As we emerge from the Covid-19 pandemic, innovation, technology and brand experience are leading an exciting rebirth in the delivery of offline retail, resulting in more opportunities with community-led and experience-based retail. Here we explore some of the ways store design helps brands to reshape their portfolio
Retailers across the United States are facing mass extinction as a fallout from the Covid-19 pandemic that’s raging across the country. Between 20,000 – 25,000 stores are projected to have closed in 2020, including the who’s who of American retailers (Macy’s, Brooks Brothers, etc.) shuttering their doors as a result of, or to stave off, bankruptcy. Over half of these closures will hit mall-based retailers, putting even greater pressure on many malls across the US. While the pandemic did not cause the decline of many US retailers, it clearly has accelerated the largest restructuring of the US retail landscape since the end of World War II.
Retailers, and especially mall-based landlords, have seen the warning signs that the consumer shopping behaviour was changing for the past 5-10 years. But a myriad of factors have hampered their ability to reinvent themselves.
As dire as the US retail marketplace may seem, there are a many brands and retail landlords who are experimenting with different business models to try to meet the changing needs of the US consumer. While it’s unknown if and when consumer shopping behaviour will return to normal, these business models are at least undertaking different strategies rather than embodying the definition of insanity; “doing the same thing over and over again and expecting a different result.”
Over 1,000 malls exist throughout the US, spread across major metropolitan areas to smaller rural towns. By some estimates, potentially a third of America’s malls will close their doors, fundamentally impacting numerous communities around the country.
To combat the decline, two leading mall owners, Simon Property Group and Brookfield Properties, have acquired a number of apparel retailers in partnership with Authentic Brands Group. The strategy behind buying fabled yet beleaguered brands like JC Penny, Brooks Brothers and Forever 21 is twofold. First, it enables them to cherry pick the best doors of these brands at a significantly reduced price, most of which will be located in one of their malls. For a mall to remain relevant, it’s needs enough appealing stores to attract consumers and drive foot traffic. If more of their tenants have to close, the mall begins to look and feel like a ghost town, making them even less welcoming for prospective shoppers. This strategy also helps landlords protect their downside risk by keeping occupancy levels (artificially?) high to not trigger an exit clause for existing tenants.
While clearly something was already broken for these brands to fall into Chapter 11, by reducing their debt, lowering fixed costs like rent and skimming off the best locations through the reorganisation process, these brands might just have enough runway to survive. Not every acquisition will be successful. But for a landlord, having a portfolio of brands that they are invested in to succeed will better align their incentives and possibly keep some of their malls from meeting their demise.
The onset of Covid-19 forced many retailers to accelerate plans towards a greater omni-channel shopping environment: curbside pick-up, contactless transactions, etc. This has helped to maintain some of their business during the pandemic. Leading retailers have further evolved their brick & mortar doors to serve their own e-commerce business.
Today, over 60% of households in the United States are Amazon Prime members, which gives them access to free shipping and in many locations, 2-day or faster shipping. What would have been considered outrageous just a few years ago has now become the norm for most US consumers. To fight back the Amazon onslaught, larger brick & mortar retailers, like Target, are making significant investments to allow customers to not only pick up same day orders in store but also to use their physical footprint as mini distribution centres. “Having all these nodes and physical retail stores has been their magic pill on how to compete with others like Amazon and pure e-commerce players,” says, Greg Conner, VP of Global Sales at Bastian Solutions. Using stores as their e-commerce hub, Target has been able to fulfil 80% of its total e-commerce volume while also saving money, since stores are 40% cheaper than shipping for a large warehouse. “We already own the building, the lights are on and we have a replenishment process … it’s allowing us to deliver faster for our guests than we could have before,” according to Target spokesperson Jill Lewis.”
