Years before the novel coronavirus pandemic shut down economies, analysts were writing about the retail apocalypse and what it would take for brick-and-mortar retailers to survive. Analysts generally cite three contributing factors for the retail apocalypse: overbuilding, too much debt, and e-commerce (aka the Amazon Effect). Suzanne Kapner and Sarah Nassauer (@SarahNassauer) insist the pandemic is finishing what Amazon started. Sarah Wyeth, lead analyst for retail and restaurants at S&P Global Ratings, told the Kapner and Nassauer, “If this isn’t the retail apocalypse I don’t know what would be.” Derek Thompson (@DKThomp) writes about empty retail streets and malls and asks, “Who will emerge intact from the pandemic purgatory, and who will not?” The simple answer is: No retail will emerge intact. Every retailer has suffered a hit during the pandemic. The real question is: Which retailers will survive at all? Thompson predicts, “We are entering a new evolutionary stage of retail, in which big companies will get bigger, many mom-and-pop dreams will burst, chains will proliferate and flatten the idiosyncrasies of many neighborhoods, more economic activity will flow into e-commerce, and restaurants will undergo a transformation unlike anything the industry has experienced since Prohibition.”
How bad will the apocalypse get?
Ben Unglesbee (@Ben_Unglesbee) observes, “Well before the pandemic, many predicted that mass store closures would continue as mall traffic declined, e-commerce took hold, off-price gained market share, consumer spending habits changed and other factors forced consolidation.” The staff at Material Handling & Logistics adds, “While it’s not a surprise that many retail stores will be closing as a result of the coronavirus crisis, what is surprising is the sheer number. A new report from Coresight Research predicts that retail closures will rise exponentially in the U.S .to reach a total of between 20,000 and 25,000 (gross — i.e., not accounting for openings), with the 22,500 midpoint of this range being significantly higher than our previous estimate of up to 15,000 closures (gross). That’s quite an increase from 2019, which was a record year with 9,821 closures.” Unglesbee notes, “In the report, Coresight CEO and founder Deborah Weinswig pointed out how months of store closures, as the country worked to slow the spread of COVID-19, weakened balance sheets while also potentially leading to some permanent channel shifts to e-commerce.”
How bad are things? Thompson reports, “The U.S. Commerce Department reported that retail spending in March collapsed by the largest number on record. Travel spending — including on airlines, hotels, and cruises — is down more than 100 percent, if you include refunds. Department stores and clothing stores are facing an extinction-level event after having experienced years of decline.” Malls and department stores have been suffering body blows for years. Sapna Maheshwari (@sapna) and Vanessa Friedman (@VVFriedman) report the pandemic may land the knockout punch. They write, “Nothing compares to the shock the weakened industry has taken from the coronavirus pandemic. … At a time when retailers should be putting in orders for the all-important holiday shopping season, stores are furloughing tens of thousands of corporate and store employees, hoarding cash and desperately planning how to survive this crisis.” Thompson goes so far as to predict, “The year 2020 may bring the death of the department store, marking the end of that 200-year-old retail innovation after decades of decline.”
Where does retail go from here?
It will come as no surprise that analysts are predicting the percentage of retail involving the digital path to purchase will increase in the years ahead. E-commerce has been a growing trend for years; however, the pandemic hastened adoption of the digital path to purchase for many items. Daphne Howland (@daphnehowland) reports, “Although e-commerce’s ability to fill in for closed stores has been surprisingly flawed, those sales rose 28%, and captured 19% of overall retail sales, up from 12% on average the past two years, according to Wells Fargo Economics Group, led by Senior Economist Tim Quinlan. Credit for that goes to retailers with already nimble e-commerce operations and the expansion of omnichannel services like curbside pickup.” Although that sounds like a death knell for brick-and-mortar retail, Howard doesn’t think so. She writes, “As beleaguered as brick and mortar is, retail can’t thrive without it, in part because e-commerce remains a lackluster and inefficient way to shop for nonessential goods, and a poor conductor of impulse-buying, according to Credit Suisse analyst Michael Binetti.” She believes companies that successfully find a balance between online and in-store retail will be the survivors. “More broadly,” she writes, “physical stores now need e-commerce as much as e-commerce needs physical space, staffed by humans, according to Michael Stefanakos, chief revenue officer at retail solutions company FieldStack.”
Jaclyn Ix (@jaclyncix) reports the research firm Digital Commerce 360 has identified five issue areas affecting the future of retail. Those areas are:
1. Flagging consumer confidence: “97% of retailers report declining consumer confidence as many buyers find themselves in a waiting game to make purchases, and 54% see COVID-19 causing a significant decline in consumer confidence.”
2. Sinking revenues: “Demand and declining revenues have the most impact, says Digital Commerce 360, due to store and production closures or reduced traffic. Half of retailers expect revenue to decline significantly, and 27% predict some decline.”
3. Fight for survival: “Retailers worry about the future of their business where liquidity and cash flow were challenged, and the reality that outside investment had ground to a halt, says Digital Commerce 360.”
4. Mixed e-commerce results: “Traffic, conversion, and average order value are down for almost half of retailers, and 55% report e-commerce declines. About 34% report positive results, and 11% find e-commerce as initially projected.”
5. Compromised supply chains: “Current supply chain challenges include delivery delays (22%), cancellations due to inventory shortages (15%), and back-ordered products (14%), according to Digital Commerce 360.”
Any actions retailers can take to address these issues will position them better when the recovery comes. The most important thing retailers can do, however, is master omnichannel operations. Elizabeth Segran writes, “Department stores were slow to adapt to age of e-commerce and social media. When they did eventually launch an online presence, many failed to invest in creating an exciting, easy-to-navigate user experience. These once-glamorous retailers had become dull, sleepy, and generic; meanwhile, online brands were working hard to capture the consumers’ attention.”
Segran notes, “Here’s the thing: It’s clear that before the coronavirus crisis hit, consumers still enjoyed the experience of visiting a store.” Even Generation Z consumers (so-called “digital natives”) have demonstrated a penchant for in-store shopping. Because they are young and feel invincible, they are likely to view the quarantine as a pause in, rather than a change of, lifestyle. They are more likely to engage in social activities, go shopping, and participate in numerous other activities older generations will hesitate joining in for months after the quarantine has been lifted. Since younger generations are likely to be retail’s best hope of surviving the pandemic, retailers need to find ways to make their stores and on-line experiences appeal to younger consumers.
 Suzanne Kapner and Sarah Nassauer, “Coronavirus Finishes the Retail Reckoning That Amazon Started,” The Wall Street Journal, 14 May 2020.
 Derek Thompson, “The Pandemic Will Change American Retail Forever,” The Atlantic, 27 April 2020.
 Ben Unglesbee, “Permanent store closures could hit 25K in 2020, Coresight says,” Retail Dive, 9 June 2020.
 Staff, “Up to 25K Stores Could Close in US in 2020,” Material Handling & Logistics, 12 June 2020.
 Sapna Maheshwari and Vanessa Friedman, “The Death of the Department Store: ‘Very Few Are Likely to Survive’,” The New York Times, 21 April 2020.
 Daphne Howland, “Brick and mortar’s next chapter,” Retail Dive, 1 June 2020.
 Jaclyn Ix, “Retailers: It’s Time to Act,” Inbound Logistics, 19 May 2020.
 Elizabeth Segran, “Department stores were the original retail startups. Now they’re headed for the grave,” Fast Company, May 2020.