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Exploring the future of retail

Operationalizing Customer Data: Examples From Nike and Zara

Now is the moment for brands to prioritize listening to their consumers above all else. Instead of driving consumers to your platforms, sites and events, businesses should meet them where they are. There are two important behaviors that can help companies to reinforce both their value proposition and license to communicate to consumers.  First, brands should be using customer data to cultivate a relationship instead of a transaction. Second, firms should be developing solutions to turn channel engagement into quantitative insights. Adopting these two systems will create an authentic reason to engage with the fans of your brand and perhaps more importantly, contribute to a company cultural shift towards a customer-centric approach.

Nike’s Nike Training Club (an exercise community platform) is a great example of prioritizing a consumer relationship over a transaction. After watching yoga class attendance rise during COVID-19, Nike has added to the number of yoga courses offered and prioritized cultivating a community on the platform over product messaging. Decisions like this have led to a 100% increase in active weekly NTC users[i]. The consumer engagement through these efforts will yield meaningful information that can inform future product launches and brand activations, increasing Customer Lifetime Value as well as related switching costs.

As consumers return to stores post lock down, measuring in-store engagement has never been more important.  In-store engagement, a challenging metric for most retailers, can be effectively measured by leveraging heat mapping technology to turn qualitative interaction with your store into a quantitative output. Two consumers visit the Zara flagship store and neither makes a purchase. However, one spends 40 minutes trying on accessories and talking to store ambassadors, while the other spends 1 minute in the store as he or she waits for a friend.  Those two experiences should be valued accordingly. Data scientists can analyze these interactions and group them based on the behavior. The data collected from these journeys can be inputted into multiple KPIs like “time spent talking to store ambassadors” or “products tried on”. The result would be a robust attribution thread between offline activity and offline + online transactions as well as a tool to optimize store experience and offerings.

A thoughtful and meaningful omnichannel approach is predicated upon being nimble enough as a company to recognize where a consumer wants to meet you rather than drive them to where you are. Agility to adapt to new growth-oriented KPIs and metrics will be a characteristic of best practice retailers.  The above two recommendations can be the building block that ensures that data is leveraged to understand where the consumer wants you as a brand to be.

[i] https://www.cnbc.com/2020/03/27/coronavirus-nike-gets-more-exercise-app-users-and-its-driving-online-sales.html

 

 

 

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ACTION REQUIRED

Just as retail stores were beginning to reopen from COVID-19, another tragedy struck the U.S.A. with the death of George Floyd under the knee of Minneapolis police officer, Derek Chauvin. After a video of the incident went viral, thousands of people swarmed the streets of that city to peacefully protest police brutality. By night, the protesting had turned into looting, beginning with a Target retail store near the police station.  Peaceful protests and looting incidents continued, spreading to other cities across the United States and escalating in size and impact.  Countless retail stores and restaurants, both national chains and independently operated stores, suffered business disruption, physical damage and merchandise loss.  In the wake of this turmoil, retailers and brands have been compelled to make a statement and share their perspectives on the situation.   A smaller, we think more courageous group, has taken action to begin the long journey toward real change.

Historically, most retailers stayed quiet on social issues to avoid alienating customers. Taking a stand was seen as risky because Americans are significantly divided on major issues and are quick to boycott companies whose values do not reflect their own. Many well intentioned retailers and brands have also been fearful of having their message misunderstood.  Extreme care is required to avoid being perceived as trivializing key issues in pursuit of profit.  Remember Pepsi’s 2017 “Live For Now” commercial?  It depicted Kendall Jenner handing a can of Pepsi to a police officer which was considered by many to be Pepsi’s proposed solution for police brutality. The company received immediate backlash across social media and pulled the ad within 24 hours of its premiere. Many companies feel it is safer to not say anything than risk potential backfire.

There are several prominent brands who have always refused to stay quiet. Ben & Jerry’s is one, known not only for their delicious ice cream, but also for their advocacy work and activism. With their history of speaking out against injustice, it is no surprise they gave a powerful response to the George Floyd incident. In their statement, they called his death “the predictable consequence of a racist and prejudiced system and culture that has treated Black bodies as the enemy from the beginning.” They also demanded that strong political action be taken by President Trump, Congress, and the Department of Justice to dismantle white supremacy.  Brands like Ben & Jerry’s can be models for other companies. They back up their messages with clear actions and accountability.

