6one5 Retail Consulting chief Bill Rooney asks: which retailers will bounce or belly flop in 2021?
Bounce is associated with resilience, the capacity to recover quickly from difficulties.
Resilience comes from strategic thought, awareness (of your competitive position and circumstances), speed, flexibility, and agility in a rapidly changing retail environment.
Citi Research paints a bleak outlook for discretionary retail in the next 12 months to June 2021.
To summarise, Citi is forecasting household disposable income growth will be negative 2%.
For discretionary retailers, we are recommending for forecasting purposes work on sale declining of 20% from 2019 levels based on these projections.
In 2021, retailers which bounce will be associated with:
• Online sales growth that will accelerate.
• Leaders who look to shrink their bricks and mortar store portfolio, and reduce rental as a % of sales. As a rule of thumb, there are around 40 "A" Class shopping malls and precincts in Australia (250 in the USA), however, the top 40 locations will vary depending on your customer demographics.
• Restructuring: a majority of retail executives expect to restructure this financial year. This figure should be 100% considering Job keeper will cut out in March 2021, so restructures will need to start soon.
In 2021 the Belly Floppers will be:
• Full price middle-market retailers with a weak eCommerce presence. Visit any H&M, Zara, or Uniqlo store to view everyday low prices in action and see how this is squeezing Australian fashion retailers.
• Retailers that " pretend restructure" and don't address the endemic problem in retail of overbuying, overstock, overstaffing (or worse, the wrong staff), view eCommerce and bricks and mortar separately. These all lead to declining sales, margin, and profits. These have already led to multiple voluntary administrations including Seafolly, Colette Accessories, The PAS Group, Tigerlily and more.
• Those who ignore the digitisation of the retail industry and the numerous changes needed to be successful in moving forward.
Last year, I tested how Australian retailers are progressing in ramping up their eCommerce offering, especially around the customer experience.
I looked at options such as offering a fully automated buy online pick-up in-store (BPOIS) and stock look-up in an individual store.
I conducted a benchmark on how many retailers were offering this functionality - the result was two out of 150 and currently, we estimate less than 20% have this functionality.
We talked to one retail software vendor this week and asked: were they being swamped with inquiries?
The answer was "we have had an uptick in inquiries however not enough to indicate retailers are rushing to adopt best practice."
When I ordered an item from a department store online recently - and paid for the goods - I was advised it was out of stock a few days later.
It took me an additional three days to get credit and I had to visit the store to purchase a more expensive item, defeating the exercise.
Anecdotally there doesn't appear to be a rush to action: understandable in some ways due to the stress retailers have experienced over the last five months, however time waits for no one.
Mike Tyson once said, "Everyone has a plan until they get punched in the face."
Covid-19 is a real punch in the face for retailers, bouncing back or belly-flopping will be determined by resilience, speed, and taking action.
Many retailers are vulnerable and practice “pretend transformation” , the real measure of success with transformation is outcomes linked to positive metrics in sales, margin, profit and customers.
It is now sink or swim for all retailers.