The return of retail?

In 2017, it was all doom and gloom. Retail bankruptcies, store closures, and the decline of the department stores all contributed to this term ‘retail apolcalyse’ and numerous discussions among analysts about the death of retail as we have known it to be. However, most retail executives sat tight, focused on the fundamentals and amped up their strategies to neutralize the threat of ecommerce and online retailers.

One year later, some of retails top players are leading the way in now what everyone is terming – the right way to do retail – something I have been talking about for a long time now – and many of you are familiar with. It is about figuring out how to meet your customer in whatever channel they choose to meet, providing the right product at the right time in the right price to them, and enhancing their experience from research to satisfaction; so that the everlasting impression drives home a competitive advantage.

Here is a motif of some of these players and their performance against the S&P 500 since the onset of 2018. Statistics from numerous associations back up the assertion that retail has made its way to a pleasant spot. In July, retail sales were up 0.4% on a seasonally adjusted month-to-month basis, an increase of 4.9% unadjusted year-over-year, according to data from The National Retail Federation (NRF). The Thomson Reuters Same Store Sales Index calculated a 3.3% Q2 2018 growth across retail, well ahead of the 1.2% SSS result posted in Q2 2017. Of the 38 retailers that reported Q2 Same Store Sales prior to the Index release, 59% exceeded estimates.

So what is happening? A number of retailers have made large investments in stores, in their supply chain focused on fulfillment and profitable execution. Additionally, online offerings are helping as well. Today it is just as convenient to buy online and receive your products from Walmart and Target as it has been for Amazon. The playing field is getting leveled. And when that happens, convenience goes out as a differentiator and your product and customer experience matters. And that’s where retail is now focused on – tailering the shopping experience for customers. Technology and supply chain related investments continue to grow across all of retail – primarily focused on this customer experience and fulfillment. Nordstorm will spend 43% of its CAPEX in these areas in the next 5 years and they are not the only one.

Retailers that will continue to perform well will focus on speed-to-market and inventory efficiency, which are critical to improving the customer experience as well as profitability. It was very common for associates to compete across channels, but today a breaking down of barriers between online and physical is helping as well. With more than 20% of sales occurring online, the shift in mindset internally has helped. The other notable area: most of these retailers have shown that their success stems from both brick-and-mortar and e-Commerce operations, and typically both channels seeing “double-digit” sales increases – a modern rarity for brick-and-mortar businesses.

With all these indicators; are we seeing the return of retail? the only question marks that remain now are – the bullish economy and how long will it last, how much unemployment will we continue to see go down, how will the consumer sentiment be going into mid-term elections and what are the tariff impositions going to do. Still a lot to think about if you are in retail.