Recent events have been a catalyst enabling many companies to find their voice.  Perhaps it is because polls show that Americans are unified in their belief that race and ethnic discrimination are a problem and the majority believe that anger over the George Floyd death is justified.  Retailers who have previously stayed quiet have begun to speak up. Minneapolis based Target’s response was especially meaningful as they were the first store to be looted during the protests. Instead of focusing on the damage done to their store, they reflected understanding that “The murder of George Floyd has unleashed the pent-up pain of years, as have the killings of Ahmaud Arbery and Breonna Taylor.” The CEO, Brian Cornell, also shared that Target was committed to serving the community by “preparing truckloads of first aid equipment and medicine, bottled water, baby formula, diapers and other essentials, to help ensure that no one within the areas of heaviest damage and demonstration is cut off from needed supplies.” Other companies also spoke up, including Apple. Their CEO, Tim Cook, stated that “To stand together, we must stand up for one another, and recognize the fear, hurt, and outrage rightly provoked by the senseless killing of George Floyd and a much longer history of racism.” Apple committed to donating to organizations that fight for racial equality and working on their own company policies.

With the surge of companies taking a stand on this issue, many consumers felt that speaking out wasn’t enough. Corporations who posted a black square on social media or used the hashtag #blacklivesmatter along with a supportive post received backlash from customers. They were accused of only making a statement to appease their consumers and not lose any business. The skincare and makeup company, La Mer, posted a picture of a white hand and black hand high fiving on Instagram and received comments asking why they hadn’t donated to the movement. Another beauty brand, Glossier, has received praise for taking action beyond their statement and donating $500,000 to civil liberties organizations including Black Lives Matter and the NAACP, as well as $500,000 to black-owned beauty businesses. Casey’s General Store just announced the appointment of their first CIO who is also their first African American senior executive.  Customers want to see corporations backing up their words with concrete actions that support the Black Lives Matter movement, using their money, voice, and resources to donate to organizations or create anti-racism initiatives.

Retailers who do not speak out and continue to post about their products on social media during this time risk appearing tone-deaf. This is especially true of larger corporations like Walmart that have the resources to help. Under Instagram posts of merchandise from last week, customers asked Walmart to speak up and donate to the movement. Some consumers went as far to say that they will boycott Walmart and used the hashtag #walmartiscanceled. Other companies who are staying silent or continuing to post as normal on social media are receiving similar responses and risk alienating customers that will be difficult to win back.

In the past two weeks, protests in the streets and calls-to-action on social media have persisted.  Going forward, it is likely that consumers will continue to expect their brands to speak out against injustice and take actions to support important social issues.

Corporate silence and apolitical companies may be a thing of the past.

 

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For Retailers, BLM Should Be More Than A Hashtag

Chicago retail, including other iconic shopping destinations, looked like a war zone this week – not a major market poised to re-open after months of closures. This week was supposed to be the next re-opening phase in Illinois – not another setback that some retailers will not survive. The stark image of damaged and boarded storefronts all across the country is hopefully the nadir from which we all rebuild.

Retailers as a whole have not historically been ones to champion social causes of this magnitude. Silence on social or civil unrest was often the preferred decision by management teams. This is no longer an option in our view. The retail industry touches almost everyone, and we’re witnessing a change that is likely permanent.

Brian Cornell, CEO of Target, issued a public statement to their huge workforce, “…as a team we’ve vowed to face pain with purpose.” And backed up his words with actions in the form of first aid supplies and essentials to the heaviest damaged areas and reassurance to employees their wages are safe even as stores are closed temporarily. Cornell went on to say, “… the safety and well-being of our team, guests, and the surrounding community will continue to be our paramount priority.”

Many retailers and consumer brands are responding similarly, but this feels different. This feels like a permanent change in how we choose to shop for and buy necessities and frivolous products alike and how retailers proactively give back to their community.

Consumers are demanding their favorite brands to speak out, and those who do not risk damage to their brand and future. Consumers will hold us accountable, and winners and losers in retail will increasingly be defined by their social and community positioning.

