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The latest 2020 IHL Group forecast points to a COVID-19 negative $1.6 trillion global retail economic impact, with USA sales declining 7.6% this year. Fortunate sectors such as grocery and mass merchandisers will achieve double digit growth. Among the worst performers are departments stores (-23%) and specialty soft goods (-33%).
How do these challenged retail sectors, which are not expected to recover to 2019 levels until 2023, return to growth? One potential answer can be found in China, which on multiple levels remains the innovation laboratory for the future of retail.
"Virtually nonexistent three years ago, livestreaming now accounts for 4% of total online retail sales in China and about 1% of total retail sales. The number of products promoted on Taobao (Alibaba) via livestreaming nearly tripled in 2019—before the pandemic—and the number of Taobao livestreaming merchants almost doubled."
What is livestreaming e-commerce? What is making it successful in China?
The Wall Street Journal recently reported a sharp rise in deadly violence in major USA cities. Their analysis of crime statistics among the nation's 50 largest cities found that reported homicides increased 24% so far this year.
"Police, researchers, mayors and community leaders see a confluence of forces at work in the homicide spike. Institutions that keep city communities safe have been destabilized by lockdown and protests against police. Lockdowns and recession also mean tensions are running high and streets have been emptied of eyes and ears on their communities. Some attribute the rise to an increase in gang violence."
This article is a follow up to the very successful July 2020 Global Retail Crime Summit. The Wall Street Journal analysis and the just published D&D Daily retail crime reports are a reminder of the challenges we face. Similar to the urban increase in homicides, retail experienced spikes in violence in the first half of the year.
Summarized in this post are the latest USA retail violence, organized retail crime (ORC) and retail robbery trends. As I pointed out in my Crime Summit presentation and in a recent podcast, data driven industry collaboration, increased best practices communication, and new technologies are critical components to attacking multiple of the surreal challenges taking place in 2020.
In my last RFID article titled "Nike and the Retail Industry Adoption Outlook for RFID", I concluded that omnichannel inventory visibility and immersive consumer experiences are extremely critical for a connected consumer that can instantly choose alternatives. Paraphrasing their CEO, Nike's adoption of RFID was ultimately putting the company in a position to serve customers in a way that gets them the product that they need when they want it and where they want it. Their approach reminded me of the lessons learned from being directly immersed in the Inditex (*) deployment of this Internet-of-Things (IoT) technology, years earlier.
Welcome to 2020, a surreal year that actually had a strong start for both RFID and the retail industry. In January, a stock market analyst announced that Walmart was launching an apparel RFID item-level tagging program later in the year.
In the first two months of this year, the USA retail industry grew +6.2%, and except for department stores, all sectors had strong positive growth. Grocery, convenience, mass merchandisers / warehouse clubs, and restaurants registered 5%+ growth. Even laggard apparel grew 3.8%.
Then COVID-19 arrived with its substantial headwinds especially for those retailers classified as non-essential. Through June 2020, in the two sectors that near term are most important to RFID --department stores & specialty soft goods-- retail sales are down -19.5% and -39.3% respectively. According to the IHL Group, both of these sectors will not recover to 2019 levels until 2023 at best.
How did we end 2019 in RFID adoption? What's the impact of COVID-19? What is the future of retail RFID in a post pandemic world?
Consumer spending accounts for roughly 70% of USA economic growth in the United States. In a short amount of time, COVID-19 has become a brutal disruptor of traditional buying patterns.
Research indicates that it takes 66 days or roughly two months for a behavior to become an automatic habit. That is roughly how long most countries were in various lockdown phases.
As we reopen stores, we are in unchartered shopping territory. This article summarizes the latest shopping data, key insights on the digital shifts underway, and recommendations for a stronger retail industry recovery.
"Retailers need to stop expecting business to return to “normal.” There’s no going back to how it was anytime soon. Even before the Covid-19 pandemic and economic crisis, brick-and-mortar retailers had been fighting a fierce battle against Amazon and other e-commerce players. Those challenges have now accelerated at staggering speed."
Throughout the COVID-19 lockdown phase, I have been following very closely the global economic and retail trends in anticipation of the reopening phases which are now underway in many parts of the world. Good signs from key markets such as USA which saw the biggest historical increase in retail sales in May.
The threat of multiple other waves of COVID-19 is still present, but key lessons have already emerged to guide countries during the reopening phase. Continuing to do well are most of the essential retailers, e.g. food and drug stores. Their growth spike will slow as more of the retail industry reopens. Best positioned are those essential retailers that had fully scaled services such as Buy-on-Line-Pick-Up-in-Store (BOPIS) prior to the pandemic lockdown.
Non-essential retailers, especially apparel and department stores have a longer road to recovery and some projections have them returning to 2019 level in the distant year 2023. To survive these sectors have already accelerated discounting, a recipe which will trains consumers to expect more and further delay profitability. As Neil Saunders pointed out in his June 12 Webinar, in May 2019 just over 21% of apparel items were discounted and the average discount was nearly 18%. For May 2020, nearly 70% of the items are discounted and the average discount rate is more than double at just over 44%.
The lockdown online shopping spike is subsiding with various forecasts having 2020 reach 20% to 21% of total USA retail sales. Prior to the pandemic, USA ecommerce was expected to reach anywhere from 15% to 19% of total retail sales as projected by multiple industry analysts.
COVID-19 has become a brutal accelerator of digital transformation trends that were already underway. Ecommerce has leaped two to three years ahead of previous growth patterns. There will be a substantial number of physical stores in the boring middle that failed to keep up with consumer engagement and innovation that will close.
"Brands will matter more in the world the virus leaves behind, and those that work now to build trust by acting, visibly and decisively, with an essential and authentic purpose, will be among the survivors. If they find new reserves of agility, creativity, and resolve, they can shape the way consumers view them in the midst of the crisis, and emerge not just with a viable business, but a sharp competitive edge." - BrandZ 2020 Report
Every year I look forward to the latest BrandZ Global Most Valuable Brands Report. Timely for 2020, BrandZ published a separate Global Top 75 Retail Brands edition that includes in-depth COVID-19 analysis on the impact of the pandemic to brands.
"The combined value of the BrandZ Top 75 Most Valuable Retail Brands has risen by 12% in the past year, to $1.514 trillion. These brands come from four sub-categories: Pure Retail, Fast Food, Apparel and Luxury, and they are growing despite – and in some cases as a result of – severe disruption in the market."
This article summarizes some of my favorite insights from the 131 pages 2020 retail report.
For the last couple of months during the lockdown, I have been extremely busy continuing to speak with retailers, working several board opportunities, setting up an in-house studio, opening a new YouTube Channel, hiring research resources, and participating in a plethora of podcasts and webinars. Because of COVID-19, my primary focus has shifted to providing intensive data-backed analysis to the "new normal" ahead.
This article summarizes the latest data from multiple leadership sources on the near term economic and retail challenges from COVID-19. All the trends confirm a post pandemic "New Normal".
What will be the 2020 GDP impact to key economies? Which consumer categories are positive? Which continent will lead the recovery? How many USA stores have reopened? Will it be a V, U, or L shaped retail recovery? How long will it take for key USA retail sectors to recover? Is online retail permanently eating the consumer world? Where do we go from here?