Homelessness has become a major issue facing most large cities across the United States. Over 500,000 people were homeless in 2018, a number that will have only climbed as the Covid-19 pandemic accelerated joblessness and food insecurity. [1] A lack of affordable housing, particularly in major metropolitan areas on the East and West Coast, has forced many people to ‘camp’ on sidewalks or in tent cities.
A mall developer and non-profit in Washington, DC are partnering to repurpose the Alexandria Mall. “It’s a new way of thinking that is bringing together three economic phenomena: the collapse of the brick-and-mortar retail industry, the disappearance of affordable housing in America’s boom towns, and the struggle to reduce homelessness.” It’s too early to tell how successful this venture will be, but it’s a unique example of trying to use an underutilised asset for greater good in the community.
Each of these three new business models will likely not be the saviour for the post-covid retail marketplace in the United States. Yet, they offer a glimmer of hope that new and innovative ideas can help to repurpose many brick & mortar locations and ultimately spur the next generation of economic growth for the country.
About the Author:
With 25+ years in the sports and fashion industry across the United States, Europe and Asia, John Ensminger, has worked with leading brands including Nike, The North Face, K2 Sports and Carhartt to develop breakthrough, actionable strategies that strengthen their brand position and drive growth and profitability. Read more of his work here.
“2025 retail rents will be like 2020 flight routes: back to the 1980s.” “The future is social commerce, digital market places are an interim hype, for brand industry’s e-com latecomers.” “In five years, an office workspace and business travel will be recruiting incentives.” “Grandpa tells me, his company used to pay him for sourcing travel to adventurous rural locations.”
In a few weeks from now (around 20 January 2021), the world will hit the first anniversary of the emergence of Covid-19 outside China.
In this article we compare the drivers for consumers’ CO2 emissions when buying online and offline. We also expand the environmental retail carbon footprint calculation to omnichannel.
So how do you adjust store operations in Post Covid Retail without losing more sales and compromising customer service?
If you believe in the mainstream news, we are reaching the end of globalisation and entering deglobalisation.
Our brand experts highlight the strategies some of the brands are pursuing: bringing the store experience into consumers’ homes and utilizing stores as fulfillment and delivery hubs improving stock utilization are some examples.
It’s failed to stop many closures even before the pandemic, and Covid has only accelerated this trend.
We look at the concepts and techniques premium and luxury brands are using today, to stay ahead of the curve tomorrow.
What if someone told you that clothing rental subscriptions are the next big thing and will take a 20% market share in 15 years? Yes, at first thought we would have argued that clothing was already rented out in the years prior to the internet.
By August 5th 2020, 50% more stores (3,140) in the UK were affected by retail bankruptcies than in the entire year 2019 (2,051 stores). The Guardian reports footfall drops of 40% in August 2020 vs. last year. And there are still 5 months to go.
This quarter saw us return to our regular publishing schedule after a Covid-19 induced break. Our contributors have since focused on sharing their insights on emerging best practices for the ‘new normal’ in a post Covid-19 brand industry.
In the early years of this century, brand retail operation felt like paradise. Store networks were growing globally and being an expanding head of retail was a fun job. Managing high street stores, factory outlets, concession stores and flagships, having CEOs promote direct to consumer growth, and even the CFO was happy. All that was needed for retail operation was easily organised and within the store ‘boxes’. But soon brand stores encountered mighty antagonists.
It attracts a young audience, and most successful hosts are brand and retail CEOs.
Too often, the argument that companies must do what’s right for the environment has been juxtaposed with the claim that it’s bad for business. As consumers become less willing to accept that tradeoff from brands (see the number of Super Bowl ads for electric vehicles), disruptive brands are driving meaningful change that helps to address a major environmental issue, broaden their brand positioning and, in turn, attract new consumers and business.
In the United States, 26 billion pounds (12B Kg) of clothing are thrown away annually, taking up 5% of the total landfill space. US consumers own an average of 93 pieces of clothing, 70% of which are never or rarely worn. Despite the fact that 90% of textiles could be recycled or reused, only 15% of clothing is actually donated.