Posting a dark screen on Instagram will not be enough. “Consumers don’t care about corporate solidarity. They want donations,” according to a story on Vox from yesterday. “As brands rush to speak out, many statements ring hollow,” states a headline on Business of Fashion from earlier this week.

Small mom and pop retailers are most vulnerable, and many will not survive the double whammy of 2020. “Big retailers say they don’t mind the looting. It’s different for small businesses,” explains Cathaleen Chen on BoF.

From our vantage point, we closely monitor the “acceleration of trends,” and never has it been more critical for businesses to focus on building lasting relationships and less on the next transaction.

The long uphill battle ahead may be best exemplified by small retailers. They are at their best when customer relationships are strong – and nurturing such connections is more elementary for business now than ever.

Your voice matters, retail. As do all voices, big and small, that we have witnessed and support in peaceful demonstrations. Let’s look back on the second half of this year as a positive turning point – a time when the healing began. It starts with all of us.

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The Private Label Industry Loses A Giant

Brian Sharoff, President of the Private Label Manufacturers Association (PLMA) passed away at the age of 77 after a brief illness. His loss is incalculable to the food retail industry. For so many who have worked in this area, Brian truly was the private label industry as we know it today.

Brian became President of PLMA in 1981, practically at PLMA’s inception and the modern private label industry as we know it today. For nearly four decades, the PLMA shows defined the industry and were demonstrable evidence of the industry’s enormous growth. During his tenure the association’s membership grew tremendously, from two hundred manufacturers, suppliers, and brokers in the U.S. to more than 4,400 companies worldwide.

The two massive trade shows, one annually in Chicago and the other in Amsterdam, drew thousands of exhibitors and attendees across 75 countries. Unlike many trade shows that fight for relevance in today’s electronic age, PLMA is a working show, where exhibitors and retailers actively develop relationships.

PLMA was more than just trade shows. It remains the definitive source of information about the industry and has played an active role in educating thousands through its association with St. Joseph’s University.

Even more impressively, the private label industry as a whole grew exponentially during Brian’s tenure. Back in 1981, the private label industry was still in its infancy, largely defined by “generic” product that was cheaper but also significantly lesser quality than the national brands of its time. But the recession of that time period propelled the industry, as did a new vision of private label becoming private brands. Quality went up along with consumer acceptance, and todays’ industry is now massive, over $136 billion and continuing to grow as retailers continue to create more sophisticated programs.  Private label share of sales during this time effectively doubled.

Brian had a spectacular sense of humor, impeccable timing and a vision for the industry that he saw come to life during his remarkable tenure at PLMA. This vision will live on as the industry continues on the path that leaders like Brian have set. He was a giant. And he will be missed.

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Beyond the Pandemic: 4 COVID-related trends in food retail that are here to stay

The COVID-19 crisis has quickly swept over the US, amassing over 1.5 million cases and 90,000+ deaths through May 18 (NYT COVID Tracker). Consumers have responded with dramatic shifts in shopping and purchasing behaviors.  While some of these new behaviors are probably short-term responses to the crisis, we expect 4 key trends to persist in the mid- to long-term as we begin to establish a new normal.

Trend #1: At-home food consumption will remain elevated and grocery numbers should remain strong compared to the rest of the economy.  As the pandemic ramped up, US consumers spent on groceries and little else, and we expect this emphasis on grocery and in-home meals to continue.

Overall retail trade numbers show the importance of the Grocery segment. Looking at retail trade since the start of 2020, we can see Total Retail (dark blue line) began to drop precipitously in February as the number of COVID cases grew (orange line). Early declines were driven by Foodservice and Auto, the first sectors impacted by quarantining and economic uncertainty, but most other retail sectors followed with declines in March. In contrast, Grocery Store Sales (dark green line) grew +29% in March as consumers stockpiled food and necessities.

