Is there hope for retailers with a heavy bricks and mortar presence? There may just be. In fact, it may just be that reports on the death of retail have been greatly exaggerated.
For one thing, quite a few retailers have announced good holiday results.
The tone at the recent ICR Conference for consumer and retail stocks in Orlando was considerably more optimistic than it was last year. At the conference, it was hard not to notice that some of the retailers who have been proactive about transforming themselves now have a bit of a spring in their step.
Kohl’s was able to update investors on the best holiday season since 2001. Destination XL, a retailer of big and tall men’s apparel, said it was more upbeat than it has been for several years. Sprouts Farmers Markets pre-announced strong holiday results. Build-a-Bear Workshop, after dramatic restructuring, has swung from loss to profit and emerged with a strong balance sheet with no debt.
What has happened? One thing is that the macro environment has improved, and consumers seem more willing to spend than they were even a year ago. Kohl’s CEO Kevin Mansell said that macro tailwinds have certainly helped. We’ve lapped the presidential election, the weather has been good and the consumer seems to have more money in his/her pocket.
But it also turns out that for those who were patient, retail wasn’t dead at all. It was just that there are new rules of engagement. For those who caught on to the new rules early and were willing to play, positive results are starting to show.
The new rules recognize that customers have smartphones, that Amazon is a frightful force, and that customers are more demanding than ever when it comes to good value and unique experiences. If retailers are to survive and thrive, they need to have meaningful brands and offer either uniquely good value or unique experiences and products that can’t be found elsewhere. It’s not like the old days. Customers demand to be fulfilled and entertained.
Retailers also need strong omni-channel capabilities. That doesn’t just mean selling in-store and online, or combining online ordering with in-store pick-up – capabilities that in themselves can require significant capital investments. Omnichannel also means partnering with third parties to get product to customers however they want it. Some retailers are finally biting the bullet and experimenting with selling on Amazon Prime. Guess, Inc. has a successful partnership with T-mall (owned by Alibaba) in China. Supermarkets like Sprouts are partnering with Instacart to expand their geographic reach.
It seems nearly every retailer has a strategy that involves:
- Improving omnichannel presence and making investments in technology and digital fluency
- Personalization, often through data analytics and loyalty programs
- Creating meaningful customer experiences and reinvigorating merchandising
- Optimizing and diversifying real estate portfolios
- Massively cutting costs, reducing inventory, and improving operational efficiencies
It’s all about execution of course. Some companies are way ahead, while others are lagging. But for those who are coming to the tail end of heavy capital investments in new capabilities, there could be brighter days ahead. The good news for them is that even though it isn’t easy to be a retailer, there is a way forward. Everyone now understands that the world is different. And as Kohl’s CEO Mansell says, retailers can’t be afraid to keep trying new things.