Fueled by the rise of fast fashion, mass merchants and e-commerce, the consumer is trained to expect the latest trends at a very low price, to be thrown away in 1 or 2 seasons. The 2019 State of Fashion report by McKinsey states, “in the UK, a survey found that one in seven consider it a fashion faux-pas to be photographed in the same outfit twice. Simply put, young people crave newness.” Whereas Americans used to buy fewer, more expensive pieces of clothing, today they are buying many more units at lower prices. The reality is that brands need to sell more units to drive growth, which fuels a large and growing used clothing problem.
Traditionally, the used clothing market has largely been an afterthought, relegated to vintage clothing shops or community-oriented outlets like Goodwill or St. Vincent de Paul. However, a growing number of US consumers, especially Millennials, are now buying used clothing for both economic and environmental reasons. The clothing resale and rental market is one of the fastest growing segments and is expected to reach over 13% (US$ 50 billion) of the total US apparel market by 2027, larger than department stores and fast fashion.
A few major apparel brands, such as Patagonia and Eileen Fisher, are making circularity a key business strategy, not only for the benefit of the environment but also for their business. Patagonia’s Worn Wear initiative recycles, resells and repairs used clothing, extending its life and keeping it out of landfills. The Worn Wear repair truck travels across the US, Europe and Japan, fixing tears and holes in used gear while also strengthening the community of loyal, like-minded consumers.
Patagonia famously stated in their Black Friday ad in 2011, “Don’t Buy This Jacket.” They have been on the forefront of urging consumers to “…keep our gear in use longer and cut down on consumption.” A privately held company, with an extremely strong environmental and socially conscious brand position, Patagonia has been able to take non-traditional marketing approaches with little negative impact to their business. At an estimated US$ 1 billion in revenue, one might argue that consumers aren’t heeding their advice to cut down on buying Patagonia gear.
The typical choice for consumers for used clothing have been small vintage stores or second hand warehouse outlets, like a Goodwill store, that are stuffed with racks and racks of merchandising. Neither offer a scalable, nor that friendly of a, shopping experience.
A few brands are starting to actively open their own resale stores to sell used clothing such as Eileen Fisher’s Renew, which has a brick & mortar and online presence. And Nordstrom, a premium department store, just announced last week that they will be opening their own resale store called See You Tomorrow, a sign that ‘traditional’ retailers are seeing the potential of the resale segment.
Another sign that resale is moving into the mainstream, E-Commerce retailer ThredUp, which calls itself the “largest fashion resale marketplace,” has raised over US$ 300 million in funding. The company recently announced partnerships with Macy’s and JC Penny to sell secondhand clothing in a select number of doors.
Closed loop apparel recycling, i.e. ensuring that used clothing is reborn as a new piece of clothing, is an extremely complex and costly process for manufacturers. There are some interesting smaller brands such as Reformation, who create about 15% of their clothes out of dead stock, the excess material from the mainstream manufacturing process. Or Cardato in Italy, who recycle wool sweaters into new yarn.
Yet, 60% of all clothing contains polyester, such as the spandex that give your jeans some stretch. Despite the efforts of many firms, clothes with even a modest amount of polyester cannot be recycled into yarn, limiting the potential impact of truly creating a closed loop apparel industry.
While the apparel industry is working to identify new solutions and more brands are taking an active role in creating a closed loop system, consumers can have the most meaningful impact today: buy less stuff from brands that support circularity, choose natural fibers wherever possible, and donate or resell the clothes you’re done with. This will not only be good for the environment but also for your wallet.
About the Author:
With 25+ years in the sports and fashion industry across the United States, Europe and Asia, John Ensminger, has worked with leading brands including Nike, The North Face, K2 Sports and Carhartt to develop breakthrough, actionable strategies that strengthen their brand position and drive growth and profitability. Read his posts here or connect with him on LinkedIn.
