New course charted by retailers

Print Friendly, PDF & Email

The shuttering of brick-and-mortar stores and the continued explosive growth of e-commerce have led to an ongoing series of news articles suggesting that hard times are ahead for the retail industry. One of the latest appeared in Bloomberg earlier this month under the headline “America’s ‘Retail Apocalpse’ is Really Just Beginning.”

The article argues that the problem is not just that and other online sellers are taking business from brick-and-mortar stores. A bigger issue is the heavy debt burdens many retailers are carrying, often as a result of past leveraged buyouts.

“The debt coming due, along with America’s over-stored suburbs and the continued gains of online shopping, has all the makings of a disaster,” the Bloomberg article contends.

Perceptions about the viability of the retail industry matter quite a lot in this case, as the article acknowledges, as struggling retailers seek to refinance their debt to stay in business. If lenders believe that the retail industry faces a dark and dreary future, the money for refinancing will not be available.

The National Retail Federation, among other groups, has been pushing back against the idea that winter is coming for the retail industry. In a recent blog post, NRF president and chief executive officer Matthew Shay argues that the industry is “changing, evolving, growing — and certainly not dying.” He went on to give his takeaways from a recent invitation-only event held in Manhattan. “A Candid Discussion on the Future of Retail” was billed as an off-the-record discussion of the industry’s prospects, with participants that included leading analysts, top economists and retail executives.

Shay’s takeaways from the discussion included the observation that government data on retail jobs doesn’t give an accurate picture of the industry’s health, because the Bureau of Labor Statistics only gives the industry credit for jobs in stores, ignoring the millions of workers in retail corporate offices, distribution centers and call centers.

Another takeaway is that many investors are asking the wrong questions about retailers, as metrics like same-store sales and foot traffic are becoming increasingly obsolete.

“Experts pointed to customer acquisition and retention costs, attrition rates, net promoter scores and purchasing trends as better guideposts for a landscape that rewards customer loyalty and brand connection,” he wrote.

Another important take is the idea that online and in-store retailing can complement each other if retailers “develop an integrated, savvy and committed strategy.” In this view, retailers need not be left behind by a changing market. Instead they can leverage their strengths and their relationships with customers while also taking advantage of new technologies that allow them to serve those customers better.

This seems right. And there are certainly plenty of examples of retailers that seem to be charting the right course toward success in an omnichannel future that in many ways is already here.

Walmart’s third quarter results suggested that its investments in its people and its technology are paying off, and many other retailers are being just as forward-thinking and innovative in addressing the changing needs and preferences of their customers.

So it seems likely that the retail industry as a whole will not succumb to apocalyptic doom, and that many of the best retail companies of today will remain viable for years to come.

But it is also likely that not all of today’s retailers will survive the next economic downturn, particularly with so many struggling in an economy that is relatively strong. And retailers overburdened with debt will face the biggest challenges in investing both the ideas and the capital needed to evolve with their customers.



You must be logged in to post a comment Login