It’s a pivot point for retailers.
U.S. department and specialty stores selling fashion and other nonessentials are beginning to reopen — very gradually and with extensive assurances of taking health precautions against COVID-19.
Among the major retailers setting brick-and-mortar store openings, or key steps enabling them to soon reopen stores, are J.C. Penney, Neiman Marcus, Macy’s, Chico’s FAS, Nordstrom and Belk.
In addition, Simon Property Group has decided to reopen a total of 49 malls and outlet centers in 10 states starting May 1, with Texas, Indiana and Georgia seeing the bulk of the reopenings, according to media reports. Simon said masks and hand sanitizers and temperature tests will be available to shoppers, the properties will be thoroughly cleaned including food tables, escalators and other high touch areas, and operating hours will be curtailed, among other measures being taken. Among the properties opening are Lenox Square and Phipps Plaza in Georgia and the Houston Galleria in Texas. It remains unclear just what retailers will open in the 49 Simon centers.
Simon could not be reached for comment.
With the U.S. on Tuesday reaching a total of more than one million cases of the coronavirus, underscoring the severity of the crisis, it’s still a long road ahead — weeks, if not months, before nonessential retailers reopen brick-and-mortar locations in big numbers.
And when they do, it will be anything but business as normal. Associates will be wearing and distributing face masks, providing sanitizers, cleaning the stores, widening the aisles, limiting shopper traffic and store hours, creating lines outside and separating people six feet apart.
Retailers will also be advocating by-appointment shopping, and increasingly merchandise inside the stores is being used to fulfill online orders and areas outside the stores are being used for curbside pickups.
While concerned about the health of shoppers and store associates, retailers are anxious over how many consumers actually will show up to shop. And while shopping is often an excuse to get together with friends and family and socialize, it’s likely to be more a solitary affair going forward.
The survival of retailers is likely to depend on the success of their digital selling and efforts to ramp up that side of the business to mitigate the losses at brick-and-mortar locations. But increases in digital sales, which are being widely reported, are not fully making up for the massive loss of business due to the temporary closing of stores.
J.C. Penney is fully reopening seven stores today in Nebraska, Oklahoma, Utah and Arkansas, while Macy’s is expected to reveal on Thursday a plan to reopen stores in different areas. Last Sunday, Macy’s launched curbside pickups at 14 stores in Texas. Another one in the state opened earlier, and there are two others, at a store in Florida and one in California.
Neiman Marcus Group started offering customers the option to pick up orders and gift cards via curbside pickup at all Neiman Marcus locations in Texas last Friday, as well as in Tysons Corner in Washington, D.C., Tampa, Fla. and Las Vegas. Customers can choose the option for curbside pickup when checking out online or working with a sales associate online. The customer will receive a confirmation when their order is ready for pickup. “A delivery associate will meet the customer at the designated curbside pickup location for a contactless delivery of their purchase,” Neiman’s said in a statement. “In order to keep our associates and customers safe, associates are required to wear a face covering and gloves when delivering the merchandise and must maintain a six-foot distance at all times when making the delivery.” Customers also pick up their alterations curbside.
It’s expected that sometime in May, Nordstrom will begin to unveil store openings, but executives are taking the position that the company does not need to be the first out with any openings. Nordstrom is well into instituting safety and health measures and training employees on them, examining staffing needs, figuring out the cadence of cleaning stores and merchandise, and actively monitoring guidance from government and health authorities. The plan is to make it apparent to the public all the measures being taken in advance of opening any stores to help reassure shoppers.
“I think there’s going to be a couple of phases,” said Pete Nordstrom, chief brand officer. “We will open up in a gradual way and gain customer confidence so they feel safe. I also think we’re going to evolve into what will be a new normal. We’re going to have to be flexible because it’s impossible to predict what that new normal will be like. When we start opening stores, we will take learnings and a super humble approach in how we can be responsive to customers and allow that experience to evolve in a way that’s relevant for them. We can’t force legacy practices or things we did in the past that may not be relevant for these times. These things sound obvious, but we’re just really trying to build in that flexibility and agility mind-set to do what is in the best interest for customers.”
