The pace of change in a turbulent-yet-slow-to-innovate retail industry is poised to accelerate.
Bankruptcies? Possibly a few. But there’s plenty that retailers have to grapple with amid shifting consumer dynamics and shopping patterns, and all the uncertainties that the new Trump administration brings.
Look for intensified consolidation of America’s overstored retail landscape, as well as ongoing convergence of brick-and-mortar and digital operations, monetizing of flagship properties through sell-offs and redevelopments, increased mobile shopping, advanced analytics, and Internet pure plays adding retail stores to their business models.
And expect a wave of successions with new leaders possibly emerging at J. Crew Group, Kohl’s Corp. and Abercrombie & Fitch Co. At Lands’ End, Jerome Griffith became chief executive officer in December, and in February, Jeff Gennette steps up to the ceo post of Macy’s Inc., succeeding Terry J. Lundgren.
Retailers will be operating with lower inventories, bringing products to market quicker and turning them quicker, and pop-ups will proliferate, hoping to heighten that sense of newness and change. Offerings will be further shaped by deeper mining of consumer data and the use of artificial intelligence to devise personalized and localized marketing and merchandising, and retailers will work harder to remake selling floors, pumping up activewear, beauty, food and experiences like yoga and cooking classes and makeovers, to offset softer categories.
“It’s not about just selling goods anymore,” Glen Senk, ceo of investment firm Front Row Partners and former ceo of David Yurman and Urban Outfitters Inc., said in a recent interview regarding industry consolidation. “Brands have to be more than just products; they have to have meaning. Stores need to keep evolving. I don’t think retailers are changing as much as they need to,” Senk said. “I don’t think there’s enough customer centricity. What technology does is give you tremendous insight into people’s behaviors. Some people use technology to their advantage to gain access to that [insight] and some people don’t.”
“People have been going to the marketplace since the time of the Greeks. We will continue to do that, as long as we see new environments, like Nike in SoHo and Adidas on Fifth Avenue, where they have created environments with activity, energy. People want that,” said Michael Gould, the former Bloomingdale’s chairman and ceo, who was also interviewed about retail consolidation and what retailers must do to survive.
“To quote Lyndon Johnson, you have to walk and chew gum at the same time — create exciting energetic stores and develop the online,” Gould said. “The customer who shops [both] online and in the stores spends three-and-a-half to four times as much.”
Among other priorities in 2017:
• Getting a handle on Millennials. Retailers must figure out their wants and needs. Millennials have limited brand loyalty, spend more on experiences and less on material things, and patronize products and brands tied to social and environmental causes.
• Monitoring President Trump’s policies on trade, government regulations, health care, job creation and tax reform, which will impact imports, consumer prices, business growth and corporate profits.
• Stressing convenience and ease of shopping. Consumers are likely to see better trained, more knowledgeable, empowered and technology-equipped sales associates; additional payment options, additional shipping options and faster deliveries of all types of goods and services, with the touch of a button or the sound of your voice.
• Stepping up the quest for unique and exclusive products.
• As online sales grow at a slower rate, brick-and-mortar retailers will play up the social aspects of shopping, as an outing for friends and family, and the desire to touch, feel and try on clothes before buying them.
Among the retailers to watch is Wal-Mart Stores Inc., the world’s largest and America’s biggest importer in terms of seaborne shipping containers. The mass merchant could see rising costs if new Trump policies impose tariffs on imports from China and elsewhere. Anti-import policies, while encouraging domestic manufacturing, could rile China and impede Wal-Mart’s aggressive expansion there. On the digital front, Wal-Mart will seek to grow Jet.com, which was purchased in August for $3 billion, and its overall [and underdeveloped] dot-com businesses, which represent just 3 percent of the chain’s $482 billion in annual sales.
Other retailers to watch:
• Amazon, and its thrust into apparel and brick and mortar beyond existing book stores.
• Sears Holdings Corp., which continues to close stores and lose money.
• J. Crew, which needs to revive its collection and reconnect with consumers.
• Bon-Ton Stores Inc., which continues to suffer poor results and shoulder the burden of having many stores in poor locations.
• Neiman Marcus, which has been losing traffic and sales, is saddled with $4.7 billion in long-term debt, and must widen its appeal and renew the aura of exclusivity.
• Hudson Bay Co., a high-flying newsmaker, is always on the prowl for an acquisition.