Shoptalk has introduced a four-phased framework designed to provide a comprehensive view of how retail is set to evolve over the next year to 36 months and examine shifts in consumer behavior, operational changes and category implications.
The event host officially revealed the framework in the first session of its Shoptalk Virtual Conference series held Thursday.
The framework includes a timeline of 30+ internal and external areas of retail that are set to change as a result of the coronavirus outbreak, including store operations and experience, retail real estate, e-commerce operations and supply chain. Shoptalk will regularly update the framework based on retail industry figures, new economic data and news related to the rollout of COVID-19 virus testing, treatments and a possible vaccine.
Phase One of the framework, “COVID-19 curveball/chaos,” already took place in March and April, when the epidemic mushroomed into a global pandemic that shut down all nonessential businesses in the much of the U.S. Government-led responses dictated the majority of retail industry actions (store closures, furloughs, social distancing and other safety measures), while brands stepped up to supply PPE to frontline workers and take a stance on social issues that are important to consumers.
Retail is presently ensconced in Phase Two, called the “COVID-19 crossroads,” as increasing numbers of states relax restrictions on nonessential businesses, and stores began to reopen at a measured rate where legally permitted and with safety precautions in place. Still, many questions remain heading into June, including whether newly opened stores and states will once again be forced to close with coronavirus cases still rising.
In Phase Two, apparel merchants have started to generate more online sales as the promise of retail reopenings makes life beyond the confines of home seem possible. Comfort will remain a key attribute in apparel purchases as some stores begin to reopen.
What’s more, fashion retailers have been forced to liquidate stranded inventory, and bankruptcies at J.Crew, John Varvatos, J. Hilburn and Aldo have already hit the sector hard. Department stores share these same issues, with Neiman Marcus and Stage Stores filing for Chapter 11, with J.C. Penney expected to file next. The remaining department stores must now evaluate which stores they may never reopen.
“In this recovery-led phase, the conversation moves to a discussion of this muted reopening of retail,” Zia Daniell Wigder, chief global content officer at Shoptalk, said during the session. “This week a large number of stores started to reopen, with notable players like Apple joining a list of those reopening some U.S. stores. Businesses are deeply uncomfortable. There are skeleton crews operating businesses and companies are figuring out how to navigate the crisis.”
Phase Three focuses on the reemergence of the retail industry and is expected to take place from the third quarter this year into the first quarter of 2021. It’s a period in which retailers are seen engaging in a comprehensive reengineering process, deploying systems and technologies to improve agility and resiliency.
Supply chain reengineering will become a critical business issue, with companies shifting away from the just-in-time supply chain model, Shoptalk projects. Some outsourced manufacturing will come back to the U.S. for strategic reasons, reversing the dominant trend of increased globalization and international trade since the 1990s.
Select bankrupt businesses will reemerge stronger after restructuring, but Shoptalk predicts that retail will lose between 20 and 30 longstanding brands and retailers forever. The retail real estate market is expected to evolve to feature smaller footprints including expanded pickup points, pre-built-out stores and shorter-term leases.
Apparel and fashion retailers will rethink their physical experiences as consumers are wary of product trial given hygiene concerns, and will rethink their traditional calendar for at least the next year. In the off-price sector, retailers will benefit from deals on excess inventory from apparel, making them even more appealing to consumers. Department stores are projected to undergo a massive wave of consolidation, and will start to shift to a showroom model, with purchases delivered later after customers browse in store.
The final phase starts in mid-2021, when the COVID-19 crisis is anticipated to subside and the economy returns to growth as employment rates rise and consumer spending picks up. Although it doesn’t stay at COVID-19 levels forever, e-commerce penetration is accelerated by three to five years as the pandemic permanently increases digital acceptance.
Phase Four, also known as “The Upturn,” will see the biggest change in retail real estate, with malls closing at an accelerated pace and getting repurposed for new uses. Retailers no longer will use cookie-cutter designs for their stores, but rather will customize each location for its specific market. Shoptalk also projects that shopping center operators that survive COVID-19 will offer far more digital in-store options to their tenants, providing less tech-savvy retailers with the ability to provide new services.
“Stores are no longer going to be the centerpiece of retail in this era,” said Krystina Gustafson, vice president of content at Shoptalk. “They truly are going to be one piece of the overall omnichannel experience. Nordstrom is a great example of this and one that we probably will see more of going forward. Nordstrom has pioneered a little bit of the hub-and-spoke model, where they have the large retail offering which is their department store, but then they have these ‘fill-in’ markets where you can pick up your orders, return your orders and have other services like tailoring done.”
Supply chain capabilities are anticipated to become even more of a strategic advantage, as shortened supply chains will mean faster access to cutting-edge products and design, allowing retailers to order products to more closely match demand. Shoptalk also expects more retailers will re-engineer demand forecasting solutions to make distribution centers more efficient and reduce out-of-stocks at physical stores.
Apparel retail finally enjoys the major rebound it hopes for in this phase as more shoppers feel assured of safety―fashion recommerce in particular experiences a bounce back.
Additionally, surviving department stores will employ a “shrink to grow” mentality, focusing on a smaller store fleet with fewer products. Shoptalk projects that new retail experiences will emerge to replace traditional department store concepts.
Shoptalk creates Slack workspace for retail community conversation
Shoptalk also created a new Slack workspace designed to facilitate collaboration and industry-wide discussion of how to navigate the constantly changing landscape of COVID-19. The workspace will enable retail community members to provide feedback, input and updates to Shoptalk’s Retail Framework, ensuring it remains timely and relevant.
Shoptalk will continue to host more virtual events discussing how the framework has been progressing in the lead up to the Shoptalk conference, presently scheduled for Sept. 14-17, 2020, at Mandalay Bay in Las Vegas.