The outbreak of the novel coronavirus, and the lifesaving measures taken around the world, will trigger one of the most disruptive periods our global economic system has ever seen. We were already due a downturn, but the pandemic and months of lockdown around the world have probably turned that downturn into a deep recession, significantly reshaping almost every region and business sector. Some industries will feel the disruption more than others, however, and few will experience such monumental change as brick-and-mortar retail.

In major markets around the world, non-essential retail outlets have closed for a period of several weeks to several months. The viral nature of the crisis means that health concerns will continue to reduce foot-traffic in retail spaces long after lockdowns are lifted, further deepening the losses for non-essential brick-and-mortar retail businesses. With everyone at home and most restaurants closed, supermarket sales are booming and the gradual trend towards online shopping has been given an unprecedented boost, being the only option for most consumers.

The extended period of lockdown is changing buying patterns forever. Consumers getting more and more comfortable with online shopping and more and more uncomfortable with crowded spaces with each day of that crisis that passes. Shoppers will not flock back to busy stores and shopping malls, in the same numbers, any time soon. While increased consumer support for local or boutique shops may emerge, revenue will be down across the board. Rents will have to fall and government support may be available, but the disruption will be too much for many, leading to tremendous consolidation and a new retail landscape.

“This lockdown, not just Coronavirus but the lockdown, has been immense for retail already. The longer it goes on for, the longer the opportunity people have had to change their shopping habits and they have already adopted digital retail in their masses,” well-known British Greek-Cypriot retail magnate and entrepreneur, Theo Paphitis, said in an interview with the BBC. “Retail will never be the same again. Every year we see a greater share of retail going to online sales, the lockdown has accelerated that trend by at least five years.”

Retail has jumped five years into the future, no one was prepared, but some less than others. Governments will not want to be seen to abandon brick-and-mortar retail businesses but no one is funding a sinking ship, so we should expect consolidation and mass closures as retailers move online or go out of business. High streets and shopping malls will drop their rents and backed-up supply chains will be desperately trying to offload a growing mountain of stock created by bankruptcies, canceled orders, and massive falls in demand for many products. This creates a perfect storm for the growth of the secondary retail market.

“The COVID-19 pandemic has thrown the US into a recession. Not a “downturn.” Not a “correction.” A recession. This unprecedented phenomenon – marked by retail-killing stay at home orders – is already impacting the very fabric of American business and virtually every sector of the US economy has been negatively affected. But there are a few exceptions. Most notable of these is the secondary market. This is one business segment that actually grows during a recession and it’s going to grow this year even as the rest of the economy suffers.”

The secondary market is the re-sale market, where excess inventory, used goods, overstocked products, and returns are traded and eventually sold to various low-cost retailers. A study titled “It's Time for Your Secondary Market Strategy to Play a Primary Role” by Dr. Dale Rogers of Arizona State University and Dr. Zac Rogers of Colorado State University determined the value of the US secondary market to be $633 billion in 2019. Symbolized by factory outlets, dollar stores, auction houses, pawnshops, salvage dealers, and even flea markets, this secondary retail market thrives in an environment of low-cost supply and cautious consumer buying patterns.

In the two years following the 2008 downturn, when US GDP was around -2%, the secondary retail market grew 9.5%, compared to a yearly average of 6.8% over the subsequent decade of economic growth (2010-2020). In 2017, when US GDP grew at +2.4%, the secondary market grew only 1.7%, underlining its negative correlation to economic growth and its great potential during the looming deep recession. Overlaying historical growth rates seen during the great depression, expectations are that the secondary market will grow more than $70 billion over the next year to a value exceeding $700 billion by the end of 2020, according to Curtis Greve, VP of Liquidation at Inmar Intelligence.

In this post-COVID extended downturn, these budget retailers will amass huge levels of low-cost stock and will seize low-rent opportunities in the high streets and shopping malls once dominated by primary retailers. Those booming mid-to-high level retailers that are most at risk of collapse were the key market for retail-focused products and services emerging from the smart building industry just 3-months ago. Now, those that stay alive will do so with cost-saving and, no doubt, limited motivation for experimental smart technology.

From energy efficiency to occupancy/customer analytics, sales-boosting lighting approaches, emotion-deducing thermal cameras, cobotics, and intelligent fitting-room mirrors, smart technology was pushing the boundaries of the retail experience. Now, we should expect the emerging smart retail market to be pushed back into specific niche retail areas as the whole sector contracts and moves into survival mode. Unless, of course, smart building technology has something to offer the secondary retail market as it prepares for its longest period of growth for almost a century.

From manufacturers to vendors and distributors, the smart retail segment must make huge changes to adapt to the very different consumer landscape they now find themselves in. The low-investment model of secondary retail outlets has essentially left this group out of the smart building market entirely, but growth will create the capacity and motivation for secondary retailers to seek new solutions and low-CAPEX smart technology could provide them.

Bigger inventories creating complex stock and warehouse management issues, rapid expansion requiring better space optimization, a surge in recruitment necessitating digital support for employees, digital trends encouraging omnichannel approaches, occupancy analytics for revenue-boosting customer data and social distancing. These are just a few of the secondary retail market challenges that smart building solutions could solve, if they can redesign services and pricing structures to suit the new post-COVID retail market.

For the retail-focused smart building sector, this is not the time to lick wounds and ponder what should have been, this is the time to adapt and innovate for the new age of smart secondary retail that now represents a great opportunity for growth.