The retail sector continues to contend with a high degree of disruption in the wake of COVID-19’s impact on the U.S. economy. Six degrees of separation has become six feet of separation. The global pandemic, changing consumer expectations, and sustainability concerns continue to redefine the retail landscape. Heading into 2020, the U.S. retail sector was already facing challenges amidst concerns of the long-term implications of e-commerce on brick-and-mortar retailers, the fiscal obstacles of incorporating augmented technology into the shopping experience, and considerable competition from category killers like Walmart and Target. With the onset of the pandemic in the U.S., many retailers were forced to close for extended periods as shutdowns restricted movement and business operations across the country. As a result, it was no surprise when many retailers who did not have a strong omnichannel presence suffered.
This pandemic has clearly worsened the toll on traditional retailers, and some analysts are estimating that as many as 25,000 stores could shut down permanently by the end of 2020, a marked increase over the 9,500 closings nationwide during 2019. Established brands announcing significant closings this year have included GNC, which announced it would shutter up to 1,200 stores; and Pier 1 Imports, which filed for bankruptcy in 2020 and will close all 936 stores nationwide with plans transition to an online only sales platform. Jos. A. Bank, Men’s Warehouse, New York & Co., GameStop, Stein Mart, Victoria’s Secret, Chico’s, Tuesday Morning, Gap, JC Penney and Bed Bath & Beyond also announced significant store closures.
The global pandemic, changing consumer expectations, and sustainability concerns continue to redefine the retail landscape.
The impact of the pandemic on the nation’s bars and restaurants has been especially crippling over the past year. With many states prohibiting indoor dining for months, many restaurants relied heavily on takeout, curbside pick-up and food delivery services in order to maintain their bottom line, often achieved by laying off much of their staff. Others did not have a business model that allowed for disruption, and subsequently have no plan or ability to reopen once the pandemic has passed. Restaurants have sustained more than $185 billion in lost sales over the last seven months, and estimates indicate the number will grow to $240 billion by year-end 2020 according to a report by the National Restaurant Association. More than 8 million industry employees were without jobs at the height of the pandemic, and 100,000± restaurants have either permanently closed or are closed for the long term. The true number won’t be known until government statistics are released in the months ahead.
The impact of the pandemic on the nation’s bars and restaurants has been especially crippling over the past year. With many states prohibiting indoor dining for months, many restaurants relied heavily on takeout, curbside pick-up and food delivery services in order to maintain their bottom line, often achieved by laying off much of their staff. Others did not have a business model that allowed for disruption, and subsequently have no plan or ability to reopen once the pandemic has passed. Restaurants have sustained more than $185 billion in lost sales over the last seven months, and estimates indicate the number will grow to $240 billion by year-end 2020 according to a report by the National Restaurant Association. More than 8 million industry employees were without jobs at the height of the pandemic, and 100,000± restaurants have either permanently closed or are closed for the long term. The true number won’t be known until government statistics are released in the months ahead.
While the pandemic may have completely upended the retail sector, it has allowed for a dramatic acceleration in the growth of e-commerce, which for more than a decade has made up a growing share of retail sales. Growing from only 4.2% of retail sales during the first quarter of 2010 to account for 11.8% of retail sales by the first quarter of 2020, e-commerce sales rose to $211.5 billion during the second quarter of 2020, an increase of 31.8% (±1.2%) over the trailing 90-day period. By mid-year, e-commerce sales had jumped to account for 16.1% of total retail sales, a quarterly jump that would have taken more than five and a half years to achieve based on the pre-COVID trend.
U.S. retail sales increased at a slower pace than expected in October and could slow further, restrained in part by declining household income and rising new COVID-19 infections, although there has been promising news regarding two successful vaccine trials. While economists are largely predicting moderate retail sales growth for the rest of the year, the November issue of NRF’s Monthly Economic Review noted that retail sales have been up both month-over-month and year-over-year each month since June. Harvard University’s Opportunity Insights research project also reported that retail sales have completed a V-shaped recovery and are up 8.6 percent since January, so the news is improving.
Despite the concerning statistics and challenges facing the sector, retailers are very resilient and creative when it comes to dealing with disruption. This is primarily because they were already forced to adapt to the growing popularity of online shopping and the rise of Amazon. The ability of retailers to adapt, be agile, and understand where and how they can be profitable is critical. As such, they are getting more creative in adjusting to the new normal. It’s either pivot or perish.
Moving forward, a rising number of retailers will increasingly tailor shopping experiences by incorporating digital technology into their products, services and promotions with the intent of moving from the supply chain to a more personal demand chain. This of course will take time to implement, but for some retail categories it will be pivotal as that is what the consumer is demanding.
The ability of retailers to adapt, be agile, and understand where and how they can be profitable is critical. As such, they are getting more creative in adjusting to the new normal.
A reset of consumer behavior to some degree is likely in 2021, and many people won’t have the means to spend at the level they did prior to the pandemic. For now, consumer confidence remains below pre-pandemic levels but is improving. With considerable pent-up consumer demand, finding a new normal and getting back to dining, shopping and socializing is being expressed from coast to coast. The one certainty is that while not every retailer is going to make it, for many this too shall pass.
