The genesis of the state of the retail industry today in the U.S. began about a quarter century ago as a slowly rolling transformation resulting from the launch of the smartphone. And you could add Amazon into the mix as an accelerant. The slow roll was catapulted forward at warp speed with the onset of Covid-19 early this year. It propelled both the demise of those retailers who were pivoting too slowly or not at all, and the success of those who were strategically shifting their business models to align with tech-armed next-gen consumers. The pandemic shined a floodlight on the winners and losers, which have been relentlessly covered across all of media land.
Longing to Be Essential
Covid-19 also created new definitions for the retail concepts of essential and nonessential. Retailers which were allowed to stay open were deemed essential for the life-sustaining needs of consumers; and those who were classified as nonessential were ordered to close their doors.
Brands and retailers must respond to the values of new consumers, including being environmentally responsible, produced under humane conditions, paying fair wages, and being inclusive and equitable in hiring and compensation practices. Social justice has become table stakes.
Fortunately, for those essential retailers including Walmart, Target, Costco and others that carried groceries and pharmaceuticals, they rolled successfully into the future. They were doing well before the pandemic and experienced even more success by maintaining their existing consumers and stealing consumers from the nonessential retailers. They were the only game in town for months.
Unfortunately for the nonessential mainstream retailers, many of whom were deeply in debt and struggling in the wrong direction even before the virus hit, the virus accelerated their demise, pushing many into bankruptcy. JC Penney, J. Crew, and Neiman-Marcus, to name just a few, found or are seeking investors to give them a new life.
A Mall Story
And if the nonessential brick-and-mortar brands are now in a horrible position to survive, much less to turn their businesses around, it’s even worse for the 900 of the roughly 1200 regional malls, who house many of these losing retailers. These malls were also transforming their models too slowly pre-pandemic and will likely not survive. The mall story redefines nonessential and irrelevant.
Winners and Losers
The pandemic was a surprising accelerant for the winners to succeed and for the losers to fail. Going forward, the winners will seamlessly integrate their digital and physical platforms and digitalize their supply chains for faster, demand-driven inventory optimization and flow of goods. Through AI and data analytics, the winners will identify consumers’ shopping behaviors precisely, and provide a frictionless, personalized journey from engagement to purchase, wherever consumers are, whenever and however they wish to shop, and how they prefer to receive their purchases (either online or off). The emerging, most dominant consumers (millennials and Gen Z) are armed with their smartphones, which makes each one of them a point-of-sale. They demand speed, convenience and value in addition to an experience commensurate with the brand’s DNA (e.g., a Lululemon yoga class, Costco’s treasure hunt and Amazon’s everything-in-one experience). The new retail landscape also requires that online natives open physical stores and that major retail brands, such as Target, Nordstrom, Macy’s and others, also launch small neighborhood off-mall stores to provide more intimate, personalized/localized experiences.
Fair and Just
Lastly, all brands and retailers must respond to the values of these new consumers, including being environmentally responsible, produced under humane conditions, paying fair wages, and being inclusive and equitable in hiring and compensation practices. Social justice has become table stakes.
These are values that will stick. It’s over for retailers simply talking the talk. It’s now time to walk the walk, authentically and empathetically.