Happy New Year! On to 2021…bold predictions for a better or simply a “normal” year!

Happy first week of 2021! I hope you all had a safe, happy and most importantly healthy holiday season. While the latest trip around the sun has challenged us many ways, there is a light at the end of the tunnel and hopefully better times ahead. Better, simply meaning more normal times! But let’s look at some BOLD predictions for what 2021 might hold in store for us.

Blanket prediction, with multiple Covid 19 vaccines having been approved and now getting into arms, the globe will move towards controlling the virus and allowing the world to put this pandemic behind us. Let’s hope this comes to fruition sooner rather than later. But what else can we expect?

• Stores are not dead…they’re continuing to evolve. Okay I might sound like a broken record, and yes this trend is not unique to 2021. But what is going to be different is the impact Covid 19 had on retail as a whole and stores in particular. It has been well documented of how the lock downs adversely impacted physical stores, restaurants, bars and a plethora of service business that could not be done over Zoom, Teams or Google meet. From a retailer perspective, 2020 accelerated a number of store shuttering, by some accounts doubling the closures from 2019. While brands like GNC, Pier 1 and Chico’s are closing stores, you still see other players such as Amazon, Warby Parker, Bonobos, Indochino and Peleton opening physical locations. We are not seeing the end of the store, we are seeing the accelerated evolution of how the physical store is being leveraged. Yes it will continue to be used to attract and drive traffic to come in and acquire inventory. But will take on an ever growing role – service center (think Apple genius bar), a return center (look at Kohl’s and what they have done with Amazon) or a micro fulfillment node (look for grocers to push this usage). As we emerge from the lockdowns, savvy brands and retailers will continue to rethink and retool how stores fit into their overall strategy. They will not be blindly shuttering those assets.
• Sustainability and the circular economy drives consumer behavior. There is no doubt that what we saw in 2020 was a massive acceleration when it came to ecommerce. And with those mountains of online ordering creating a tsunami of goods being delivered to our front doors, this will invariably lead to a return tidal wave of coming the other way. The amount of returns and how retailers and brands will handle this volume is potentially more than a headache for the industry. Forward thinking retailers will see this as part of a larger theme – sustainability. Returns are a part of the circular economy that has been growing. It is not only the amount of product coming back into the supply chain, but also how retailers will strategically address this as their overall go to market. How do retailers and brands ensure that sustainability is not an afterthought but is integrated throughout the business? Consumers’ sustainability awareness, are deciding factors in how they spend their money. Retailers and brands need to keep this in mind with regards to how they approach all aspects of their businesses – from sourcing to returns.
• Automation gets closer to the consumer. Yes I know, the robots have been here for a while now. But we will automation start getting closer to the end consumer. Granted robotics have already made their way into our homes – see the Roomba. When it comes to our supply chains, automation has been a presence for decades. Starting on the manufacturing floor and now pushing into the sourcing, warehousing and distribution parts of the supply chain. Look for automation to push into consumer spaces in 2021. From sanitization robots keeping public spaces hygienic, robots focusing on security and automation that will function amongst the public to complete order picking or store replenishment. We will also see more usage of automation in the last mile fulfillment, from Kroger to DHL, companies will seek to leverage autonomous robots and drones, to get our stuff to us when and where we want it. Look for automation to become a greater part of our lives, from our homes, to how we get products delivered to our doors and when we are out in public. Hopefully this is not the start of Skynet…
• Not your parents’ point of sale. My first prediction is the store is not going away it is changing…same can be said about point of sale (POS). The days of static, fixed cash registers has long been eclipsed by mobile and cloud based POS. But even this is evolving. POS will become untethered. Only requiring an internet connection and digital interface, modern POS will occur almost anywhere these two tools are present. You might say, so what, we already knew this…but this will expand into social media. We are already seeing a surge into Facebook, Instagram and TikTok to allow for transactions to occur on these platforms. We are finally seeing it come to content via your television (I remember working on a report in 1998 while at Forrester talking about this possibility). We are not far from science fiction shopping where QR codes and other scannable objects will be sprinkled through out our physical world allowing us to interact and shop almost anywhere. Advertisement on a billboard, scan the QR code to purchase. Walking through a park and there is a nice flower arrangement in a planter, take a picture via the PictureThis app and connect with local florists that can sell you the arrangement or individual plants. Our “limitations” to participate in commerce will continue to crumble, as POS becomes omni present. Retailers and brands need to be prepared to service demand anywhere and anytime…in locations not imaginable a few years ago.