Grocery Store sales declined -13% in April from the March hoarding peak but were still up 13% compared to the same period in 2019.  Grocery is expected to remain one of the few strong US retail sectors in the short- and mid-term as:

  • Restaurant business is down in the US
    • Despite measures to increase food pickup and delivery, overall restaurant transactions have remained down between -30% and -40% all April (NPD webinar, 5.7.20)
    • Overall restaurant spend is down -55% in Q1 (Visa Q1 Earnings Call) and reservations are down -95% or more (OpenTable)
    • Even as state-by-state legislation allows some sit-down restaurants to reopen, most have strict guidelines in place to limit occupancy, curtailing their sales potential
  • Measures of in-home food consumption are up
    • 67% of respondents are cooking/preparing more meals. Most plan to continue this after COVID
    • 65% are consuming more groceries and buying more grocery items
    • Only about 1 in 3 respondents are ordering more restaurant takeout or delivery
    • (Source: Numerator webinar, 5.7.20)
  • In-home food consumption increases in recessionary conditions
    • In the 2008 recession we saw an increase in at-home meals and food expenditures when compared to food away from home. In the coming months, we are likely to face some of the same recessionary conditions and corresponding consumer behaviors as we did in 2008.

Numbers from the recovering Chinese economy show the importance of CPG and Grocery. Post-COVID consumption data shows that Supermarkets, Convenience Stores, and Food Specialized Retailers are doing relatively well when compared to Overall Offline Consumption (-21%) or Foodservice (-28%) vs pre-COVID conditions.

Trend #2: Grocery Ecommerce will remain important and keep growing

As consumption has shifted in-home, many consumers have pivoted to grocery delivery and buy online pickup in-store (BOPIS) fulfillment options. We predict these fulfillment options will remain important and continue to grow as consumers push for more convenience and safety while retailers improve their footprint and operations.

Grocery ecommerce exploded in Q1:

  • 3rd party grocery delivery orders are indexing at 250+ this quarter vs. last year (NPD Webinar 5.7.2020)
  • New users are trying grocery ecommerce options and plan to continue use after COVID
    • Only 35% of online order and 18% of BOPIS customers were regular users before their recent purchase, the rest were new or previously infrequent users.
    • 83% of new BOPIS users report they are likely to keep using this option after COVID.

(Source: Numerator Webinar 5.7.2020)

Online grocery visit frequency and spend has remained elevated in recovering APAC countries (MIYA Payments via McKinsey). Post-COVID, we expect grocery ecommerce to keep some of its share gains and continue to grow for the following reasons:

  • Convenience-driven trends have been a common thread across retail. Many new consumers will continue opting for grocery delivery and/or BOPIS due to their convenience.
  • Consumers will remain health-conscious and may avoid unnecessary trips to the grocery store or in shared/public transportation.
  • As time goes on, retailers will improve the efficiency, reach, and customer experience of grocery ecommerce, increasing consumer access and appeal.

Trend #3: “Stockpiling” shopping patterns will continue to some degree throughout recovery

During March, as cases rose and many states instituted social distancing measures, we saw some very clear signs of stockpiling behavior. Foot traffic peaked across all grocery channels (Placer.AI) while according to Numerator, basket sizes soared to 2.5x-4x their pre-COVID average size.  NPD data indicates that shelf-stable and frozen foods were key categories that over-indexed. Specialty Grocery lagged behind the Mass, Club, and Food-Only Channels as people shifted spend toward large pack sizes and household necessities instead of premium food.

During this period, NPD reports sales of stay-at-home related categories soared, e.g. cooking appliances, cookware and bakeware, office equipment, and puzzles, toys, and video games (NPD COVID News).

After the sharp drop in grocery shopping in the first 2 weeks of April, seen in both foot traffic and basket sizes, we have seen a blunted rebound. While some of the recovery in foot traffic comps can be attributed to certain states reopening and consumers returning to more typical shopping habits, there has been a concurrent rise in basket sizes (Numerator Webinar, 5.7.2020) and “stock-up” grocery channels are still greatly overperforming Specialty Grocery. This indicates that at least some consumers are continuing to stockpile, and the rebounds in foot traffic since mid-April are somewhat attributable to consumers restocking their diminished pantries.

We predict that stockpiling behaviors will continue as health and saving money remain top-of-mind. Despite being ahead of the US in terms of recovery, Chinese consumers are still making less frequent supermarket and grocery trips but buying more at once than they were pre-COVID (MIYA Payments via McKinsey). However, the degree to which stockpiling behavior will persist in the US is dependent on consumers’ perception of their own safety. News coverage, social media, and messaging from political leadership can have rapid and unpredictable impacts on this consumer behavior.

