Retail Restoration: A Better Stance For 2019?

2018 was the year for many US retailers. Because of the strong economy and low unemployment, 2018 retail sales were the best in six years. Last year, the total retail sales rose 5.1% to $850 billion according to Mastercard SpendingPulse. While bricks-and-mortar stores acquired ways to combine their physical and online experiences, digital beginners continued to disturb the status quo by decreasing hassle for consumers.

Matthew Shay, president and CEO of the National Retail Federation said 2018 “one of the best years for the retail industry in a decade,” adding that predictions of a “retail apocalypse” have abated. “Certainly, there are things that are out of our control,” he said in a blog. “But if we avoid self-inflicted wounds, we can have another fabulous year in 2019.”

Global consulting firm Deloitte has a more tempered viewpoint. Its 2019 retail outlook report says, retailers’ face a variation point this year because the strong economy begins to show some faults and digital disturbance continues thrashing incumbent. But people who can steer this headwind successfully will succeed. Retailers may need to make bold moves if they want to set themselves up for success in the future,” the report said.

Retailers Will Advance Their Game

Bankruptcy filings of Retailers like Sears, Brookstone, David’s Bridal, Mattress Firm, Nine West and Rockport in 2018 show that the challenges in the sector are far from over. But survivors who are trying to sustain in this new retail environment will obtain the rewards.

“I think what you’re seeing is that the ones who get it are going to win, and the ones who don’t get it are going to lose,” Kahn said. “I personally think 2019 will be an exciting year for smart retailers, and we’re going to see some really creative stuff.”

According to her major innovations are making the retail sector more resourceful. For example, Amazon Go stores allow customers skip long checkout lines; Nordstrom’s showroom stores do not carry inventory; and the flawless combination of technology into automobiles let people shop while they travel.

Bright retailers know the business strategies. “People are talking about the death of retail, but look at these great new beautiful stores that are opening up in New York,” Kahn said. “So, no, retail is not dead. Good retail is live and creative. And bad retail — rest in peace.”

Cohen has the same opinion, there’s “no weakness” in retail per se because there are plenty of customers with healthy disposable incomes — and they love to shop.

“Human beings have an encoded behavior that results in them seeking out things that are new and exciting, with vigor,” Cohen noted. “And they do that in the retail marketplace, whether it’s a physical store or it’s online, or some combination of the two. So, I think the business up top is fine. It’s going to continue to thrive. But within the businesses, the breakage is going to continue.”

Subscription Exhaustion?

The expectation of both the professors on e-commerce activity is to increase as more companies switch to omnichannel retailing and integrate business models geared toward online shopping activities, for example, showrooms and curbside pickup.

Cohen expects double-digit growth for digital. “It will vary by category, but it’s certainly something that consumers have adopted worldwide, and there’s absolutely no reason in the world why that trend would abate,” he said. “The legacy brick-and-mortar players who don’t … get it, or who don’t get enough of it, are dead. They’re going to continue to lose share.”

However, Cohen expressed concern, for showroom-only stores and for subscription-based retailers such as meal kits and pet products. He told that according to the practices, the customers who are at first eager to receive a new box of things every month ultimately get exhausted. The company is forced to pursue new customers for the replacement of leaving ones, driving up the cost of achievement.

“Subscription models [have] been around for a very, very long time. They kind of come and go as they become more fashionable, and right now, they are very fashionable for many customers,” Cohen said. “But my prediction is that most of these new subscription models will have relatively short lives.”

 “Super-Regional” Malls Will Succeed

Some malls in America are slowly dying while others are blooming. It’s a confounding challenge for most customers, so Cohen elucidated it: There are about 1,400 malls in the United States. About 250 of them are triple-A or ‘super-regional’ malls, which means they have four to six anchor stores and are ringed in by communities that won’t let them grow any larger. The remaining 1,150 or so malls are characterized as B, C or D-level malls. They have two or three anchor stores that are dying, such as Sears, J.C. Penney or Macy’s. Specialty tenants have either gone bankrupt or exercised their right to exit because the anchor store that was part of their lease agreement has left.

“They’re referred to by many as zombie malls, because they look more dead than alive,” Cohen said.

He thinks that these challenging places will close, while super-regional malls will be in good condition because they are completely tenanted with sufficient traffic. “And many, many, many customers will always want to touch, feel, try and experience something physically. That behavior is not going to disappear.”

Kahn pointed out the trend in malls is to make them more multi-use and pragmatic, with lots of restaurants, movie theaters and even co-working sites like WeWork.

“You need to have this mixed use,” she said. “People are still looking to go out and have a fun time, and the mall can be it, but it’s got to change.”

For Sears, The End Is Very Near

The bankruptcy filing of Sears was one of the biggest business headlines in 2018. The 126-year-old retailer, owner of Kmart, found to be on path for liquidation. But according to Bloomberg, on January 16, Chairman Edward Lampert’s hedge fund won a bankruptcy auction of the firm with a bid of more than $5 billion. The agreement still requires approval by the bankruptcy court.

Cohen, the former chairman and CEO of Sears Canada, told that the operation strategy of Sears was problematic not its debt. It had lost its relationship with customers. “There’s no leadership in the company, there’s no strategy in place that demonstrates any viability for the future. So, the sad news, which is certainly to me not a surprise, is that this incredible American — if not international — icon is about to disappear.”

Kahn had the same view that lost connection is one of the most unfortunate aspects of Sears’ failure because the legacy retailer once had the kind of customer loyalty that other retailers crave. “[You] can find tons of people who grew up on Sears and are seriously upset that Sears is out of the market. You can’t buy that kind of brand loyalty and legacy,” she said. “It was pure lack of leadership. For whatever reason … they just didn’t take an amazing asset and grow with the retail world.”

Data Privacy Will Increase Importance

Data mining is most important for retailers those need to hone in on customer liking, reduce friction and interrupt old business models. But as 2018 clarified, the security of that data became an increasingly vital issue, which has caught the attention of lawmakers.

Most customers overlook the fact that their personal data is being monetized without direct profit to them, Cohen said, but that could transform in the coming year. “It’s possible that the pendulum is going to swing very, very sharply over to the other side of this issue, which [would mean] very restricted use of data.”

Kahn agreed with this. According to her, access to data is not a predictor of retail success; it’s what retail does with the data that matters. “You’ve got to turn it into information. You’ve got to turn it into action,” she said. “You still need human insight. You still need that little magic of the smart merchant to put all those things together. It’s not just a data solution.”