Are Peloton’s recent struggles due to managerial hubris or indicative of deeper issues with its business model? Brand strategist John Ensminger unpacks the Peloton story.
49% of fashion executives signal that supply chain disruptions will be the top issue for 2022. This article explores why and provides tips how to mitigate these challenges.
The fashion supply chain has a global crisis, the worst in decades. Deliveries experience delays every day, and costs are rising exponentially. (more…)
Recruiting is picking up again – a clear indication that, at least economically, we’re beginning to see the end of the pandemic. Across the board, companies are looking for skilled workers.
Job portal Indeed reports a 22% increase in job advertisements for 2021 so far. And the fashion industry too is desperately seeking to hire. (more…)
Retail executives often struggle to objectively evaluate the store performance of their portfolio due to changing market dynamics and consumer behaviours pre- and post-Covid. The good old Footfall Utilization Index (FUI) might be of help.
A long time ago in a galaxy far, far away… (retail) humans and many species of (online) aliens co-exist with robots who assist their routines. Travelling between planets takes place offline as well as online. The same goes for shopping, where retail spacecrafts range from small starfighters called mom & pop shops to battle stations such as the moon-sized Death Star (called Zalando). (more…)
Three innovative distribution models currently help retailers to survive the Covid-19 lockdowns and new players to disrupt traditional markets. (more…)
Our research and industry dialogue ‘Future in Brand Distribution’ has been off to an enlightening start. Four weeks in, executive talks and our online survey have already returned much valuable inspiration on the future of the lifestyle industry.
The sentiment we encountered in the industry dialogues was generally positive and energising, even though many still find themselves in lockdowns. It seems as though the Covid-19 pandemic not only gave a boost to digital transformation but also liberated some of the brand industry’s best creative thinking.
Shopping physical products in dedicated streets was often convenient and sometimes fun. With the advent of digital shopping, we need to rethink the purpose of these streets and how we use them.
Retailers and landlords are scrambling to figure out how to survive as consumers have accelerated the shift to e-commerce. Will they be able to reinvent themselves or become one of the many businesses weakened by the Covid-19 pandemic?
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.
- Over-supply of retail: The US has the highest square footage of retail space per capita worldwide, 40% higher than Canada and two times the space of Australia. The post-WWII flight to the suburbs across the United States fuelled a massive expansion of retail stores, especially at malls where consumers could easily shop multiple stores in one easy location. The mall has been an icon of American culture, where teens would go to hang out with friends, young families would go for the indoor playground and retirees would go to socialize and exercise. The decline of the mall is tearing apart the fabric of many communities across the US.
- Decline in apparel spending: US consumers have been spending less on clothing, as a percentage of their disposable income. For the past 40 years society has become less formal, and younger generations have placed greater emphasis on experiences rather than material goods. The constant pressure to eke out positive comps has led many brands to focus on discounting to drive growth, rather than on differentiation. This shift in mindset opened the door for fast fashion brands like Zara or H&M to enter the market and leverage their supply chain expertise to shift the value equation.
- E-commerce Acceleration: Much has been written about how Amazon has reshaped many different retail industries. E-commerce now represents 37% of all apparel and accessory revenue and, unsurprisingly, was the only bright spot for many retailers who pivoted their business model last spring as stores shut down.
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.”
Landlords Buying Bankrupt Brands
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.
Brick & Mortar as an E-Commerce Hub
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.”
Repurpose Dead Malls to Address Homelessness
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.  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.
Is there a need for a thorough recap of 2020? Let’s keep it short: Economically, it’s been a year for the dumpster; a year we will never forget.
But maybe that is the good thing about the year?
A healthy store P & L is still at the heart of happy retailing. As Covid-19 made it somewhat easy to lower rent costs, many took the same approach with store head count. But this will certainly cost future retail productivity and flexibility.
So how do you adjust store operations in Post Covid Retail without losing more sales and compromising customer service?
With trade and travel restricted, and industries’ CO2 footprint under the microscope, what does “deglobalisation” mean for Global Sourcing Fashion?
If you believe in the mainstream news, we are reaching the end of globalisation and entering deglobalisation.
22,144 readers, 3 new authors, updates from China, India and Europe, and 14 greatly diverse posts. It is great to be back with our best quarter ever. Thank you to all for contributing, reading and promoting. Post Covid, the best read in brand and retail.
We are living in-between most interesting times
As we wrap up our post-lockdown publishing, we realise the industry mood is somewhat in-between. In-between first and second lockdown. In-between a return to office or of stay at home office for good. In-between going on international travel or staying put. Slowly we start to see, in-between could be the new normal for some time to come.
More and more industries are moving from buying to leasing subscription models. We discuss the pros and cons of leasing versus owning your wardrobe
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.
Much has been said and written about the disaster the pandemic has brought to the global retail landscape. This post highlights challenges and opportunities for retail and social life in our post Covid-19 city centres.
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.
Post Covid Brand Strategy: Discover the latest insights and emerging best practices across the brand and retail industry, from e-commerce and digitalisation to low touch strategic sourcing and creative social distancing implementations.
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.
Diversity and inclusion are at risk of slipping off the radar at a time of crisis, but are essential for a company’s recovery, resilience, and innovation post Covid-19.
The Covid-19 pandemic hit companies around the world with severe disruption and daunting impacts like the loss of footfall and revenue, liquidity challenges or supply chains in disarray.
When airlines were grounded, strategic sourcing had to find new ways. We share five emerging best practices
Over the past decade, all sourcing discussions at the Textile Buying HQ, were about:
- Finding lower prices
- How to be more sustainable
- Exploring alternative production countries
After months of watching the Covid-19 pandemic shake the global economy and adapting our personal lifestyle and company practices to a low touch economy, it’s time to look ahead for new strategic sourcing practices: How will we organise sourcing and how will the pandemic impact the countries we source from? (more…)