The current stage of the pandemic – perfect storm that it is – is producing some serious cross-currents. And several of them are affecting the retail industry.
The most important is the current progression of the pandemic itself. Not consistent and certainly not in check, COVID is raging in a majority of states, while the others hang on in hopes of avoiding the second wave. And judging from the continuing proliferation of videos on social media, the ability for retailers to enforce even the minimum safety standards of mask-wearing is risky business for employees. Until COVID is in check and a vaccine is developed, no amount of retailing genius is going to repair consumer spending, which is up, but walking on colt’s legs. (See the latest PYMNTS research for more details.)
The second is the stock market – which, for retailers, has become completely untethered from reality. It is setting records, while the economy and consumer spending have been dependent on government stimulus checks and an arguably false sense that the economy will somehow throw off its COVID chains any day now and start firing on all cylinders. While the unemployment rate has settled around 10 percent and big retailers are declaring bankruptcy with disturbing frequency, the stock market is where most people would like to be right now: back on New Year’s Day, 2020.
That’s not to say the stock market isn’t important. Psychologically, it’s a benchmark of economic health, even if it is divorced from reality. And because it hasn’t thrown corporate valuations into the ditch, hopefully, companies have been able to bring back furloughed workers.
That line of thinking also leads to the counter-currents of retailing. It’s a sure bet that even though the stock market is spiking overall, that doesn’t include some of the brick-and-mortar retailers that are publicly traded. It begs the question of whether they would rather be privately held right now. Ask the CEOs of Nordstrom, Macy’s or J.Crew if they wish they didn’t have to deal with stock analysts and angry shareholders this week. Retail and Wall Street have never had an easy relationship, and that’s largely due to customers.
As customer-centricity guru Martha Rogers says: “Without customers, you don’t have a business. You have a hobby.” It’s hard to make enough money to keep Wall Street happy with a hobby. It’s customers – not stock options, or even happy stockholders – that are the precious resource for retailers. But in the process of becoming beholden to stockholders, many retailers have taken their eye off the ball, and have gotten caught up in a game they can’t win in the current climate.
Playing to Wall Street does two things. First, it makes a company subscribe to short-termism. Example: The RealReal. The company started out with an innovative business model. In short, it was to open a limited number of stores in major markets – Los Angeles, New York City and San Francisco – to sell high-end consigned apparel, jewelry and accessories, to complement its eCommerce focus. The company went public with four stores and a niche eCommerce business. It seemed like a great idea at first, but the disappointing results from its most recent quarter have exposed certain elements of its business model.
That model depends on the suppliers, which in this case are the small companies and individual sellers that consign goods. That supply chain has been cut back due to the pandemic – especially in New York City, where citizens have scattered to various summer destinations. Instead of waiting and being patient with those suppliers, The RealReal now has to hustle and fix things immediately. It will proceed with plans to open its Chicago store, but it’s a sure bet that the market will not look kindly on spending money in this climate.
Retailers need to play the long game right now. They need to craft strategies that get them through this current crisis and then come out whole so they can survive and thrive when the industry finds some consistent footing – which, for brick-and-mortar and high-touch supply chains, will depend on a vaccine.
The second thing a public company must do is deal with a variety of stakeholders instead of just one. Today, the CEO of a publicly held retailer has to take care of debtor sources, employees, shareholders, societal concerns and customers. Sometimes those priorities can create cross-currents. For Macy’s or Nordstrom or any department store, this mix means discounting. It means blowing out inventory at any price to prove that it can, because department stores count on seasonality. The customers (in the short term) see value benefits – but they aren’t shopping for spring and summer clothes anymore. Despite the pandemic, fall fashions will arrive. The customer must be satisfied with the experience – and a satisfactory customer experience is very different from a satisfactory shareholder experience.
That might be the strongest cross-current of all. At a time when retailers need some calm and focus, the best way to do that is to focus on the customer at all costs. Some retailers have been able to accomplish that while publicly trading quite successfully. Amazon, Apple and brick-and-mortar retailers that have avoided staggering debt like Dillard’s are good examples.
The customer – even among fears of COVID – is the most important thing. That was the case on New Year’s Day 2020, and it will be the case on New Year’s Day 2021.