but it also increased the recognition of this method’s convenience. Because of this, the uptake in takeout orders is projected to continue throughout 2021. A study done by PYMNTS and tech provider Payronix reported that 63% of the $769 billion spent on ordering food was from takeout orders in 2020. Of the takeout orders, 89% of them were ordered online from a restaurant’s website, mobile app, or a third-party marketplace. However, consumers are more likely to order takeout directly from a restaurant’s app rather than a third party app like DoorDash or Grubhub. Half of the consumers surveyed said that they used restaurant apps 1-2 times a month and 32% said they used third-party apps. Interestingly, 61% of the online orders in the study by PYMNTS came from restaurants that only had sit-down dining pre-pandemic. The increase in takeout was significant, but restaurants also employed outdoor dining options to make up sales.

With the indoor seating at 50% capacity in most restaurants, outdoor dining was huge in compensating for lost revenue. Outdoor seating has been a hit with consumers as well, and not just for safety reasons. The new consumer mindset is here to stay throughout 2021 and beyond; 1 in 3 people surveyed by Bluedot said that they would continue their new restaurant behavior, while only 22% said they would fully return to their former habits. 

College students are a prime example of consumers likely to continue the new, more convenient restaurant habits following the pandemic. A survey of IU Bloomington students shows an increase in outdoor dining among college students from 2019 to 2020. As compared to pre-COVID times, 75.8% of students said that they cook more meals at home. In regard to the increase in takeout orders during the pandemic, 69.7% of students said they were more likely to order from local restaurants rather than chains. This is a stark difference in comparison to the pre-pandemic chain loyalty that the majority of consumer demographics fell into. When students are not ordering takeout as often, outdoor dining options are very popular. In 2019, 6.1% of students said they were very likely to dine outdoors, but for 2020, this statistic increased to 24.2%. Retention of outdoor dining habits are very likely: 81.8% of students said they wanted outdoor dining to be a prominent offering of restaurants in the years following the pandemic. IU students also prioritize COVID-19 safety precautions when choosing a restaurant; 54.5% of students said they were very unlikely to dine at a restaurant where mask wearing is not required for anybody. 

The Retail Industry

When the pandemic first hit, there was a surge in consumer spending in China and the United States, as many were stockpiling food and necessities. The Statistica Research Department published a study on spending habits in the United States during the pandemic which showed over 47% of American consumers reduced their in-store spending and over 20% increased their online purchases during the week. Since 2020, retailers have had to drastically change their behavior to fit a new type of customer experience expectation and comply with health and safety regulations. This includes mask wearing, ensuring physical distancing, regulating the number of employees and customers allowed on site, implementing contactless transactions, and offering more self-service options. According to the Harvard Business Review, brick-and-mortar stores have had to adapt and create an “even more extraordinary experience” for those visiting stores since COVID-19 began. Other retailers have focused on online shopping by increasing and improving e-commerce experiences for customers. 

Currently, consumption trends in the United States have increased since the end of March 2021 with the first week of April showing an peaked 85% increase in general merchandise dollar sales compared to last year (NPD Group). As these numbers have tapered off, the end week of April shows an 35% increase in comparative spending when this time last year many stores were closed and parts of the country were on lockdown. The continued growth for 2021 against pre-pandemic levels is impressive. Many consumers have an increased intent to make more purchases over the next 60-90 days in 2021. Nearly 48% of consumers plan to make a purchase in the apparel industry.

This national data and consumer spending trend is synonymous with what the CSC data pulled from Indiana University students has shown. Since the pandemic has started, 83.9% of students now shop online instead of in-store, with two out of three students finding it easier and more convenient to shop online. Price has also been one of the biggest current purchasing factors with over half of respondents. College students want things that are easy, efficient, and low cost. Many shop online because they can stay at home, save time, and find the best deals while looking online; over two-thirds of respondents look at a company website and/or other online platforms for product information now. Because of the new importance of online shopping to many consumers, it is necessary that businesses build and tailor their online experience for its customers especially as the world moves into navigating consumer trends and shopping experiences in the recovery of the devastating pandemic.

In Conclusion

In a pandemic that has initiated disruptions unlike any other events, the world has changed at a rapid pace. Consumers receive information in different ways, discover products in personalized environments, and have lost the face-to-face aspect of life in a business setting. Two industries that have perhaps changed the most in the midst of the pandemic are the restaurant and retail industries. With reduced physical contact, exploding online promotions, and altered methods of customer retention, the changes in both areas of business will be felt for years to come. College students are a target for many small businesses, who are now seeing increased levels of customer engagement in a shifting tendency away from chains and big name entities. As vaccinations become more widespread in the United States and the world, there is no one sure answer to determine how both these industries will look in the coming years. Some practices will stay and some will go, but the unified recuperation from such a deadly time will unite companies and customers, driving forward relationships that are more meaningful than ever before.

FoodSafetyNews.com

Forbes 11/26

USA Today

KPMG

ABeam

Forbes 11/16


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