Can Retail Investments Keep Up With Changing Consumer Desires?

Thinking about the future, even in the most optimistic of times, is not always a pleasant exercise in crafting dreams and goals. Hard, cold choices are usually involved. And in the world of retail, those choices — about where to invest — are becoming harder and colder for some executives as they try to figure out where commerce is going in the next few years, and what is worth putting fresh money into.

The Wall Street Journal recently drove home the point. “Global trade conflicts, an upcoming presidential election and mixed signals on consumer spending are painting a murky picture for retail finance chiefs — particularly those with big bricks-and-mortar footprints,” the news outlet said. “The uncertainties ahead come as the retail industry is already grappling with challenges posed by shifting consumer tastes.”

More Consumer Appeal

A big part of the new retail investments in the short term will likely involve finding ways to make brick-and-mortar retail appealing to more customers, especially members of the millennial and Gen Z generations, who are coming into increasing earning power. Part of that comes from necessity — most retail activity still takes places in brick-and-mortar stores, even as eCommerce rises. But even in the physical retail realm, eCommerce and mobile experiences are becoming more prominent as the latest incarnation of omnichannel retail — that is, serving customers via all the channels they use — becomes a brighter ideal.

For instance, “CFOs will continue to lead initiatives such as loyalty programs, and they will further efforts to allow more shoppers to buy products online and then pick them up in the store,” said Jonathan Matuszewski, an analyst at Jefferies Group, said in that recent WSJ report.

But even efforts that seem like sure things on the surface might not be in this retail landscape that continues to evolve. Take Kohl’s, which has forged a relatively deep relationship with Amazon, one that covers returns, for instance. As some other retailers have started to report, suggest or imply, brick-and-mortar sales in late 2019 did not exactly emerge as a highlight of the 2019 holiday shopping season.

Omnichannel Benefit?

Kohl’s is set to report fourth-quarter and full-year 2019 financial results on March 3. But its recent release about 2019 holiday season sales has left observers skeptical about the Amazon benefit.

More specifically, in a statement from Jan. 9, Kohl’s said that its “comparable sales for fiscal November and December 2019 combined (the ‘holiday period’) decreased 0.2 percent over the same period last year.” That’s not the only bad news Kohl’s gave investors. “Based on the holiday period sales performance, the Company now expects its fiscal 2019 diluted earnings per share to be at the low end of its previously announced guidance range of $4.75 to $4.95,” Kohl’s said.

Some analysts have used that holiday news to question whether the chain’s relationship with Amazon is really paying off — the bigger question, of course, being whether such investments of time, space and money are really worth it going forward in this world of brick-and-mortar retail. But Kohl’s is sticking by its Amazon program, saying it brings benefits.

Kohl’s CEO Michelle Gass recently presented an optimistic view.

According to an account of her recent interview at the NRF show in New York City, an account that came via HFN, “the company’s single biggest move over the past few years has been transitioning from a brick-and-mortar retailer into a ‘customer-centric omnichannel business.’” And Amazon has played a big part of that. “Thinking about its stores differently was what led to Kohl’s recent partnership with Amazon on returns. The move raised eyebrows in the retail community, but Gass said the partnership has paid off. Amazon gets a ‘fantastic, frictionless experience for their customer and we get the traffic,’ she said,” according to that account.

Those are types of issues that many retail executives will focus on in 2020, and the answers to such questions will help shape retail investment patterns for years to come.