The Pandemic will End; But Will the Retail Apocalypse?

Stephen DeAngelis

March 25, 2021

The light shining in many a retailer’s eye is a reflection of hope that the pandemic is beginning to wind down. Despite growing optimism about the end of the pandemic, retail correspondent Lauren Thomas (@laurenthomas) reports, “Coresight Research predicts as many as 10,000 stores could close in the U.S. this year, which would set a new record. As of Jan. 22, Coresight said, retailers in the U.S. have already announced 1,678 closures, which include ones by Bed Bath & Beyond, Macy’s and J.C. Penney. In 2020, Coresight tracked 8,741 closures, along with 3,304 openings.”[1] Coresight CEO and founder Deborah Weinswig (@debweinswig) told Thomas, “In 2021, the rollout of [Covid] vaccination programs should result in a partial recovery in store-based sales. However, these programs may take many months to reach a wide base of consumers.” The industry being hit the hardest, Weinswig said, is the apparel industry. Analysts from EY note, “This is a pivotal moment for the retail industry. While many retailers are under acute pressure just to survive, those that make it through the pandemic have an opportunity to create a much stronger and more profitable relationship with their customers.”[2]


No return to “business as usual”


Although everyone looks forward to normalcy, the new normal won’t be the same as the old normal. James Hyde (@jameshyde_uk), CEO of James and James Fulfillment, insists the pandemic has driven permanent shifts in consumer behavior.[3] He points to a transaction in the UK as proof of his assertion. “If anyone was in doubt about the future of retail,” he writes, “the purchase of Debenhams by Boohoo has surely sealed the deal. When an online-only retailer can snap up one of the UK’s high street stalwarts — and refuse to take either the physical stores or the warehouse operation — every bricks and mortar retailer needs to take note.” He adds, “The pandemic has tipped many digital laggards to the brink and beyond — retailers unable to respond to customers’ moves online face a challenging future.” Retailers aren’t blind to the digital-path-to-purchase trend. As Hyde notes, “There are few retailers that haven’t considered eCommerce in some form.”


Andrew Busby (@andrewbusby), Founder and CEO of Retail Reflections, agrees the retail world has changed forever. “The COVID-19 pandemic has dragged retail into a new, unknown world,” he writes. “This is a world where floor space by itself doesn’t guarantee success. In fact, it can even become a hindrance, weighing down a retail business and preventing it from being agile and flexible.”[4] He argues, “The line between online and offline sales is blurring. The customer journey that concludes with a sale in store could very easily have begun online and vice versa. The fact is that most retailers still view their stores as existing to sell ‘stuff’ and believe their very existence should fuel a sales-first model. We need a seismic shift in thinking to tap into a mindset of retail providing access to brands, not just sales.” In other words, the future demands that retailers understand changing consumer behavior and master omnichannel operations to ensure they meet consumer expectations.


Retail industry reporter Suzanne Kapner believes retailers face a conundrum — close stores to save money or keep them open to retain loyal customers. She writes, “The hope is that by cutting expenses associated with physical locations, the chains can become more profitable and start growing sales again as customer purchases shift to their remaining locations and websites. But that rarely happens, according to new research and interviews with industry executives. … Retailers that closed stores in recent years often continued to shrink, sometimes to the point of disappearing altogether, according to research from Citigroup Inc. and BMO Capital Markets. … The risk of shrinking-to-grow — which is how some retailers describe their store-closing strategies — is that chains aren’t always able to cut enough costs to offset the lost sales and shore up profit margins, analysts and executives said.”[5] Unfortunately, she notes, there seems to be no silver bullet solution to this conundrum.


