You can look at it one way or another: Fashion retailing is either crashing or digging itself out of a hole.
This year, as thousands of stores close, Amazon gains market share, and consumer spending continues to shift from apparel and accessories to restaurants, travel and home improvements, the long-term viability of several iconic but struggling retail brands is being questioned. Will J.C. Penney’s turn around? Can J. Crew, with its recently anointed chief executive officer, make a comeback? Could J. Crew’s Madewell division be the savior? What about Gap? Have shoppers lost interest in Abercrombie & Fitch? What about Neiman Marcus, which may be losing its grip on the mantle of luxury? Is Sears on its last legs? Is there a future for department stores?
Retail uncertainty is part and parcel of the unease and angst gripping the U.S. due to conflicts with distant and neighboring countries, threats of terrorism, social ills and sharpening political divides. Retail doesn’t operate in a vacuum.
But there are bright sides to the picture, like the potential for tax reform, deregulation and continued stock market gains. These will help retailers by putting more money in their coffers and by putting additional dollars in the pockets of consumers. Border taxes, which would have cut profits and put many retailers out of business have been abandoned by the Trump administration and Senate leaders. And store closings will bring additional business to stores remaining open where retail executives will put greater focus and investments.
Much of retail is healthy and performing well, such as T.J. Maxx and Ross Stores, which provide brand names at cheap prices and the thrill of the hunt; fast-fashion chains such as Zara, which are on trend, value-oriented and constantly changing the assortments; Costco, which always has big crowds for buying in bulk and buying cheap, and home stores such as Home Depot and Lowe’s, which are riding the nation’s rising home values.
Wal-Mart is picking up steam and changing its dated image through acquisitions such as Jet.com, but facing competition from all sides. “Wal-Mart is still an outstanding retailer, but it’s not quite operating on all eight cylinders, and the key performance indicator that needs a tune-up is its traffic growth, since strong and sustained traffic growth is the hallmark of all great retailers, from Costco to Wegmans,” said Craig Johnson, president of Customer Growth Partners.
Nordstrom is outperforming its peers and posting sales gains, and simply knows how to buy and sell merchandise better than most, and Sephora and Ulta keep drawing in crowds eager to try on the trendy makeup, while department stores lose ground on the cosmetics front.
America’s AA malls remain very productive, and developers and retail executives point out that while Amazon and other online pure plays are gaining market share, Internet sales only account for about 10 percent of total retail sales, and the Internet players — hampered by high return rates and delivery costs — are increasingly investing in brick-and-mortar in their quest for profitability. But no one knows for sure at what level online sales will plateau.
The bottom line: Retailers must change fast and dramatically. From the pundits, here’s the task at hand: downsize the store count, make the stores smaller, simpler and easier to navigate and flexible so shops and displays can be readily changed. Reexamine properties for alternative uses and monetization. Remerchandise for eclectic, exclusive, flexible and fast-changing assortments.
Stores and malls must morph into more than commercial enterprises and become hangouts — places where families and friends want to once again congregate, eat, drink and shop together, or just relax. Or engage in activities, like cooking demos, dance classes, yoga lessons, readings, exhibits and performances.
For fashion retailers, specifically, the focus must shift to versatile styles good for both daytime and evening occasions; relaxed, less structured styles; local tastes and the wants and needs of youth. Sneakers, activewear and dresses seem to be the best tickets. The new model calls for greater convenience, added technology, services, delivery options, and tie-ins to social, charitable and environmental causes. Consumers want more from retailers. They want to be engaged, not sold something.