Coronavirus continues to accelerate dramatic changes across the retail industry, and it’s hard to imagine what the sector will be like for businesses and shoppers in a post-pandemic world. According to a new report from market research company Euromonitor, U.S. retail sales could be down by an estimated 6.5% this year. For comparison, retail sales were down just 2.2% in 2009, the year the Great Recession ended.
While many factors could alter the course for retailers, including another outbreak or shoppers’ willingness to return to stores, current headlines affirm that the pandemic will have long-lasting and likely permanent impacts on customer behavior and the retail landscape. Here are a few key themes we’ve seen being covered across publications:
Apparel retailers and department store operators continue to report on operating losses and declining profits, with many announcing temporary and permanent layoffs in an effort to cut costs during this time. Neiman Marcus, J.Crew, Stage Stores and J.C. Penney have already filed for bankruptcy during the crisis. And just last week, Macy’s announced forecasts of up to a $1 billion quarterly loss while Kohl’s net sales tanked 43.5% during the first quarter due to lockdowns.
E-commerce players and essential-item retailers that stayed open throughout the quarantine – such as Target, Walmart and Home Depot – saw sales surge in the last quarter as shoppers stocked up on household goods. To keep up with demand and retain their workforce, both Target and Walmart have stated they plan to continue offering wage increases for workers as a result of the pandemic.
As consumers continue to engage in “relief” spending – some retailers will continue to see unprecedented demand, while others look to stay afloat.
- Reuters, May 21, Macy’s to be ‘smaller company’ as loss to hit $1 billion in quarter amid lockdowns, by Melissa Fares, Aishwarya Venugopal
- CNBC, May 19, Kohl’s sales tank almost 44% as coronavirus slams the retailer, by Lauren Thomas
- The Dallas Morning News, May 19, Pier 1 Imports to liquidate as soon as it can get its stores open, by Maria Halkias
- CNBC, May 18, Retail sales in the US could fall more than 6% in 2020: Euromonitor, by Lauren Thomas
“Dark” Stores + Fulfillment Strategies
The surge in online shopping has caused retailers to rethink the way they use their store space. To manage the massive increase in online orders and provide faster deliveries, many are turning their shuttered brick-and-mortar locations into “dark stores” that moonlight as fulfillment centers. Because staff do not have to work cash registers or help customers, it makes it much easier for the retailer to rapidly fulfill online orders.
This has become particularly common in the grocery industry amid record demand for online orders, with Whole Foods opening a total of six dark stores, and chains like Giant Eagle, Kroger and Stop & Shop leveraging the strategy to fulfill delivery and pickup orders.
Walmart and Target, as well as fashion brands, have converted stores into fulfillment centers, too. Bed Bath & Beyond recently announced plans to transition 25% of its stores into regional fulfillment centers, and Gap has been fulfilling and shipping online orders from 1,000 locations.
Gap, REI, as well as other clothing chains, have started to reopen these stores for business by offering curbside pickup to trim down transportation costs and further boost fulfillment capabilities.
- GroceryDive, May 14, 2020, Whole Foods continues to open online-only ‘dark’ stores, by Jeff Wells
- WWD, May 14, 2020, As Stores Reopen, Strategies for Reimagining, Rethinking Retail, by Tracey Meyers
- Business Insider, May 13, 2010, Amazon is opening more ‘dark’ Whole Foods stores as online grocery orders surge and workers worry about rising infections, by Hayley Peterson
- CNBC, May 6, 2020, Gap plans to reopen 800 stores by the end of May, by Lauren Thomas
Re-opening of Stores
As US states continue to loosen restrictions on stay-at-home orders, retailers are announcing their plans for the slow re-opening of store locations and preventative steps taken to ensure shopper and worker safety. People want to feel safe, get their lives back to normal, and start shopping again, but as they return to stores, they will notice many changes.
TJX announced it “expects” customers to wear facial coverings while shopping, and American Eagle announced it will provide hand sanitizer for customers and institute employee temperature checks. Meanwhile, Ulta is banning any product sampling.
Aside from new sanitation practices, some retailers, such as Nordstrom and Macy’s, will temporarily close some fitting rooms and quarantine items that have been tried on before returning them to the sales floor.
- NBC, May 18, 2010, From touchless payments to ‘quarantined’ returns, the retail experience may be forever changed, by Leticia Miranda
- Adweek, May 18, 2020, Retail M&A Returns to Life as Stores Reopen, by Richard Collings
- Business Insider, May 12, 2020, REI, Macy’s, Ulta Beauty, and Gap are reopening stores. Here’s how your shopping experience will change, by Hayley Peterson
- WWD, May 7, 2020, American Eagle Outfitters Begins Reopening Stores, by Kellie Ell and Jean E. Palmieri
What headlines stood out to you this month? We will continue to closely monitor the media and market sentiment amidst the COVID-19 crisis. Send me an email if you’d like to receive our weekly summary and insights.