Innovation in retail


Stephen Sadove, the former chief executive of Saks Inc., told Kapner, “Closing stores isn’t going to solve a retailer’s underlying problems. You have to look at why the stores aren’t performing. What is their competitive advantage and their reason for being?” Analysts from EY believe retailers need to integrate themselves into customers’ lives. They explain, “[Retailers] will need to move beyond their traditional definitions of customer centricity and work to become truly integrated into the life of the customer. A strategic shift from customer centricity to customer integration is a critical change of focus and a much harder ambition to realize.” That last statement is a bit of an understatement. Customer integration is extremely difficult in an age where customer loyalty is disappearing. To accomplish this feat, they believe retailers must deliver an ideal mix of what they call the “three I’s.” They explain, “There are only three routes to integration: invisibility, indispensability and intimacy. In other words, a retailer needs to offer the customer invisible, time-saving convenience; to solve the customer’s problems in ways that make it indispensable; or to create experiences for the customer that are so satisfying and rewarding that they choose to make the retailer an intimate part of their life.”


Catherine Seeds (@CatSeeds), President at Ketner Group Communications, believes retailers will never succeed with customer integration if they don’t equip themselves with the right technologies. She explains, “Retail winners have rebounded due in large part to the investments in tools, such as enhanced e-commerce capabilities, that have been designed to make the retail experience more convenient and engaging. Many were already pushing these technologies live prior to the pandemic, but state and city shutdowns have only accelerated the deployment of these solutions. Unfortunately, many retailers that have not kept pace with these innovations and new consumer expectations have floundered and failed. As we enter 2021, technology innovation for retailers will continue to thrive.”[6] Another innovation, Seeds notes, is the rise of “dark stores.” She explains, “As retailers often do, they made lemonade out of lemons, and thus the notion of the ‘dark store’ was born. Dark stores — businesses that are closed to the public but function as retailer distribution points or locations for shoppers to pick up orders — have become a vital part of many retailers’ survival.”


Journalist Lucy Handley (@lucyhandley) notes, “The pandemic has created rapid innovation in retail as shoppers switched to e-commerce and used curbside pickup, according to [the American Apparel and Footwear Association (AAFA)].”[7] Steve Lamar, president and CEO of the AAFA, told Squawk Box Asia, “We’ve implemented 10 years of innovation in the last 10 months … One of the things that we’ve seen coming out of this is … an incredible amount of innovation that’s really been put in place and again plans that people have been looking at over the next 10 years, all that’s implemented and we’ve really seen a great deal of innovation on every angle: retail, supply chain, sourcing, technology, you name it.”[8] According to Lamar, retailers are beginning to master omnichannel operations. “You buy online, you pick up in the store,” he states. “There’s curbside pickup, now you can return products that you buy online, you can return them into the stores. That seamless integration is really becoming the rule, it used to be the exception and we’re going to see a lot more of that.”


There are no simple solutions to the challenges facing the retail sector; however, understanding consumer behavior is the place to start. Cognitive solutions, like the Enterra Shopper Marketing and Consumer Insights Intelligence System™, can leverage all types of consumer data to provide high-dimensional consumer, retailer, and marketing insights. Once retailers understand changing consumer behavior, they are better able to adapt in order to provide the customer service and experience consumers require to become loyal, return patrons.


[1] Lauren Thomas, “10,000 stores are expected to close in 2021, as pandemic continues to pummel retailers,” CNBC, 28 January 2021.
[2] EY, “3 I’s that could reframe the future of retail,” Retail Dive, 18 January 2021.
[3] James Hyde, “Pandemic drives permanent shift in consumer behaviour,” IT in the Supply Chain, 4 February 2021.
[4] Andrew Busby, “The Evolution of Physical Retail,” Longitudes, 18 November 2020.
[5] Suzanne Kapner, “Retail Chains Shed Stores, but It Isn’t Good for Business,” The Wall Street Journal, 16 November 2020.
[6] Catherine Seeds, “The Innovation Hits Keep Coming In Retail,” Forbes 8 January 2021.
[7] Lucy Handley, “There has been ‘10 years of innovation in 10 months,’ retail body says,” CNBC, 7 January 2021.
[8] Ibid.