The world has changed. Behaviours learned during the last four months of the COVID-19 crisis are set to shape the way customers interact with retailers for years to come.

These fundamental shifts to consumer behaviour will determine how retailers should prepare to adapt, particularly in the second half of 2020 and into 2021. After evaluating the key COVID-19 trends, I have distilled them down into three core areas: Hands, heads and hearts.

In addition to this trend evaluation, I’ve spent considerable time speaking to retail clients about how they are planning to respond to new customer expectations now that COVID-19 restrictions are beginning to ease.

I have detailed some of the insights born out of these trends and conversations below:

Habitual localisation

We are seeing a trend towards people staying closer to home to fulfil day-to-day needs. For instance, a Kantar survey suggested that 72 per cent of people prefer to use supermarkets and smaller grocers (such as butchers, fishmongers and delis) close to home since the start of COVID-19. I’d expect that this will become a continued trend as it becomes more normal for people to work from home, and the number of people commuting into CBD’s in the week decreases.

From a grocery perspective, this is likely to impact the volume of ‘top-up’ shops (shop visits that people naturally do to pick up daily essentials) on their way to and from the office – something that the smaller metro format stores had previously been set up to cater for. This is something that the major supermarkets will be tracking closely over the next few months.

Contactless physical shopping

It was reported in April that 69 per cent of Australians now avoid touching objects in public due to fears of contracting COVID-19. This trend has already given rise to retail innovation (most of which was already in progress but has been accelerated due to the current environment) to ensure customers feel safe within physical store networks. Woolworths recently week extended its Amazon-esque checkout-free self-service offering to 15 stores as part of a wider trial. This allows customers to scan products in their basket during their shop with an app; and then automatically pay rather than having to visit a traditional or self-service checkout.

For retailers, this type of innovation balances customer experience improvements against shrinkage controls (similar to the introduction of the self-service check-out several years ago). Whilst shrinkage will naturally increase by allowing customers more autonomy in their shopping experience, it’s imperative for retailers to encourage customers back into their store networks by creating a safer and more seamless experience.

There is also a whole host of other payment innovation on the way, and the New Payments Platform (NPP) presents a particularly interesting opportunity to retailers in terms of speed, availability, simplicity and data richness.

E-commerce transformation

Whilst April saw a historic decrease in retail revenues (falling 17.3 per cent from the previous month), online sales rose significantly year on year to account for 10 per cent of the $24.7 billion turnover. This supports a conversation I had with a retail client last week, who has seen 100 per cent year on year digital revenue growth in March and April.

Now is the time for investment in e-commerce channels as this seismic shift towards digital sales will continue long after COVID-19. For instance, we’ve just seen a portion of the population use e-commerce for the first time for a grocery shop, explore buy-now-pay-later (BNPL) payment options and use click-and-collect to minimise time in physical retail stores. We expect to see investment centred around the following areas:

For too long now we have seen retailers ‘bolt-on’ e-cCommerce to their traditional sales channels. As more customers move to online channels, there will still be a need for instant gratification and ‘I want it now’ behaviour. This means that physical and online channels need to be seamlessly integrated to support customer transacting online and collecting in store. This means real-time inventory, the ability to allocate stock between channels as demand changes, and also deliver customer service in new and innovative ways.

Digital means data, and data allows insight. An old saying suggests that if you can’t measure it, you can’t improve it. Customer data platforms are now the battlegrounds of all businesses, as they compete to more quickly understand and react to changing customer needs. Getting the right data, in the right format, in an accessible way will be the catalyst for retailers to optimise their business across both physical and digital channels in the next 12 months. A good example of this is Coles recently announced they are moving their data management platform from on-premise to the cloud in order to drive efficiency, simplicity and data connectivity.

While crisis can be costly, it also often breeds innovation. The trends we are seeing within the retail sector, coupled with ongoing challenges within the Australia economy,  could create the perfect storm for transformation activity within the retail sector as we head into the second half of 2020 and beyond.

Neil Kelly is a Partner at Wunderman Thompson Australia and specialises in digital product and service consulting.