Skip to main content

Walter Loeb: What Went Wrong in Retail During the Tumultuous 2010s

The start of a new decade is a good time to take a step back and review the one that has come to a close.

Sourcing Journal reached out to former retail executive turned retail analyst Walter Loeb to get his thoughts on how retail fared in the 2010s. Over the course of navigating retail changes in his past positions, the retail consultant has seen a variety of economic cycles and maintains a bird-eye view of how the retail landscape has evolved.

Looking ahead, Loeb expects 2020 to be a “favorable year for U.S. retailers,” due to because presidential incumbent Donald Trump desire to get “re-elected.” That said, he believes retailers still need to do a far better job connecting with customers.

“If stores are to survive properly, they have to be innovative and have new, creative stuff,” he said.

The words “new” and “creative” weren’t exactly evident in the decade that’s about to end. Here’s Loeb’s list of five major retail mistakes of the past 10 years.

1. Sears Failure

“This is still ongoing,” Loeb said, noting the recent $200 million sale of the DieHard automotive battery brand, leaving just the Kenmore appliance brand as the sole crown jewel in Sears’ brand portfolio. The company sold its Craftsman tools brand in 2017 for $900 million.

“Sears stood for something in home furnishings. Look at the growth at Home Depot and Lowe’s–both have captured a huge share of the market that Sears could have owned,” Loeb said.

Once Edward Lampert, who controls the ownership of Sears, began selling its three most desirable brands in other retail channels, Sears lost its exclusivity and no longer gave customers a reason to shop its stores.

“Lampert operated the store like a portfolio manager….Instead of developing its print catalog electronically where one can shop special deals early, he missed the boat on how valuable the internet was going to be,” Loeb said. “He had a lack of vision, and didn’t understand the customers. That, in turn, hurt apparel and footwear sales. Sears had quality shoes and quality fashion.”

Related Stories

Sears’  fashion brands ended up getting “shoved aside” as its store environment became increasingly more promotional, Loeb said.

2. Abandonment of J.C. Penney

Known for its softlines, the mass merchandiser was the go-to destination for family fashion and soft home goods like bedding, curtains and table linens. Several management changes have burdened the retailer as each subsequent leadership team has tried to undo its predecessors’ mistakes.

“When former CEO Myron ‘Mike’ Ullman III stepped aside, Marvin Ellison came in even though he knew nothing about fashion, Loeb said. “Then he walks out to become CEO of Lowe’s. Now Jill Soltau is trying her damndest to get [the retailer] back on track.”

The former retail analyst believes that soft goods vendors and lenders will extend credit over the long haul to J.C. Penney to give it a fair chance at survival–but only if the retailer can show some positive trends in its sales momentum.

“J.C. Penney will have to start showing some positive sales numbers and goals in the fourth quarter to convince people that the turnaround efforts aren’t in vain. While I admire Soltau and her staff for being very hardworking and dynamic, I hope they will have the opportunity to show that J.C. Penney has a customer base that it can grow again,” Loeb said.

3. Lack of focus at Macy’s

“I don’t know what it stands for anymore,” Loeb said. “Macy’s used to be where you got introduced to new merchandise and, from time-to-time, there was a big sale.

“Now all of it is on sale,” he added.

He’s not so thrilled about the retailer holding sale after sale after sale. “It looks as if [when] the sales aren’t helping them make their numbers, the only answer is ‘Let’s have another sale,'” the former analyst said.

To be sure, Macy’s, like many other national retailers, has had to deal with storms and other bad weather in recent weeks, on top of a shortened holiday selling period.

But there could be other issues that might need some improving at Macy’s, such as experiential retail. “Story is working as intended, and while the new stuff with Backstage is resonating with millennials, it’s also cheapening the store,” Loeb said, noting that new Manhattan competitor Nordstrom has done a far better job at creating experiential retailing with its multiple dining options at its three-month-old women’s flagship.

4. Walmart’s expensive misstep

Walmart took a 77 percent majority stake in Indian e-commerce platform Flipkart in 2018 for $16 billion in a deal considered by many to be a disappointment.

Just six months after Walmart made the risky bet, the regulatory environment shifted when the Indian government amended its foreign direct investment policy where e-commerce was concerned. The restrictive changes barred exclusive deals for online marketplaces, and also prohibited them from having a single vendor provide more than 25 percent of total inventory. The latter change resulted in thousands of items that had to be taken off the selling platform.

There might be a silver lining, as Flipkart owns smartphone payments wallet app, PhonePe. The payments firm is said to be fast-growing, although whether that growth–through user downloads and the number of merchants on the service platform–will continue at the same rate is currently unclear.

“I think Flipkart is still a negative for Walmart. However, I also think 2020 will be the year of Walmart. They have understood that they needed to focus on productivity on the internet. They are doing better and I believe that’s where growth will come from in 2020,” Loeb said.

5. Secondhand clothes

The resale market is a “thing” now, and some expect its popularity could overtake fast fashion in the next decade. Macy’s and J.C. Penney now have partnerships with ThredUp showcasing secondhand merchandise in stores. The RealReal’s $300 million IPO raises last year also signals the market’s growing interest and investment in fashion resale.

But not everyone thinks resale will be as big as some predict. Sucharita Kodali, analyst and e-commerce expert at market research firm Forrester believes that there could be limitations to the resale sector’s ability to scale up, not to mention find new customers to grow market share.

Loeb also believes fashion’s reliance on secondhand apparel to grow market share is a bad idea.

“I am very doubtful about this idea over the long term…. If you want to be a fashion store, why would [a traditional retailer] go to second-hand clothes? Even if millennials love it, for how long will they love it?” Loeb said.