Even though fashion has been in serious flux for several years, the changes are not only going to keep coming, they seem destined to get bigger.
While many legacy players were able to get away with omnichannel tweaks or modest steps into big data or augmented reality, more companies are being forced to take larger strides into an uncertain future.
“Change or fail,” warned Art Peck, president and chief executive officer of Gap Inc. at a recent meeting with investors, invoking the words of the retailer’s late founder, Don Fisher.
Peck and others are taking the sentiment to heart.
Gap Inc. and VF Corp. are both splitting in two. Walmart Inc. is in full transformation mode, looking to exit some businesses while building online and in new markets, like India. The now publicly held Levi Strauss & Co. has in recent years expanded beyond its home turf, wholesaling men’s jeans, and is growing in women’s and tops and through its own stores in the U.S. and abroad.
On Monday, Hudson’s Bay Co. signaled the continuation of this trend and its own evolution, putting a “for sale” sign up on the struggling Lord & Taylor, having just recently completed the sale of the chain’s Fifth Avenue flagship to the company that runs WeWork.
“This review of strategic alternatives for Lord & Taylor is another example of how we are exploring options to position HBC for long-term success,” said Helena Foulkes, ceo of HBC. “Over the last year, we’ve taken bold actions and made fundamental fixes that have resulted in a far stronger, more capable HBC, having returned to positive operating cash flow, increased profitability and strengthened the balance sheet.”
Expect more of the same as economics, demographics and digital transformation are all forcing fashion to keep moving.
There were hopes that the industry was going to get a breather. Sales rose steadily last year and chains went into Christmas with big expectations, only to have the season land with a thud.
Reality has set back in. Over the first three months of the year, department store sales fell 4.9 percent from a year earlier, while apparel and accessories stores logged a 1.2 percent decline, according to the Census Bureau. Meanwhile, the fundamentals supporting consumer spending are strong, with unemployment standing at 3.6 percent in April — down from 4 percent in January and a low not seen since the Sixties.
The role models for the new era are coming from beyond fashion.
David Simon, chairman and ceo of mall giant Simon Property Group, pointed last week to the nimbleness of the tech darlings while speaking about his company’s test of an outlet web site, ShopPremiumOutlets.com.
“I think of all the great Internet companies and start-ups and all of the new technology companies [that] have all started with one product, one idea, then morphed into several,” Simon said. “You could look at Amazon, Google as prime examples.…We’re not even close to those companies. But you have to think about our product just along those lines and that we start somewhere. As we get traction, we add to it.”
While the outlet web site is just a small part of Simon — which has a market capitalization of more than $55 billion — it is an important sign of the times that the company has started with a web test and is thinking of Silicon Valley-style change. After all, the tech giants know how to change.
Apple, which ushered in a new kind of on-the-go consumerism by launching the iPhone, is making a hard pivot to its “services” business, pitching itself as a gadget-cum-content machine. Facebook, which successfully made the leap from desktop to mobile after falling behind, is now pushing itself as a creator of community as it seeks to deflect privacy concerns.
And Amazon has gone from e-commerce into cloud computing and entertainment streaming services and is supercharging its already massive logistics network and pushing the industry toward one-day shipping.
The rise of Amazon and e-commerce has steadily forced retailers to adjust — with web sites, integrated shipping systems and buy-online, pick-up-in-store capabilities — but the crush of the digital world could simply become overwhelming, forcing bigger and bigger adjustments.
“Clearly we’re at an inflection point for the way retail works,” said Jan Kniffen, ceo of retail consultancy J. Rogers Kniffen Worldwide.
Kniffen pointed to Amazon’s dominance, noting the web giant takes 35 cents out of every new dollar of sales, and the disconnect between a strong consumer and record store closures and retail bankruptcies.
“We’re going to go from 9 percent to 10 percent of total sales being online to 50 percent between now and 2030,” he predicted.
That sets up a decade of dramatic shifts one way or another. Already, the industry’s been through a turbulent run that saw J.C. Penney Co. Inc. have a near-death experience under Ron Johnson, only to fight its way back and then slip again. Sears Holdings Corp. gave up the ghost and filed for bankruptcy, only narrowly dodging complete liquidation.
Even stronger players, like Macy’s Inc., have taken big steps. The department store operator has closed doors, bought Bluemercury, launched into off-price and acquired and rolled out the Story experiential concept. It also has repeatedly said it is open to options for its flagship in Herald Square, ranging from building on top of it to renting out space inside to another retailer.
But all that could just be the start.
“It’s going to get bigger from here, not smaller, as far as the change goes — by 2030, this has all got to be shaken out,” Kniffen said.
The problems for retailers are manifold.
They have built big businesses by scaling up, gaining greater efficiencies of scale and a broader reach, and have to figure out how to move in reverse while evolving with the consumer as they go.
And it’s not clear just what they’re supposed to evolve into.
Does e-commerce really grow by a factor of five, as Kniffen estimates? If so, how would stores be used and how many could the market support? What kind of experiences are worthwhile and who can bring them to life?
Those questions and more have retailers wanting to change, but not exactly sure how to.
“For many people, they’re putting out a wide net right now,” said consultant Robert Burke, chairman and ceo of Robert Burke Associates. “They don’t know where things are going or where they’re going to pick up on the losses from these traditional businesses.”
Nor is retail as practiced at change as the Facebooks and Amazons of the world.
“We all talked about omnichannel for years, but I don’t think we ever really fully understood what we were saying or the reality of what omnichannel really meant and that is really starting to sink in,” Burke said. “The customers all want experience.”