Let’s hope that 2021 proves to be all that we hope for. Especially with regards to a wide spread vaccine. Captain obvious comment – but the ability to spread the vaccine globally will be a massive driver to getting the Covid 19 nightmare behind us. Fingers crossed this continues to march towards reality in the first half of 2021. What we did learn from 2020 was the major shock to our system accelerated the thinning of the herd. It also will reveal with brands, retailers and supply chains are best prepared for 2021 and beyond.

Happy New Year to everyone. Here is to a boring and normal 2021.

Amazon fulfillment center coming to a mall near you. Not as bad as you think.

There has been some recent reporting that Amazon is in talks with mall management companies to take over some of the space from anchor tenants. Click here for a recent piece in the WSJ. Legacy tenants such as Sears and JCPenney. Legacy names that have fallen on hard times and faded away from the mainstream retail conversation. Many are fretting that this would be a terrible move for malls, letting the very player that has put these malls under duress come right into their house! Set up a fulfillment center, and just crush whatever life there is left for these malls. Not so fast!

I’m not convinced. First, what choice do malls have? The days of having mega retailers act as the anchor tenant have gone. The internet made sure of that. The advent of the World Wide Web meant that the mega shopping malls, were just a click away. I remember working at Forrester in the late 1990s, I had a large mall owner as a client. We had a conversation that went something like this:

Mall owner: “We are really excited about the web. We want to create a portal, where the brands and retailers that are in our mall could be part of our portal. Customers can then access our site and get to their pages.”

Response: “The internet is that portal. Why would you need to go through a secondary portal when I can get to those brands and retailers directly?”

Needless to say the silence after that conversation was deafening. This was retail thinking driven by a brick and mortar only mentality.

So fast forward 20+ years. Malls are taking it on the chin. They are scrambling to figure out how to get foot traffic into their physical locations. Many have turned to more experiential type tenants – restaurants, salons, gyms, medical offices or amusement park style operators (visit the Mall of America in Minnesota for a true experience). Some have looked to add residential inventory as well – or built around a larger attraction such as a sports venue. The Atlanta Braves’ new baseball park, Truist Park, is built with an outdoor mall and residential space – the Battery.

But many malls are still stuck with massive anchor footprints, a reminder of the Jurassic time in retail. Some are looking to bring grocers into those spaces. A local mall in the Boston region added a Wegmans a few years ago, hoping to attract foot traffic. And now, some mall owners are considering bringing in their biggest nemesis of all – Amazon – into that space. Here is why that might not be as bad as some believe:

• Create some buzz – want to bring your property some buzz? Let Amazon put up a distribution center. The local media will certainly pick up on it. There will be news reports on the automation that Amazon will be using to fulfill orders, clips of the boxes zipping around the conveyors and on Kiva Robots. There will be talk of how many employees the fulfillment center will now employ.
• Amazon employed foot traffic – maybe a small victory, but any mall should be happy to have bump in terms of having “guaranteed” foot traffic as Amazon employees will be present through out the day. There is the potential for these employees to become patrons of the other services within the mall. Maybe that is fool’s gold. But at least there is some opportunity to have a pseudo captured audience.
• Incentivize Amazon to do more than simply deliver – Malls who look to Amazon to take some fo the real estate space, should work with Amazon to not simply use the space to do last mile order fulfillment, but also BOPAC (buy online pick up at curb). Think of it. What do malls have other than a lot of physical store space? Lots of parking and are usually located in convenient geographic locations. Amazon could offer customers the ability to come and pick up their orders as well. Create designated curb side pick up spots, create spots where patrons can pick up merchandise but also park for a period of time in case they want to also go into the mall to pick up something. Could Amazon take some of the real estate and create seasonal stores – small footprint stores with the high demand merchandise and other Amazon products. Much like what they already do with their pop up and other physical stores now. Finally leverage this footprint to process returns. Maybe once the patrons return items, they might also stop at the food court or see what is going on in the mall.
• Leverage the Amazon fulfillment know how – This might be a stretch, but what if the Amazon fulfillment anchor tenants, also took on last mile fulfillment for the other tenants on the property. Amazon is already working on becoming a 3PL, delivering and fulfilling for other brands and retailers. Imagine if as an anchor tenant, Amazon worked with the other tenants to deliver merchandise from the stores. Either last mile fulfillment or BOPAC. Of course they would make their money in the services they offered. While the tenants would be able to take advantage of the fulfillment infrastructure and knowledge of Amazon. This may feel like giving up even more to Amazon, but sometimes if you can’t beat them, join them.

