Retail

Retail Spending Recovers, But What Happens Next?

shopper with face mask

This week’s 17 percent bounce for retail sales was a welcome bit of good news. Unfortunately, it will not be sustainable nor does it indicate the complete return of consumer spending. Time will tell if the number looks better on paper than it does in practice. However, it does show that consumers have spending power. As such it’s worth considering the questions raised from this comeback.

Question one: Now that consumers have been shown to spend and now that the shift to Digital 3.0 looks to be permanent, what happens to eCommerce competition? It’s not so much that so many new arrivals including luxury brands like Gucci and Ferragamo have embraced eCommerce. The factor to watch is the urgency in which they go after it. If the new converts to eCommerce are aggressive about growing their businesses, it could lead to growth in online media and more choices for the Amazon-obsessed consumer. A good example of the non-urgent model is Dick’s Sporting Goods. Its first quarter was disastrous as lockdown measures kept its stores closed. However, its digital business went up 210 percent. But instead of tripling down on digital the company is splitting its bets between eCommerce and off-price brick-and-mortar with the Overtime With Dick’s Sporting Goods outlet model.

And then again, some brands are coming to eCommerce for a presence only. For evidence, see this quote from the CEO of ultra-high-end Swiss watchmaker Ulysse Nardin from The Robb Report: “I see the website as the continuity of what we’re doing at brick and mortar,” Patrick Pruniaux said in that report, adding of the company’s website, up in the U.S. and U.K., “When someone puts a watch in a basket, they may not go to check out and that’s fine. If the e-commerce experience is good, it may continue in store.”

The second question is: “How high is up for social selling?” When a brand like Macallan opens an eCommerce store and invites its shoppers to have a social experience through it, it’s a trend worth following as brands try to catch the Digital 3.0 wave. Social selling become a way for brands to be digital and direct-to-consumer at the same time. By pushing the experience and the purchase onto social platforms the process is contactless, contained and manageable for brands that are new to the game.

“One of the best things about social commerce is that it all takes place on the social platform, including your shopping cart,” says fulfillment company G2. “That means you’re working on usually one page and interaction, and you’re getting some customer data from the social site. People stay on the platform, too, so they aren’t forced to decide between buying and keeping reading what’s in their feed. Making shopping seamless and frictionless removes hurdles for customers and makes the experience more enjoyable.”

The third question concerns those stores that were deemed non-essential. What will the apparel store or bookstore of the future look like? The answer can be found in the experiential retail movement that was so hot before the pandemic. And here lies a conundrum. One of the classes of trade that is doing well right now is fast, casual fashion — the Ross, TJ Maxx, Burlington model. On the surface, it makes no sense. The clothing is in bins and racks and the “safe and clean” priority set by most retailers seems to be devalued. But consumers are flocking to these stores as they reopen. But there’s also a lesson here for retailers that want to embrace it. Basically it says to merge cleanliness with operations experience. That intersection, for now., might be the future of experiential retail.

“Walking around essential businesses today, you see many makeshift efforts to reduce contact and limit crowds — devices like tape on floors, plexiglass shields, and hastily written signs on colored printer paper,” says a recent article in Harvard Business Review. “These methods are cheap and easy, but they do little to lessen fear and manage the psychological state of their customers. Retailers outside of the essential category need to think about space as a service — a performance, where “front of house” is serene, while “back of house” supports the complex maneuvers that occur on stage.”

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