As store openings accelerate across the U.S., the velocity of online sales continues on an upward trajectory, according to at least one analyst who is also taking a bullish view of retailers poised to outperform peers in a post-COVID-19 world.
And in a recent survey of retailers who are reopening stores, in-store experiences and digital signage solution provider Raydiant said the pandemic has created a permanent change in the retail industry. This includes a commercial real estate market that has undergone a “massive shift” as many stores will stay permanently closed while services such as “curbside pickup” will remain well after the pandemic ends.
Bobby Marhamat, chief executive officer of Raydiant, described the current climate as “an incredibly challenging time for brick-and-mortar retailers, but our belief that the industry has a bright future remains as strong as ever.”
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“Change has been accelerated faster than expected but retailers who are able to adapt to these changes will thrive in the years ahead,” he added. The degree of change, though, increasingly includes the permanent closure of retail units.
In a survey of more than 400 retailers, researchers at Raydiant found that 29 percent of respondents “now plan to close their physical locations to go online-only, while 14 percent intend to downsize.”
The report found that curbside pickup and delivery options “are now permanent” and noted that most of the respondents who added these services “intend to keep them.” In regard to in-store experiences, 41 percent of those polled said “creating better experiences would be their top priority upon reopening.”
“The majority of the survey group [85 percent] believed in-store experiences would be important to their reopening success,” authors of the report said. Retailers such as Saks Inc., for example, have reconfigured the in-store experience with consumer and worker safety in mind. And as stores reopen, consumer spending trends increasingly reveal a more frugal shopper.
For example, in a separate market update report released this week, Dana Telsey, chief research officer of Telsey Advisory Group, said Nordstrom “is poised to have reopened 90 percent of its store fleet as of mid-June and productivity is running slightly better at Rack versus the full-line stores.” Telsey said digital growth is at 5 percent and is comprised “a strong 20 percent velocity in units driven, at least in part, by promotional levels and accounted for expected returns.”
Telsey said business at Nordstrom that is “derived from full-price mall-based stores last year was less than 40 percent and will shrink this year as Nordstrom’s channel mix continues to change.” She also said in the report that the COVID-19 crisis “has essentially confirmed Nordstrom’s local strategy that is in five of the company’s top 10 markets with the additional launch of five markets still planned.”
The analyst noted that a shift in consumer behavior toward “casualization from occasion/events” is also being accelerated by the pandemic. But Telsey quickly noted that Nordstrom’s “breadth of merchandise offering that allows customers to mix and match from head-to-toe allows for more discovery of product.” Telsey Advisory Group as Nordstrom pegged with a “Market Perform” rating and a price target of $21.
At Macy’s, Telsey said the retailer’s e-commerce business “has been strong with 80 percent growth in May, although the trend has moderated slightly as stores have reopened.” With inventory, Telsey said it is expected to be down “significantly and reach parity [with sales] in Q3 in order to provide merchandise newness to customers.” But the road to a full recovery of its business is far off.
“While inventory is being managed tightly [at Macy’s], a recovery in overall business trends is expected to be gradual and normalize well into 2021 and possibly not until 2022,” Telsey said in the report. The firm has a “Market Perform” rating on the stock with a $6 price target.
For Ulta Beauty, Telsey said in the report that the company was well under way with store reopenings, and noted the push into “clean beauty” via a partnership with Credo Beauty, which she described as a “pioneer in the clean beauty category.”
“With plans to launch in 100 stores and online in the fall, the initial collection of eight clean beauty brands, includes EleVen by Venus Williams x Credo SPF, Innersense Organic Beauty, and One Love Organics,” Telsey said. She has Ulta Beauty tagged with an “Outperform” rating and a price target on the stock of $280.