Will Retailers 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 & your current circumstances), speed, flexibility, and agility in a rapidly changing retail environment.

USA Mid Year outlook based on Bureau of Economic Analysis and Broker Reports is for GDP to drop 6% to 9% in 2020 Calendar Year and rebound to 2% to 4% Growth in 2021 post-vaccine. Of course, if a vaccine cure is delayed the US could stay in negative growth. For discretionary retailers, we are recommending for forecasting purposes work on sale declining of 20% from 2019 levels based on these projections until the 4th Quarter of 2021.

In 2021 the bounce will be associated with

• Online sales growth that will accelerate
• Retailers who look to shrink their bricks & mortar store portfolio, and reduce rental as a % of sales. As a rule of thumb, there are around 250"A" Class Shopping Malls and Precincts in The USA, each retailers top locations will vary depending on their customer demographic.
• Restructuring: A majority of Retail Executives according to a recent Retail Survey expect to restructure in the next 12 months. This figure should be 100% considering, the current 2nd, and 3rd wave of Covid-19 , and GDP projections, so restructures will need to start now

In 2021 the Bellyfloppers will be

• Full price middle-market retailers with a weak e-commerce presence. Visit any H&M, Zara, or Uniqlo store to view everyday low prices in action and see how uncompetitive many of our Fashion Retailers are becoming. These fast fashion monoliths offer value for money, quality for the price, and cover basics to fashion-forward.
• Retailers that " pretend restructure" and don't address the endemic problem of overbuying, overstock, overstaffing, or worse the wrong staff, view e-commerce, and bricks & mortar separately that have for several years have been dealing with declining sales, margin, and profits. J Crew, Gap, Banana Republic, most department stores, G-Star + + + come to mind in this category.
• Ignore the digitization of the retail industry and the numerous changes needed to be successful in moving forward.

Anecdotally there doesn't appear to be a rush to action by our retailers to restructure, understandable in some ways due to the stresses retailers have experienced over the last 5 months however time waits for no one.

Summary

Mike Tyson 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 now sinks or swim for all retailers.