The company, compared to some other fashion retailers and department stores, is in a better position to navigate through the crisis considering its liquidity position. It exited 2019 with roughly $850 million in cash has a revolver of $800 million that it drew down. Nordstrom’s market strategy has been accelerated so that in the past two weeks, all Rack stores in the U.S. started fulfilling online orders; all full-line department stores and Rack stores in Canada started fulfilling online orders, and e-commerce was launched in Canada about a month ago. In the U.S., Nordstrom has been fulfilling orders from its full-line department stores for a long time.
The market strategy, said Erik Nordstrom, the chief executive officer, “remains our primary strategy moving forward with two key goals. Number one, to engage customers more with services and across channels really addressing some friction points along the way. Specifically, this means providing convenient access to our services, including order pickup, returns, and alterations through Nordstrom Locals and Racks in addition to our Nordstrom full-price locations. And secondly, better leverage the inventory we have. Inventory is our biggest investment and mostly it sits in stores and most of our stores are close to where most of our customers are. By leveraging inventory already in the market, we’re able to bring to customers same-day or next-day delivery with up to seven times more inventory selection.”
In another step, Nordstrom has assigned “health ambassadors” to all of its full-line department stores and Rack off-price stores. They’re tapped from human resource teams to make sure health screenings occur, that employees fill out health questionnaires, and to answer questions about benefits, among other responsibilities.
Starting May 4, Chico’s FAS, which operates Chico’s, Chico’s Off the Rack, White House Black Market, White House Black Market Outlet, and Soma stores, will roll out a three-phase approach for its boutiques. First, fulfillment of online orders through about 500 stores using store inventories; second, buy-online-pick up in store (BOPIS), including contactless curbside pickup with white-gloved associates will begin sometime before May 8, and third, the introduction of a new shop-by-appointment service within two weeks.
“By the week of May 17 we anticipate a number of stores opening, as many locations as we are allowed to do, as states allow,” said Bonnie Brooks, president and ceo of Chico’s FAS. “There are lot of customers who are anxious to get back into the stores; we are going to be in touch with all of the other retail peers and stay very close to our landlords in terms of everyone working together.
“A lot of our stores have physical storefronts that are easy to drive right up so you can see how many people are in the store,” Brooks said, adding that associates will be at the front doors with masks and sanitizers. “It’s very easy for us to limit the number of people entering. It’s also easy to move the racks around to make sure there is a lot of aisle space. And when someone tries on some clothing, we will be making sure no one touches the clothing for 24 hours. It is a lot of extra work but that is what we are going to do.”
Stores operated by Chico’s FAS are concentrated in the Southeast, Midwest and West Coast.
“We believe we will have some significant advantages in the next several months as the majority of our stores are under 3,500 square feet and are located in easily accessible shopping plazas,” Brooks said. “Due to the smaller size of our boutiques, Chico’s FAS has the ability to reopen quickly and safely and to follow enhanced safety precautions.”
Brooks said the company is in “heavy conversations with landlords. Some will work with us. Some don’t. In some cases we will have to give back the keys to the doors.”
At J.C. Penney, “We’re taking a strategic approach as we develop our reopening plan and will continue opening stores gradually based on guidance from local officials,” according to a statement.
Penney’s offers contact-free curbside pickup at all reopened stores, plus 13 other stores which at this point customers can not shop, but in each case associates will be wearing masks, and place orders on the backseat or in the trunk of the customer’s car.
Penney’s cited other health precautions being taken, including “diligent cleaning throughout the day, paying extra attention to frequently touched surfaces,” adjusting store hours, social distancing with reminders posted throughout stores, limiting the number of customers in the store at a time based on local and state requirements, making hand sanitizer available for customers and associates, plexiglass shields at each register in use, an extended return policy and more time to use rewards, associate training on safe practices, providing PPE to associates, and postponing offering salon services.
