US Retail Innovators to Prosper in Post-Coronavirus Recovery
Economic fallout from the coronavirus pandemic has battered a US retail industry already experiencing seismic change. But companies with effective, multichannel consumer models in place before the crisis will compound these advantages on the other side of it.
The US retail industry—from groceries to jewelry—has undergone major structural change over the last decade. Amazon’s dominance around product information, availability and convenience has long raised the bar on consumer expectations and continues to fundamentally shift how retailers view their store-to-customer relationships. For equity investors, select companies that have adapted well to these changes deserve a closer look.
Pandemic Store Shutdowns Reflect Legacy Problems
The sea change in how consumers shop has left many retailers behind. Since 2010, over 41,000 US retail locations have closed—40% more than over the prior 10 years, which included the global financial crisis of 2008–2009 (Display, left). And more stores will stay closed after the pandemic. Our analysis estimates that one in 10 of the roughly 108,000 stores run by the 74 largest retailers may never reopen in the post–COVID-19 world (Display, right). Before the crisis, this 10% permanent closure would likely have taken three years to reach.
J.C. Penney, J.Crew and Neiman Marcus are clear testaments of what happens when retailers stick to old ways. Even when they lost money, these “anchor store” retailers got by with a core model of low fixed operating costs and a steady volume of in-store customers. This legacy brick and mortar model is not ideal in the new retail environment, and flat out can’t work in a global pandemic when you’re forced to turn away shoppers at the door. By late May, J.C. Penney, Neiman Marcus and J.Crew had all sought Chapter 11 bankruptcy protection.