Retail sector preps for recovery as online commerce grows in 2021
by January 19, 2021 10:04 am 670 views
![](https://talkbusiness.net/wp-content/uploads/2021/01/SOTS_Retail_webhed-732x384.jpg)
Retail market watchers expect 2021 to be a year of recovery, but they also agree the pain will continue for some amid dozens of bankruptcies and a plethora of store banners moving to the retail graveyard after the more than 9,000 closures in 2020.
Analysts agree the downsizing in retail is needed and not unexpected as evolution of the sector continues with more sales moving online and store experience expectations rising. The National Retail Federal (NRF) has said there will continue to be a challenging stretch ahead but the promising COVID-19 vaccine is fueling some level of optimism for the economy and retailers.
“Retailers have adapted and evolved their businesses at a speed not seen in decades, implementing changes in days and weeks that would have normally taken months, and this innovation will help retailers yield new efficiencies in 2021,” said NRF CEO Matthew Shay.
The chasm between winners and losers also widened in 2020, according to Scott Benedict, director for retail studies at Texas A&M University.
“The great ‘bifurcation’ of retail into winners and losers will likely intensify in 2021. Those that are financially strong and resilient, that are invested in serving customers across digital and physical channels, and that operate in product categories that are in demand by consumers will accelerate their growth coming out of the pandemic. Mall-based retailers, specialty retailers in declining categories, and those that are financially constrained by heavy debt loads will continue to struggle, and many will not survive to see a post-pandemic future,” Benedict told Talk Business & Politics.
Jan Kniffen, a retail consultant with J Rogers Kniffen Worldwide, said brands that were winning before COVID-19 have also largely been the ones growing share through the crisis and they will be stronger on the other side, leaving the rest of the pack further behind. He expects store closures and bankruptcies to accelerate again in 2021. While much of the sector expects to see some return to normalcy in 2021, no one is quite sure what the “new normal” will look like.
“Retailers will have a real opportunity to not just attempt to return to ‘normal,’ but to take things up a notch as pent-up consumer demand is unleashed in the wake of COVID-19 vaccinations. I expect retailers to focus on reimagining brick-and-mortar locations specifically. On the practical side, store redesigns will address advanced e-commerce fulfillment capabilities. On the experiential side, creative merchandising and next-level technology integrations will help retailers make up for lost sales in discretionary categories like apparel and accessories. Reigniting non-essential categories will be a top priority and if successful, will drive better margins in the latter half of the year,” said Carol Spieckerman, CEO of Spieckerman Retail.
Some retail watchers expect consumer behaviors brought on by the pandemic to have a lasting impact on the sector. One of the most obvious is the rise in online commerce, particularly in grocery, which had been one of the slowest growing categories to gravitate online prior to COVID-19. New research from data marketing firm Savanta found 53% of surveyed consumers said they will continue to cook and eat at home and 47% said they will shop online more after the pandemic is over.
Kniffen predicts the growth rate of online sales will not significantly fall once the pandemic subsides. He does not expect brick-and-mortar stores to regain any share in the back half of 2021 despite the end of the pandemic. Kniffen does expect to see grocery solidify its online presence. He also predicts fashion will have a comeback by April and consumers will be tired of the at-leisure apparel, such as sweat pants, they have been wearing during most of 2020 and want to refresh their closets.
“It’s going to be the roaring 1920’s again when it comes to fashion,” Kniffen predicts.
Benedict expects to see plenty of pent-up demand from consumers to return to shopping in physical stores as the pandemic subsides. He said the perception of safety will drive the timing and scale of this behavior in 2021 and beyond. He said there is plenty of “cabin fever” among consumers because of the pandemic. Benedict also cautions that economic factors and higher unemployment brought on by the pandemic is not likely to soon dissipate and it will no doubt weigh on consumer discretionary spending in much of 2021. Benedict and Spieckerman agree that 2021 could be a time for “retail reset” given so many changes in operations were made on the fly in 2020.
“Retailers have had to react quickly to the pandemic, and much of their focus last spring was to react to the needs of their customers with speed, with little testing. As such, they may not be cost efficient or optimal approaches that will enable profitable growth over time. In 2021, retailers will look to these rapidly deployed solutions for ways to enhance their scalability, make them more cost efficient (i.e. profitable) and able to remain as a sustainable part of their omnichannel business over the longer term,” Benedict said.
Kniffen told Talk Business & Politics he expects to see consumers gravitate toward personalized or curated products in 2021. He also predicts consumers will want more local brands or those that share the same values for environmental, social and corporate governance as the consumer, as well as brands that support lifestyle. He said these categories could dramatically grow over the next year. Kniffen also said people will go out to lunch, attend sporting events and begin traveling again on the back side of this pandemic. Even so, he expects consumers will continue to spend money on their homes, a trend that began amid the pandemic.
Benedict said 2021 will be about recovery for retail, but much of the gains will occur in the back half of the year stretching into 2022 and maybe 2023.
“The good news … the healing will begin in the year ahead for our nation and for our industry,” Benedict said.