Last week, Belk said stores in South Carolina and Arkansas will reopen May 1. Stores will begin by opening from 12 p.m. to 6 p.m. and will be limiting the number of people in the store to ensure social-distancing standards. Belk recently launched curbside pickup at select stores, including all stores that will be open in May.
Efforts to get brick-and-mortar stores up and running again come after governors in Texas, South Carolina, Arkansas, Nebraska and Oklahoma green-lighted a return to business in the last several days, with the governor of Texas most recently indicating stores could reopen starting Thursday at 20 percent capacity.
“If I was running a store today, every worker has to have their temperature taken,” said Michael Gould, the former chairman and ceo of Bloomingdale’s. “Any associate certainly wears a mask and anything they pick up in the course of interacting with a customer gets wiped down. Stores have different kinds of products — housewares, jewelry, cosmetics, every one of those products can be wiped down every morning, and if somebody picks up something, just wipe it off. One of the great concerns will be the apparel business — who touched the garment before, who was in the fitting room with it. Cleaning has to be taken to a whole new level. You are going to have to have people continuing to wipe certain parts of the store all day long.
“Nothing is foolproof here,” Gould added. ” But if I saw everyone wearing a mask, if I saw wipes at every counter for the associates and knew that every time merchandise was touched it was wiped down, maybe if there were fewer fitting rooms open, with a housekeeper there for every fitting room and signs that say it was just cleaned, that would make me feel better. There will be costs created in different ways, but they’re small costs relative to no business at all.”
“The key issue to all of this is how is the customer going to respond,” said Rick Maicki, managing director of retail performance improvement at BRG Corporate Finance, a global consulting firm. “Will they be willing to go out or anxious to go out. Most people are going to feel comfortable.” He estimated that roughly 60 percent of the usual mall shoppers will be back, but open air malls will be higher in terms of people’s comfort levels.
“Staffing models, traffic models, are going to be altered,” Saturdays, in particular, when shopping normally peaks, will be much different, with people steering away then.
“Mother’s Day is coming up — I doubt many stores will be open by then,” Maicki said.
“Retailers will have to be very agile to monitor and adjust their traffic flow, certainly on a week-to-week and on a day-to-day basis, there may be situations where they won’t let more than five people in a specialty store, and there will be situations where their better customers set up shopping appointments. That has a lot of potential value (in the current climate) since it will give the consumer confidence that they are in a relatively safe environment. There is also the likelihood of converting that customer on that trip, since it won’t be so much as a pastime or leisure activity as the shopping has been in the past. Stores will see traffic down and conversion rates up. It’s also an opportunity to tighten up relationships between the retailer, its store associates and consumers,” he continued.
“With all the sanitizing and cleaning and wiping things down, retailers will require some additional manpower for those chores, but with the muted traffic and increased conversion it balances out.”
He recommended that retailers divide up their staffs into “platoons” or staffing groups, so if one employee gets sick that staffing group can be put aside for awhile so another group can be in place to take over. “Some retailers are doing that already. Hospitals are doing that as well.”
Maicki said that he’s working with a number of retailers on staffing models as stores ramp up and adjust. “We are also helping them evaluate their site portfolios. A number of stores that were on the cusp of being four-wall negative profitability, now become very much negative profitable. There will be a thinning out” of store fleets, he predicted, beyond the culling that had been occurring for the last few years.
Reopening stores is more than just a matter of flicking on the light switch. Among the considerations — making sure the POS systems are properly operational, confirming the IT is working, determining staffing levels, deep cleaning to wipe out the virus, clearing out and packing up merchandise that could be dated, and resetting the pricing and promotional signage, explained Maicki. “It’s almost like opening a brand new store,” said Maicki. “It will be a significant effort to determine what to do with fashionable, seasonal merchandise.
“The trick is trying to balance the desire to get people to come back but not create huge spikes of traffic and demand and managing price margin implications,” said Maicki. “You have to ask who are your key customers and target special offers for those high-value customers that you really want to keep and protect.”