The Orange Report – 2020 Q1

The Orange Report – 2020 Q1

A Post-Pandemic World

The Lasting Effects of COVID-19 on Consumer Behavior and Preference in Retailing and Restaurants
LEASE RATE - $12.97
VACANCY -5.4%

RETAIL

LEASE RATE - $20.70
VACANCY - 7.1%

OFFICE

LEASE RATE - $4.41
VACANCY - 4.5%

INDUSTRIAL

What does the post-Covid19 world look like? The question is impossible to ignore. There are one thousand ways to phrase it, but in the end, it’s the same question. The only question. And yet, even with the collective brain power and insight of nearly every industry expert, economic guru and joe-schmoe across the board, there are no straightforward answers. As we near mid-May, states and localities across the nation are beginning to lift various stay-at-home and shelter-in-place orders. Despite the political or medical reasoning behind them, most of these re-opening decisions come with a wide-range of guidelines and requirements. In the Kansas City metropolitan area, we are doing our best to adhere to the requirements of the two states, five counties and countless municipalities that make up the KC metro. Occupancy limits, required face coverings and the magical six-foot social distance rules are the norm, as well as strict limits on how certain businesses are able to operate, if at all. It’s safe to assume that the “re-opening” of America will be a process, and one that looks different depending on where you live.
We could wrack our brains thinking about the various ways retailers, restaurants and service-focused businesses are navigating the currently typhoon-like waters, but let’s take a step back and look up to the big picture. Let’s fast forward to the next phase of recovery, whenever that may be. What are the lasting effects of the pandemic that will likely fuel consumer behavior for the foreseeable future?
Two primary needs seem to be dominating the consumer outlook on re-opening: the need for physical safety and social connection. While these normally fall adjacent to one another in a hierarchy of human needs, never before have they been at such odds with each other. In the recent past, the shops, restaurants and businesses we visited as consumers have had a relatively low threshold for satisfying customers’ need to feel safe. Today, 95% of consumers want companies to implement physical protection and distancing measures to help keep them healthy1. Though dining out is second only to family gatherings as America’s “most missed” activities2, restaurants face even more stringent expectations from the customers who are striving to support them. In a Techtomic poll3 focused on the restaurant operation in a post-COVID world, nearly 55% of all consumers surveyed expect to see more hand sanitizer dispensers to make them feel “safe and comfortable” inside restaurants. Additionally, 56% said they’d like to see staff “visibly cleaning” high-touch areas3. Also high on the list of diner demands are having all employees wear gloves, seeing fewer tables, and single-use condiments, utensils and menus.
Despite the additional measures in place to enhance the health and safety of customers, some impacts on consumer behavior may be irreversible. The trend toward online shopping was overwhelming before, and the pandemic has likely solidified the remaining late adapters to the practice. Thirty percent of people plan to shop more online in the future than before the COVID-19 crisis, including 28.3% of those 65+ and 33.8% of ages 18-241.
We are, and always will be, a social culture. While we are fighting to meet our physical need for health and safety, we are equally fighting to fulfill our need for belonging and genuine connection. Twenty two percent of Americans are experiencing anxiety from being confined to their house1. A quick look at the news makes it obvious that society is ready to get back to “normal activity” including gathering, shopping and eating out. Forty-one percent of consumers said they’re likely to eat in a restaurant within 30 days of government officials declaring that the infection rate for COVID-19 has started to decelerate2.
It would seem that the need for social connection in this pandemic climate is deeper than simply connecting to one another. Consumers are being forced, either by government mandate or internal conflict, to be more selective in the businesses they choose to support. We are collectively reevaluating what is important to us, and consequently, choosing companies we feel good about supporting. Above all else, we are forming preference for transparency, authenticity and social responsibility. We want to do business with companies we trust and feel a connection to. Today, a third of consumers strongly agree with the suggestion that they will reappraise the things they value most and not take certain things for granted4. Thirty-eight percent of consumers say they will support local businesses more in the future5. Seventy-one percent of people say if they perceive that a brand is putting profit over people [during this pandemic], they will lose trust in that brand forever6.
It’s nearly impossible to predict the overall social or economic ramifications of an event like the COVID 19 Pandemic until it is well in our rear-view mirror. The effects are massive and compounding daily. What we can say with certainty is that there will be (and already is) an effect on how we as a society think, act and respond, and ultimately how we continue with our “normal” lives. At the end of the day, we as humans have needs and look to our resources to fulfill them. As has always been true, successful businesses identify and adapt to the needs of its consumers, no matter the economic climate in which it exists.