I have this theory that the future post-pandemic retail landscape will be populated by the giant-sized retailers who have successfully survived their pre-Covid downward trend, as well as surviving the downward slope post-Covid. However, since the big brands have such expertise in AI and analytics to drive personalization, including localization, they will change their business models. They will only keep their giant footprints or flagships in select, outperforming urban areas and A-ranked malls (but only AFTER they have been converted into compelling special entertainment and experiential destinations for next-gen consumers). Simultaneously they will evolve small, personalized/localized neighborhood boutiques (locally curated with plenty of events, interesting food and learning experiences) that they will roll out to become large national specialty chains. Their online businesses are already being baked into the cake at a rapid rate. So, the boutique and omnichannel strategies will be the primary growth engines for the surviving giants. That’s my prediction and I’m sticking to it.
Macy’s in the Neighborhood
In February of this year, just before Covid-19 hit, I wrote about Macy’s conjecturing (hoping), that their Market by Macy’s test store in Texas, would be a precursor of my specialty-store thesis. However, the pandemic might have derailed progress and put a full stop on the model becoming a viable long-term strategy. The departure of Rachel Shechtman, its architect, is one major sign that Macy’s has likely decided that capital expenditures need to be allocated to short-term priorities to jump start the business as it opens its doors. And of course, there is that immediate challenge.
For those retailers pre-Covid who were not already evolving, who did not have a plan and who are deeply in debt, your theme song is playing on the deck of the coronavirus Titanic: “Nearer, My God, to Thee.”
If that is the case, maybe it was because of a big nudge from Wall Street and the Board, most of whom might still have their heads stuck in the sand on last century’s department store model, believing that the right strategy is “do what you’ve always done, just do it better,” or some inane belief like that.
Even before Covid-19, it was crystal clear that 21st Century retailing was being radically transformed. Perhaps Macy’s is just a “stuck” culture. That would be sad, because I really believed Macy’s was going to seize the moment to be bold, envision the transformed future and invest in it.
Target on Target
Target is a great example of the smaller, local store strategy in real-time implementation. In fact, I was present when Brian Cornell told a crowd of analysts that Target was going to spend billions of dollars in a long-term strategic transformation, and that their margins would be severely squeezed over a period of several years. That’s bold. He did invest in his vision and continues to do so. And the financial results prove out his vision, even during this virus horror show (being an essential provider did help them).
When I wrote “Don’t Let a Crisis Go To Waste”, I identified eight key trends, most of which were already evolving pre-pandemic, which would only accelerate during this seemingly endless period of physical distancing and outright shutdown. It behooves every consumer-facing industry to plan on these possible outcomes.
For many of the legacy brands and retailers who were evolving their models pre-crisis to be more competitive and survive consumer and business model shifts, my advice now is to bite whatever financial bullet you must to advance from evolution to revolution – tomorrow is now!! Make whatever radical changes that need to be made. And if it’s downscaling to the extreme, just do it. If you have the plan, the good news might be the flood of liquidity you may be eligible for.
For those who were not already evolving, who did not have a plan and who are deeply in debt, your theme song is playing on the deck of the Covid-19 Titanic: “Nearer, My God, to Thee.”
Unsubscribed is a new apparel retail brand, which I parachuted into the middle of my theory for a reason. In my opinion, it’s another example, similar to Market by Macy’s, of the type of small and intimate community retail model that will populate the post-pandemic retail landscape. They are hangout destinations for customers (of course, Lululemon has been, and still is the poster child for this model). Unsubscribed is a new brand in AEO’s portfolio, launched as a test boutique in tony East Hampton, Long Island, where the rich and super-rich frolic during the summer months. It’s American Eagle Outfitter’s fourth brand, along with Todd Snyder and the meteoric next-gen intimates brand, Aerie. Enough has been written about Aerie, and its roaring success. So, I won’t repeat all of it. However, Aerie is arguably, the main culprit bringing Victoria’s Secret down, and probably out. The lesson here is that VS got caught in the brand positioning drift by continuing to market to a continual decline in consumer demand for their brand. In short, the brand stood for attributes that millennials and Gen-Zers did, and do not.
So, the big point about Unsubscribed, its parent AEO and sister Aerie is that they “get” the quickly emerging and dominant young consumer culture. And they build brands and real-time shopping experiences that they love. Unsubscribed is not selling online yet, however, they will add that later. By the way, even in the pandemic, they plan on opening about 25 more Aerie stores. I mention that just to emphasize the power of the brand and AEO’s ability to respond to the demand pulse of young consumers.
On Unsubscribed’s Instagram page, along with a bunch of beach photos, they describe the brand in socially-conscious-lower-case as “consciously-made, slow fashion” (just two lines a year), and they continue, “we believe in being kind – to ourselves, to each other and the world. nothing more. nothing less.” As reported in WWD, “Inside American Eagle Outfitters’ new Unsubscribed store are phrases such as ‘less is more’ and ‘kind. conscious. free-spirited’ painted along the walls, oversize green plants and lots of sunlight. Clothing is spaced at intervals on racks, invoking a sense of minimalism, with a select assortment of accessories, including handbags and sunglasses, on display.” Jennifer Foyle, Aerie global brand president said, “Unsubscribed is all about slowing down, celebrating the beauty of modern simplicity and taking things easy. It’s about enjoying a stress-free shopping experience amongst beautiful clothes and accessories that you can’t help but purchase. We’re constantly listening and learning from our current customers and we’re excited to do the same for the Unsubscribed shopper.”
Have they not hit, spot on, the zeitgeist of today’s young consumer? I think so. And I hope Macy’s doesn’t give up on Market by Macy’s.