While I am sure that mall owners would prefer that their anchor tenants were not named Amazon and that they could still draw the foot traffic needed to make the property profitable, those times are in the rear view mirror. Mall owners need to face today’s reality. Having an anchor tenant such as Amazon, using the real estate to fulfill eCommerce orders, might be one of the few ways to get someone to pay for that space. But if you can work with them to offer other services such as BOPAC or become a returns hub, you now have new ways to getting people into the mall.

Yes Amazon will continue to eat at some of the mall’s core business, but might as well try to profit from their physical presence. It isn’t a pretty relationship, but it might just give malls some extended life.

Vintage retail? Another reminder of the circular aspect of inventory.

I read an interesting piece in the Wall Street Journal last week about the rise of vintage retail. The concept that hand me downs are now becoming cool! Is this a blip on the retail radar or another indicator that consumers’ attitudes continue to evolve. The latter.

We have long talked about the notion of a circular economy when discussing retail. The retail supply chain, as most supply chains, is no longer a simple linear process. Rather it has become a network and the inventory no longer simply flows in a linear pattern. Orders are fulfilled from inventory that is all over this network – store, distribution centers, factories, partners to name a few. The inventory that satisfies these orders also does not end its journey at the final consumer, but its life cycle has increasingly extended beyond that end consumer. On the contrary we are seeing an increasing move towards finding ways to reintroduce inventory back into the supply chain, whether to be more environmentally conscious or to harvest a new source of working capital.

What the research from Accenture is highlighting is another avenue this inventory is coming back into the supply chain. Now under the guise of being vintage goods, a one of a kind unique item. This type of item is differentiated in the fact that it has been used, it is a bit worn and has a history. It also appeals to the desire to be more environmentally friendly. Rather than discarding the item into a landfill, it gets a second life.

So what does this mean for retailers? Continue to think like your consumer. The majority of your consumer will probably still want to purchase the item that you are selling, but is there an opportunity to offer a line of vintage items? Not necessarily from your brand. Does offering these items offer your consumer an extra incentive to come visit your physical store? Adds a treasure hunt experience to attract foot-traffic. Could you encourage exiting customers to trade in items for credit or discounts on new purchases? This might be a source of inventory that you could then position in your vintage section. Maybe even see if your consumers would trade in items from other brands but fit your target persona’s wants.

Vintage and reselling inventory is not for every retailer. But every retailer needs to adopt this mind set – it is all about the circular economy. What can a retailer do with the secondary market? Can they appeal to a desire for vintage items? The retail supply chain is no longer linear, it has become circular. The rise of vintage is another indicator that retailers can ignore this at their own peril.

Customization: more than monograms and pant hems.

We as consumers have demanded and started to expect that our brands and retailers provide us products that are personalized. Beyond simply adding our initials to the sleeves of our Ralph Lauren shirt or having to hem our new Hugo Boss suit, product customization is moving towards a place where the consumer can dictate what they want from the brands and retailers.

All one has to do is look at how we can customize our automobiles – BMW’s Spartanburg factory could run a full year worth of production and never produce the same car twice. Or how we can call up our sneaker companies such as Adidas, New Balance or Nike to create customized footwear for our enjoyment. The market is also seeing the rise of brands looking to create bespoken clothing such as Indochino, Suit Supply or MTailor who look to create suits, shirts and other items simply by taking your measurements over their apps. Of course these services are not without some growing pain issues…I have two Indochino suits that both have a sizing story associated with them!

Indochino suit…looks good. But it took some work to get here…

While customized products are becoming more of the norm, what brands and retailers need to starting thinking about goes beyond simply products. Customize the entire experience for consumers. The inventory is only a part of the overall retail ecosystem. Consumers expect greater information about their purchase, flexible fulfillment and friendly return policies.

