"The impact of measures to close all but non-essential retail stores will have a significant impact on the Italian retailing industry for an as-yet unclear period of time. It will result in fundamental changes in the way many Italians shop and we are expecting a surge in online shopping. For retailers whose physical stores are closed, online may provide them with a glimmer of hope in terms of being able to continue to trade. The effect of these measures will be to force many Italian retailers without an online presence to move into online and also consumers to finally start embracing the channel."

For more information on retailing in Italy, please see the Italy section of our report European Retail Handbook - September 2019.

What we've seen

  • As from Thursday 12 March, all non-essential retail outlets in Italy were ordered to close. This is currently scheduled to last until 25 March but at the moment it is unclear whether or not the measures will be extended as this depends on whether or how quickly the country is able to tackle the issue of COVID-19 and bring it under control.

  • Those allowed to stay open are ones which allow society to continue to function and include hypermarkets, supermarkets, food discounters, mini-markets and convenience stores, frozen food stores, pharmacies and drugstores.

  • Other types of store able to stay open include computer and telecom stores, DIY stores, pet shops, newsagents and tobacconists, all measures designed either to enable people to work at home, maintain their homes or to maintain the flow of news and updates to the population.

  • A key element is that online retailing, TV shopping and mail order are also permitted to carry on, as well as vending.

Experience of the impact of COVID-19 on retailing in other countries

In China, where the largest number of coronavirus cases have been reported, we have seen a number of shifts in shopping habits as a result of isolation measures introduced by the authorities. We expect that many of these will be replicated in other markets affected by the virus, including Italy.

Chief among these are that buying online has become the norm. A key facilitator here was the ubiquity of the WeChat app, which incorporates messaging, social media and payment functions. As a result, we saw local grocers stepping in and using WeChat to promote community buying and a general increase in activity in terms of group buying using WeChat.

Bulk buying has replaced the daily shopping habit. In countries like China and Italy, daily shopping at stores or market is still quite prevalent but this has not been possible during the virus outbreak. Instead, consumers have needed to buy larger quantities of goods less frequently, with consumers much more likely to buy for the full week ahead, rather than just the next day or two.

While not necessarily the best thing for the environment in the longer term, we have seen the temporary introduction of individually wrapped fresh foods in China, in order to reassure customers that items they were eating had not be handled by someone who might have the virus.

Keeping with the theme of customer reassurance, we have seen a number of examples of employers in China recording and making public the body temperatures of delivery staff and we've already seen in Europe that Deliveroo in the UK and Glovo in Spain and Italy has instituted contactless deliveries, removing the need for any kind of signature of receipt.

Similarly, to avoid contact with couriers, in China, online shopping deliveries were required to be left at the main entrance of residential blocks and collection points for deliveries were also set up in some areas, so that customers could come out and collect their goods once they had been delivered.

Online purchasing in Italy before COVID-19

Before COVID-19, Italy was a long way down the rankings in terms of the proportion of individuals in the country who had bought something online in the past 12 months in 2019, according to Eurostat data.

Figure 1: Online purchasing in the past 12 months, 2019
[graphic: image 1]
Source: Eurostat

The next chart looks at how online purchasing in Italy has grown during the past decade.

Figure 2: Online purchasing in past 12 months in Italy, 2009-19
[graphic: image 2]
Source: Eurostat

Although online purchasing has grown just about every year in the past decade, it has done so from a relatively small base.

Clothing and sports goods were the most popular item bought online by Italians in 2019, as is the case in most other countries. Food/groceries were well down the list, with relatively few of the major brands offering an extensive service, mainly due to the nature of the structure of retailing in Italy, whereby leading brands are often large groupings of smaller regional or even local co-operatives or are effectively just buying groups representing large numbers of smaller retailers operating under a common brand.

Figure 3: Online purchasing in Italy by category, 2019
[graphic: image 3]
Source: Eurostat

In our report Online Retailing - Italy, July 2019, we identified Amazon as the largest online retailer in Italy. We estimate that in 2019, the company had total sales (including third party marketplace sales) of €913 million, of which 46% (worth €420 million) were electrical goods. The company also operates its Prime Now service, offering same-day deliveries, in several larger Italian cities.

In the grocery sector, the largest and longest-established player is the number four operator, Esselunga. The company’s service now reaches over 1,500 municipalities in 36 provinces and six regions, offering an assortment of around 15,000 items. However, it has been overwhelmed by demand as a result of COVID-19 and it is understood that, by the end of last week, shoppers faced a two-week wait for a delivery of groceries.

What it means

  • Retailers are going to have to become more creative in the way that they communicate with and sell to, their customers.

  • Specifically, if possible, they are going to have to immediately scale up their online activities to compensate for the fact that customers cannot visit their physical stores.

  • They may have to look to redeploy shop floor staff to other roles within the business, such as working in online distribution centres and delivery drivers, to help with increased online demand.

  • There may be an opportunity for retailers to partner with other home delivery providers whose demand peaks in the evenings in order to increase daytime delivery capacity, including the national postal service.

  • There is an opportunity for smaller, local stores to re-establish a closer relationship with the communities they serve through offering group-buy facilities and offering free deliveries.

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