The State of Retail, July 2020

Last week, I volunteered to give an informal talk to a largely non-retail audience about what’s happening in the industry right now. I realized I should jot down some bullet points, and afterwards I put them into the sentences below.

This is what was at the top of of my mind. What pops for you, what do you agree/disagree with, what did I miss?

As you know, the retail industry struggling overall.

The middle of the price range, specifically, department stores and specialty stores - everything from Ann Taylor to Brooks Brothers to Sur la Table to GNC - is faltering. 

There have been significant store closures and mass layoffs announced almost daily. 

Almost 40 retailers have filed for bankruptcy in the first 7 months of 2020, which is more than in all of 2019.

But a few slices of retail have held up better, including luxury - maybe that’s counterintuitive to you - and certainly grocery and drug stores.

A lot of what’s driving grocery is a quick shift in consumer comfort with online grocery shopping. People who had never done it before, and for whom it will be a new habit going forward.

Apparel outside of athleisure is hard-hit, while skincare and eye makeup sales - the mask effect - are reported to be increasing.

In grocery and also in other categories, there’s a bifurcation where companies with unlimited choice - not just Amazon, but Walmart - are thriving, and companies with extremely curated assortments are building a customer base. 

Just like retailers in the middle of the picture price-wise may be squeezed even more than pre-downturn, I think the same may happen with brands that don’t offer wide choice but also lack a specific point of view.

We’ll also see retail stores fall more dramatically than before into two categories - specific needs fulfillment on one end of the spectrum and entertaining discovery on the other end.

Overall, the shift to greater e-commerce penetration that would’ve taken years has taken a matter of months. But with a recession on the horizon, e-commerce growth overall is expected to slow down. 

Beyond those broad trends, I want to highlight a couple of quick ways the retail industry is responding in ways that are exciting to me. 

One is a greater willingness to adopt new tools to fuel e-commerce growth. One specific example of this is that B2B2C companies that sell AR solutions for companies to use on their web sites, apps, and in social campaigns are reporting a lot of interest and growth. And then live-streaming, which has long been an e-commerce strategy in Asia, is finally gaining traction here.

Another response is that some retailers that have had to close stores have found new ways to connect their employees with customers virtually. In a lot of cases, it’s brands that never did virtual appointments and now they’re seeing such a meaningful response to the offering that it’s a strategy they’ll keep using post-COVID.

Finally, as in other sectors, we’re seeing retailers step up and communicate more purpose, and that’s something more customers clearly are demanding.

So overall, like in many other industries, this period will probably shake out a lot of necessary change for the industry and make it more efficient faster than that otherwise would’ve happened.

Very sadly, there will be a lot of lost jobs, companies disappearing altogether, and empty real estate as everything resets.