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Popularity of curbside pickup has 'massive implications' for retail: McKinsey partner

Sajal Kohli, McKinsey & Company Sr. Partner joins the On the Move panel to discuss the future of the retail industry following COVID-19.

Video Transcript

JULIE HYMAN: Right now, we also want to broaden out that retail conversation and bring in Sajal Kohli. He is McKinsey and Company senior partner. He watches retail very closely. And in particular, Sajal, I know that you're watching the phenomenon of buy online, pickup in-store, which has been huge for grocery stores in particular during the pandemic. But, as we heard from Dick's Sporting Goods, it was also big for some apparel and gear retailers, right?

SAJAL KOHLI: Yeah, absolutely, Julie. Thank you. It is quite unprecedented if you just sort of look across the entire landscape. So just to go back to consumer sentiment, consumers are still incredibly hesitant, right, to return to some of the in-person activities that you saw.

We are seeing some pretty massive surges to the point that Brian was making earlier and Dan as well. Buy online, pick up in-store is having about a 56% surge across multiple retail formats and categories. Grocery delivery, which is another manifestation of both of this, is up 45%.

And we've been doing consumer sentiment work ever since the pandemic struck in 42 different countries, including the US. And you kind see a 40 to-- 15% to 45% growth in consumers who are purchasing online and actually are demonstrating strong intent to stick with that behavior. So we think this is going to be pretty sticky across multiple retail formats and categories as we move forward.

DAN ROBERTS: Sajal, Dan Roberts here. Julie mentioned Dicks. And I just thought what was so interesting at the earnings call is CEO Ed Stack said that they launched curbside in mid-March as a safety precaution, which makes sense. But now it's transitioning from safety to convenience. And he thinks it's going to continue to be huge for them.

Now, the only problem with that bet-- I mean, hypothetically, once we're through the pandemic, who knows when that'll be and it is safe to go to stores-- why wouldn't people want to return to certain stores, right? And, in fact, I did actually go to my local Dicks a couple weeks ago, just anecdotally. They're letting customers in the store with masks on. And I had a good experience there. So then, personally, I don't need to use curbside anymore.

I guess I'd ask what you think of the bet that curbside will continue to grow even post-pandemic. And then similarly, are there other trends that you think the pandemic launched that are here to stay now?

SAJAL KOHLI: It's a great question, Dan. So listen, given-- and we've been sort of obsessing about this trend and just the whole question of the stickiness of it. We believe, given what we've seen and the way the consumer is voting, actually across the world, in China and Italy were very instructive because as to what might happen in the US. But we think the upside is going to be exceptionally sticky.

The fundamental question for most retailers is that if you think about the box, the retail box and the physical footprint, what's the strategic intent of the box in the world of omnichannel post-COVID? And so there are going to be some categories that are still going to be incredibly conducive to in-store interaction. But for several, several categories, I think the consumer has discovered this newfound convenience, that they will actually stick to curbside.

Which has massive implications, as you can imagine, for retail, right? So if your supply chain was configured for full-trailer loads and full-pallet loads and no store drop ships, it's now a small drop economics which fundamentally changes how retailers have to configure the supply chain. So I think this is going to be the massive pivot that we envision is going to happen in the retail sector, especially in the developed markets around the world. So we think it's going to be very sticky, yeah.

JARED BLIKRE: Jared Blikre here. Just wanted to ask you about-- well, let me just put it this way. We see a really bifurcated market in retail. A lot of it has to do with the digital strategies. Those that had invested in it doing well, those that didn't or because their business model doesn't really provide for it or allow for it, not doing so well.

Is there any hope for these companies that really haven't embraced digital yet? Can they still get on board? And what kind of a factor is that going to have with their business going forward?

SAJAL KOHLI: Jared, great question. Listen, it's a tale of many mixed fortunes, right? So let's just take a few categories for example. So, obviously, apparel, discretionary spend categories, think about beauty, et cetera, and are massively hit from a physical footprint standpoint. Massive surges in e-commerce, but it's still not offsetting the losses and the attrition that they've had in the stores business.

Plus, in general, if your supply chain was not configured for a high econ penetration business, it's actually a lower profitable sale, right, versus the sale in store. So that's going to be a huge issue, just from an economic standpoint. There's a very clear trend that folks who had actually not invested in e-com or in a more online-as-a-channel prior to COVID are going to be at a significant competitive disadvantage just going forward.

The only panacea here might be that if all the cap ex that they had is not going towards incremental square footage and opening new stores, it will get crowded with technology. And that's sort of the only saving grace here. But I think you're going to see a lot of disruption and consolidation. And net, we think there's going to be a lot of market share up for grabs for folks who are actually laggards, or were laggards prior to COVID.

JULIE HYMAN: Very interesting. So we'll continue to watch all those phenomenons and have you back on to talk about it. Sajal Kohli is McKinsey and Company senior partner. Appreciate it.