• Greater information, greater insights expecting by consumers. The experience for consumers starts much earlier than it did 20 years ago. Brands and retailers need to be there when that journey begins. That means rich data, entertaining information and deeper knowledge sharing. Where did the product come from? How was it manufactured? What was its journey to its final destination? Can I customize this information – shopper A might be more environmentally conscious so give her lots of data on the sustainability efforts, while shopper B is more interested in how others use that product so give him YouTube videos or Instagram pages of how the product is being leveraged.
• 2 Hour fulfillment? Sure as long as it is one option. Retail giant Amazon has trained us that the 2 hour fulfillment window is nirvana. Is it really? While instant gratification, in this case 120 minute, is a driver for consumers, it is not always the right option for fulfillment. Savvy brands and retailers are starting to realize that they need to rethink this, rather than chasing Amazon, set their own strategy when it comes to order fulfillment. It is hard to compete when Amazon’s fulfillment costs, as they have only continued to rise to the tune of $34 billion annually. Fulfillment needs to be seen as part of the customization process. Want it delivered in 2 hours or in a month, sure. Need it shipped to a local pick up locker for you to retrieve after work, okay. Want it shipped to your vacation hotel next week, absolutely. Retailers and brands need to start thinking about customization in this context – when I want it isn’t always within 2 hours.
• Circular life of inventory demands for better returns. Returns and the circular aspects of retail are becoming of greater importance. Rather than viewing this as a cost center, savvy brands and retailers are seeing returns as a way to pull back working capital into their supply chains, as a touch point with customers and as overall good business. Retail giants such as Home Depot still view returns as a cost center, trying to minimize the overall cost of processing the returns as much as possible. A short term cost cutting strategy. While other retailers such as Kohl’s has been willing to take the chance, and dance with the devil, allowing Amazon returns to be processed within their stores. Inviting the biggest disruptor into your store! Smart. Get those customers into your physical store, allow them the ease of returning that Amazon item and yes try to sell them something from your inventory. I have heard customers say, “well I needed to get product A, and had to return this Amazon item, so might as well do it all at Kohl’s.” This is simply the beginning. More retailers will realize that they need to offer simple and customized returns for their products, sometimes it might call upon partnering with other players in the space.

Of course the drive towards greater product customization will continue. Whether it is your BMW X5 or your new pair of Adidas, we expect our brands and retailers to try to amaze us by better meeting our personalized needs. But it is simply not in the product, but in all that surrounds the retail experience.

The circular life of retail – good for the environment and a lifeline for traditional retail.

81 pounds of clothing per year, is what the average American discards. That is per person, not per household. That’s like discarding my 11 year old (he weights around that much). Not something I recommend. And this is happening every year. That means 26 billion pounds of textile waste end up in landfills. In a world of fast fashion and disposable products, it is easy to see how the environmental threat becomes real. Consumers have come to expect that they can access a plethora of apparel, from a host of brands and retailers. Of course our friends at Amazon aren’t going to let an opportunity to disrupt an industry pass them by, and they are entering the fray. So what does this have to do with the circular aspect of retail?

According to wikipedia, a circular economy “is an economic system aimed at eliminating waste and the continual use of resources. ” Increasingly we are seeing this playing a role in retail. We have long touted companies such as Madewell with their exchange program – bring in a pair of used denim and get money back towards a new pair. Consumer electronics firms, such as Apple or Dell, have long embraced the notion of taking back devices such as laptops and mobile phones and either refurbishing them to resell on the secondary market or harvesting them for their valuable parts. So what else can retailers do with the circular life of their inventory?

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First, it makes business sense to play a more active role in the environment. Our emerging economic power groups – millennials and generation Zers – are voicing their desire to purchase from environmentally conscious brands. These buying cohorts will only grow in influence, their desires to do business with brands that see sustainability as a key part of their business, not simply a marketing ploy, will be rewarded.

Second, retailers should look to this circular economy to drive foot traffic. How? Obviously brands like Madewell drive traffic for those returning the used denim. But other vendors can start exploring leveraging this secondary market to drive traffic. Banana Republic in the Lenox Square mall in Atlanta, offers their usual merchandise within the four walls of their store. However, they all have vintage second hand luxury items for men and women. Louis Vuitton duffle bags, Gucci wristlets or Prada scarfs are all displayed around the store. Smart move by the retailer. The secondary market for luxury items is a growing space – a recent article in the Wall Street Journal touts it as the “Rise of hand me downs.” For traditional retailers as Banana Republic, it is a great lure to get folks into the store. The inventory is constantly changing, aspirational for most and adds a touch treasure hunt to the traditional allocation within the store. The same is with Kohl’s who is accepting more Amazon returns within their own stores. Adding a component of the circular economy within their four walls, and driving foot traffic to their physical stores.

Finally, the after market part of the retail supply chain offers retailers a touch point with the consumer. It is a chance to understand the consumer and their needs – why are you returning the item? How can we ensure we satisfy your needs? Can we ensure we build on our life time transactional journey? These are all pieces of the equation that are driven when retailers can physically interact with these consumers. Something that can be encouraged to happen by savvy retailers and brands.

As consumers are being trained to view much of what we are acquiring as “disposable.” Even when it comes to large items such as appliances or cars, we do not view them as lasting a life time. Rather we often times find or selves counting down the days until we find the next replacement of our shiny object. Savvy retailers will figure out how to take advantage of this part of the circular economy of retail.