Trend #4: Grocery store foot traffic will have smaller peaks and valleys across the week

Pre-COVID grocery foot traffic tended to be much higher during weekends and certain times of day. We expect more parity in daily foot traffic across the week for the following factors:

  • Consumers will likely remain hyper-aware of health risks for the foreseeable future and seek to avoid unnecessary crowds during grocery store peak days and hours. The degree to which this is true will depend on mass perception and our success against the virus.
  • The number of full-time employees working from home has doubled (Gallup COVID Workplace Poll), and out-of-home activities are greatly reduced. Home-bound consumers have more flexible schedules, allowing them to shop for groceries at traditional off-hours.
  • Retailers have taken measures to space out foot traffic across the day (e.g. senior-only hours, externally-visible lines when busy, etc.)

Preliminary results show traffic is already evening out:

  • Daily foot traffic comps (versus the previous year) across retail are much lower on weekends than they are on weekdays (AI)
  • Transaction data from China show that weekend grocery shopping remains depressed at this point in recovery

As the retail industry shifts from Survival to Recovery, expert advice and perspective is more important than ever. Armed with decades of experience, an unparalleled commitment to your team, and play-making insights, McMillanDoolittle can help you win in a post-COVID world. To stay up to date on the latest retail industry news and insights, connect with us.

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Walmart Grounds Jet.com

Lost in the wake of Walmart’s blowout quarter (e-commerce sales up 74% and same store sales climbed nearly 10%) is the news that they are officially shutting down Jet.com. The news itself is not shocking: they have been telegraphing this for well over a year with executive realignments, staffing reductions and the relatively recent closure of Jet Black.

Still, it creates the opportunity to reflect on a $3.3 billion deal that was consummated less than 4 years ago and what it means for Walmart in the future.

From a dollars and sense perspective, this could be viewed as a costly misstep. Jet.com was not making any profit at the time of the acquisition and likely continued to bleed profitability during Walmart’s ownership. Like other more premium acquisitions the company has made (Bonobos, ModCloth, etc.), Walmart hasn’t really proven they can effectively court a more premium consumer. No exception here.

At the time of the acquisition, I commented that this may be “one of the most expensive acquisitions of talent ever”.  Viewed from a different lens, and considering Walmart’s continued omni-channel success, this may have been exactly the right move at the right time. Jet.com, and the talent (and technology) that came along with it has been one of the contributing factors to Walmart’s emergence as a serious competitor to Amazon in the e-commerce space and the leader in omnichannel retail.

Consider what Walmart CEO Doug McMillon said at the time of the Jet.com acquisition:

“We’re looking for ways to lower prices, broaden our assortment and offer the simplest, easiest shopping experience because that’s what our customers want,” said Doug McMillon, president and CEO of Walmart. “We believe the acquisition of Jet accelerates our progress across these priorities. Walmart.com will grow faster, the seamless shopping experience we’re pursuing will happen quicker, and we’ll enable the Jet brand to be even more successful in a shorter period of time. Our customers will win. It’s another jolt of entrepreneurial spirit being injected into Walmart.”

From this viewpoint, Doug McMillon looks prescient. While the Jet.com platform was allowed to languish and eventually fade away, Walmart.com is thriving. The fact that Walmart built this infrastructure ahead of the pandemic has allowed them to be a clear leader in servicing the consumer today.

In my initial take on Forbes.com, I believed that “the synergies between Walmart’s merchandising, sourcing and financial muscle combined with Jet’s innovation could help further re-define e-commerce over the next decade”. Walmart has been able to make the right moves to be competitive today. While it is certain that all of this cannot be attributed solely to the acquisition, the end results are convincing enough.

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E-commerce And Grocery: This Time It’s Real

There’s nothing like massive disruption to accelerate a trend that was already occurring in the market.  In this instance, a global pandemic the likes we’ve never seen before has caused significant change in the retail landscape. While grocery stores have remained open and fared better than any other retail segment during the crisis, e-commerce grocery sales have also accelerated at an unprecedented level that has changed the game, likely irrevocably for supermarket retailers.  For many customers, it is easier (or safer) to purchase on-line for delivery or contactless pick-up.

