What Will Retail Look Like When This Is Behind Us?
-Gerry Marrone, Chief Revenue Officer
I recently read an article where the writer used this phrase – “This Too Shall Pass”. This saying has a very long history, and was even used by President Abraham Lincoln during one of the challenges he faced. I don’t think there is a better way to capture where we are today in our world, and specifically in retail – this too shall pass – and it will.
But, where will retail be when it does?
Of course, not all retail is being harmed by the pandemic. Essential retailers are seeing large increases in sales. This week alone, Kroger stated that they are seeing a 30% increase in same store sales YOY.
I’d like to pose four questions for all of us to consider thinking ahead of the recovery phase no matter when it starts:
Will businesses return?
Of course, we hope so. However, there are strong opinions out there that we may lose a fair share of businesses that just couldn’t survive through the downtime. Even with government assistance, some businesses will not be able to reopen. This isn’t just small businesses either. Many businesses that were teetering on the brink prior to this may not be able to return – even a couple of the biggest ones. Could this be the final blow to many of the apparel retailers? How about the malls? Many of these retailers will need a whole lot more than just a solid retail merchandising plan to survive. The ultimate winner may be online retail, and those that have adapted their business models will stay in the game.
Will shoppers return?
Yes…hopefully. There are a lot of opinions out there about this. Some say the floodgates will open, others say people will be hesitant to return too quickly for fear of re-infection. I don’t think there is any doubt people will go back – and in my opinion, they will come back with a vengeance just to get out of the house. What will they buy and how the pack-rat mentality of lockdown has affected them is open to debate. My guess is, staples like paper products will be plentiful in supply again, and people will be working off the truckloads they hoarded. Other categories could be booming, and if you heard what Walmart said about sales of tops versus bottoms, people may start buying pants again! One thing that is for sure, strong merchandising at retail will be back in vogue!
How will this period have affected shopper loyalty?
This is a huge question. We will all be dealing with the issue of which retailers treated you, and their employees, in a way that made you feel good about them, and which ones sent you the other way. I believe the other significant issue is shopper thinking and behavior may change with respect to online shopping. That would be a significant swing if it happens.
Amazon and others have not proven to be all they could be during this time. Deliveries were not made in a timely manner. Inventories ran out quickly. The overpromise of online was apparent and obvious. For those that truly counted on these services, I believe most were disappointed. This could be a moment of change for physical retail to re-stake their claim and demonstrate why they have always been important. Moreover, they show why the human part of retail is so critical; it has feeling, empathy, and awareness. All the things online experience lacks.
What happens to all the new hires?
This is perhaps the biggest question from my perspective. The numbers here can be staggering. In one place I read there will be 700,000 retail workers out of a job. In another article, I read that there will be many retailers hiring as high as 450,000 employees. To add to that, Amazon and Instacart want to add 400,000 more. So, if my math is correct here we should see an additional 150,000 jobs or so. When you add in the original 700,000 that were furloughed does that mean there will be one million jobs to fill in retail? I find this very, very hard to believe. I think you need to take a hard look at these numbers and the companies adding and subtracting them to wrap your arms around what they really mean.
Let’s look at the losses.
The biggest hit here is department stores, with fifty percent of the losses. Nordstrom, JCP, Kohls and Macy’s have furloughed 355,000 employees. What is the over/under on all of this staff returning? Is there a real chance that one of these four retailers themselves won’t make it back? My money is on a massive shift in the business at JCP to the point where they may not even reopen. I don’t think that would shock a whole lot of people in the retail industry. There has been a revolving door of leadership there, and recently their Chief Customer Officer resigned after only nine months on the job. Macy’s is no different from a personnel standpoint, just this week the CFO resigned as well.
Now, the plus side. If there really is a plus side.
Where did these mystical “new jobs” come from in retail? It seems a bit like a knee-jerk reaction to the COVID-19 situation especially with retailers that are considered essential. With buying habits all turned upside down, pantry loading is happening at epic proportions while shoppers continue to hoard To put it simply, it is unrealistic to think this behavior will be long-lasting when we are through this pandemic.
So where does that leave all these new, primarily part-time, workers with no benefits? Well, many of these retailers are paying bonuses due to the COVID-19 circumstances. However, these bonuses are temporary. This leads me to ask: How will these workers feel when they have their pay reduced when this is over? My guess is not too good.
Looking at Amazon is another story altogether. They are looking to hire 100,000, primarily in their warehouses where they are dealing with poor labor conditions and walkouts. These aren’t high salary corporate jobs. Dig a little deeper into Instacart and the problem is a bit different. They are stating they want to “hire” 300,000 new shoppers. Really? Are these salaried jobs in stores? Nope. These are independent contractor positions. Kind of like Uber saying they want to hire 300,000 more drivers. Again, not really full time, permanent jobs, are they?
Perhaps the worst part about the “positive” side of this hiring is people are falling for it. States are publicizing these jobs for free on state-run websites, like here in NJ. Some retailers are using this pandemic for the positive PR spin while raking in record sales. Will they be reducing these positions once this emergency is behind us? Let’s hope not. This situation is not all that different from the airlines who ran at record profits for the last few years, and within 60 days of the pandemic had to furlough everyone and ask the government for a bailout. This sounds eerily similar to the financial crisis of 2008 when the banks that were the cause of the problem benefited the most from the bailout.
When will we learn?