At the same time, e-commerce for grocery has also had an awkward coming out party. While services such as Instacart are literally hiring hundreds of thousands of new employees, the surge in demand has revealed significant cracks in the system along with the difficulty of scaling the business. Wait times for getting a slot for an order have sometimes exceeded four or five days and order fulfillment rates have been abysmal as supermarkets wrestle with out-of-stocks driven by the massive surge in demand. So, while more consumers are turning to e-commerce, they are also seeing it at its worst.

As I’ve written several times before, there are multiple reasons why the grocery category has historically been well under-penetrated relative to other e-commerce categories. Multi-temperature products, awkwardly sized and shaped products, product and SKU proliferation, delivery challenges, combined with razor thin margins have kept e-commerce penetration to around 3-4%. However, this penetration has likely tripled in the past six weeks and we are probably around 10% penetration today. And while some of these gains may be given back in a return to normalcy, it is also likely that the new normal will feature a much higher e-commerce penetration rate along with continued growth. While 15% e-commerce penetration for grocery used to have a “best-case” scenario of happening by 2025, this is much more likely to happen and perhaps several years sooner.

But, and it’s a big but, profitability and an excellent customer experience remain elusive. In-store, in-aisle pick (the primary method for Instacart and Amazon Prime Now) will always be less efficient and have poorer in-stock conditions associated with it than fully automated centralized solutions (as represented by the Kroger/Ocado partnership). But, that model is expensive and time consuming to build and takes time to maximize efficiencies.

As I’ve discussed before, a number  of technology companies are deploying efforts to find a middle ground. Referred to as MFC’s (micro-fulfillment centers), they combine robotics and automation in a much smaller space. This allows them to be less costly to build, be located in a back room of an existing store or dark store which provides closer consumer access, either for delivery or pick-up. Takeoff Technologies, one of the leaders in the field, just published a white paper entitled “How to Win in Online Grocery” that discusses the trade-offs between price, variety and speed that retailers will need to balance to win. They argue that MFC’s optimize that relationship. Along with Takeoff, other technologies include Autostore, Alert Technologies, and Fabric. While all have pilots underway, expect an explosion in the use of this technology as grocers gear up for the new level of e-commerce sales.

At the same time, while delivery has been the dominant way to get groceries to the end consumer, the cost and complication will have limitations. Led by Walmart, we would also expect curbside, contactless pickup to grow significantly as customers and retailers adapt to new realities.

The ways that COVID-19 will impact the world of retail are just beginning to be felt. Long-term social distancing, restrictions on customer counts and a less comfortable shopping environment will hasten even further e-commerce adoption.

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How Will DTC Fare During The Pandemic?

What the last recession can tell us about this one…

The Covid-19 virus has stressed – with a few notable exceptions – all retailers. Over the last decade, Direct-to-Consumer (DTC) brands were heralded as successful disruption stories that lay bare the inadequacies of stale legacy retailers. But in the last year, the frailties of DTC brands came to light. Ironically, both Casper’s IPO and Brandless’s bankruptcy showcased the same challenges; high customer acquisition costs, financial and operational difficulties managing returns and the difficulty of bringing digital intimacy to the physical store front.

These “blocking and tackling” challenges are exacerbated by a lack of differentiation within the DTC cohort. As multiple brands chase the same category, the founder story of graduating from business school and starting an authentic company in an apartment is only exciting so many times. The indistinguishable look and feel of these brands does not help.

Every Font Tells a Story, Associated Press

Writing in Adage, Erik Spooner pointed out that DTC companies share a similar fingerprint. Whether hawking khakis, libido-enhancing medicines or mattresses, their hallmarks include “product photography where the object of desire is shot isometrically askew; solid background colors that are predominantly neutral; copy that has an ironically familiar tone—and is nearly always set in that eerily similar, playfully bold, geometrically designed sans-serif typeface.”

Already facing these challenges, what will Covid-19 do to DTC brands?

At first blush, DTC retailers could see opportunity. E-commerce channels remain open for business. Browsing is a go-to for boredom. And digital customer acquisition costs may drop as businesses sprint to reduce their advertising budgets.

A look back at past recessions provides additional insight – and some hope. In 2008 and 2009, spend on categories that often include a strong DTC presence in 2020 – such as beauty and pet care – grew. Unfortunately, categories with the DTC stalwarts of apparel and home furnishing shrank.

With DTC brands predominantly single category players, the performance in the last recession provides a clue for this recession.

But all is not lost for the apparel and home furnishings brands. Peeling back another layer of sector performance shows hope for apparel – and indeed most – DTC brands. The recession of 2008 and 2009 gave an early indication of the struggles mid-tier retailers would face in the future. Discount was an unsurprising winner, but premium apparel and luxury retailers also outperformed the mid-tier.

The extremes won in apparel; the struggles of mass predicted the future.

Amazingly, premium even outperformed both discount and mass in food and grocery.

Premium food retailers and brands maintained a strong growth trajectory.

According to a 2019 Forrester study, the DTC consumer skews to higher income, 18-35 year-old males in urban centers. While the gender skew and 18-24 year old cohort could be questioned, the higher-earner characterization certainly applies. And if premium categories did well in 2008, then there is more hope for DTC in 2020.

Yet for all of the comparison to previous recessions, Covid-19 has created behavior changes that were previously unheard of – and will leave all retailers wondering “what next?” Early indicators – such as waits of up to five weeks for delivery at Peleton or “join the waitlist” for Concept II rowing machines – say that home fitness and corresponding fitness accessories are beneficiaries. More broadly, self-care – including the home furnishings market – may be stronger than the previous recession.

But these consumer trends – normally a strong indicator of which retailers win and which lose – are insignificant compared to cash-on-hand and access to capital. If those levels were already low, then Covid-19 will drown even the brands that had their consumer clearly in their sight. News that Purple, Everlane, Cuyana and more are laying off or furloughing workers indicate this is already happening.

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The Future Of Supermarket Retailing

Extraordinary measures are being taken by supermarket retailers in response to COVID-19 in this extremely challenging time including customer limits, line spacing, the discontinuation of salad and hot bars and crucial safety precautions. Are these measures temporary or are they here to stay?

We’ve been contemplating these changes with our friends at Connors Group and asking what will supermarkets look like in the future? This joint Infographic demonstrates those discussions.

What changes do you think are coming to supermarkets? Leave your comments below…

 

 

 

 

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Retailers Pivot To Feed And Protect America

This week the impact of shifting consumer spending during COVID-19 resulted in a new wave of massive employee furloughs in non-food retail sectors.  For those retailers still open for business, the employees working on the front line have become increasingly anxious about their own health.  COVID-19 infections on-site have forced closures of some stores and food production facilities raising food supply chain continuity concerns.  In response, we’ve seen another week of quick, innovative actions from the industry focused on new partnerships, offerings and charitable contributions:

  1. Open innovation coalition – started by Rothy’s early this month, this is a group of brands and suppliers working together to help the COVID-19 response. To date, brands like Third Love, Marine Layer and Lucky Brand have been involved to provide the materials and capacity to make protective equipment for front line workers.  Read more about this here.
  2. Partnering up – continuing the trend of retailers that are coming together to help, by the end of last week Crocs, in partnership with Famous Footwear, had donated 240,000 pairs of footwear to healthcare workers.
  3. Direct donations – countless retailers and brands have set up programs to donate a portion of their revenues to worthy causes such as the American Red Cross or local food banks. Dwell published a list of 50 retailers that are giving back.
  4. Individuals stepping up – celebrities have partnered with retailers in creative ways to help the needy. A few examples:
    • Tyler Perry teamed up with Winn Dixie and Kroger to purchase groceries for customers in New Orleans and Atlanta;
    • Brad Paisley and his wife teamed with Belmont University and Second Harvest Food Bank of Middle Tennessee to open The Store—a free grocery store that delivers in Nashville that serves individuals and families experiencing food insecurity and financial hardship;
    • Actor Ryan Reynolds is donating 30% of online sales of Aviation Gin to the United States Bartenders’ Guild (USBG) to support on-trade members affected by COVID-19.
  5. Customer service for just about anything – Zappos extended its “Delivering Happiness” mission enabling customers to call for service about anything, such as help getting groceries delivered, movie recommendations or whatever is on your mind. The free service is available 24X7!

Stay healthy!  Please send any tactics that should have a spot on our list to info@mdretail.com.

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