BEFORE WE JUMP INTO APRIL, let’s look back at March retail sales. The results were grim: overall sales dropped 8.7 percent for the month, the biggest dip since the government started keeping track in 1992. Stores shuttered to comply with government orders and layoffs in other industries hurt consumer spending. Clothing sales dropped 50 percent and home furnishings and food services/drinking establishments both dropped 27 percent. On the bright side, sales at grocery bounced almost 27 percent, health and personal care grew 4.3 percent, and general merchandise stores grew 6.4 percent.

If the March numbers weren’t brutal enough, Barclays Chief U.S. Economist Michael Gapen told Bloomberg, “the April data is likely to be even worse because for a good half of March, things were still open.” But while it’s been a bumpy past few months, some sectors are hiring and by the end of April, stores were beginning to reopen in states including Georgia, South Carolina, and Texas under special guidelines. Come early May, Simon Malls, the biggest mall owner in the U.S., is set to reopen 49 locations and Best Buy announced plans to gradually reopen its doors to customers with instore consultations by appointment. Meanwhile, other department stores including JCPenney, Macy’s, Neiman Marcus, and Saks Fifth Avenue will offer curbside pickup at select locations, mostly in Texas.

Let’s explore what transpired over the last few weeks.

On the Brink of Bankruptcy

With the vast majority of retail locations closed since March, many retailers are struggling to stay afloat. Having already been on the brink of bankruptcy, many retailers see no other way out.

  • Neiman Marcus is reportedly on the cusp of applying for bankruptcy, but an investor group is hoping to push for a full sale with a competing loan. The group say potential buyers include Hudson’s Bay, owner of Saks Fifth Avenue.
  • Lord & Taylor is exploring a bankruptcy filing following its acquisition by Le Tote in August. The sale was seen as Lord & Taylor’s last chance, so the timing of the pandemic could not have been worse.
  • Macy’s is considering raising as much as $5 billion in debt, using its inventory and real estate as collateral. Since closing its stores on March 18, Macy’s has furloughed most of its 130,000 employees.
  • JCPenney is reportedly in the advanced stages of bankruptcy funding talks with lenders. The retailer is carrying $3.7 billion in debt, but apparently has enough cash on hand to survive months of closures at its 850 stores and sources say that bankruptcy is not necessarily imminent.
  • Gap said in a securities filing that it’s exhausted half its cash savings. The retailer furloughed 80,000 employees, canceled summer and fall orders, and skipped April rent for its closed stores. On March 26, Gap drew down its entire $500 million credit line. Further job cuts, order cancellations, and more cash via new debt financing are all options. They may also permanently close stores where leases can’t be renegotiated.
  • Victoria’s Secret buyer Sycamore Partners seeks to cancel its takeover after Coronavirus. The investor said the company’s decision to close its U.S. stores in March, furlough most of its workers, and skip April rent payments violate the proposed transaction.
  • True Religion filed for bankruptcy for the second time in fewer than three years. Interim CFO Richard Lynch called the filing “unavoidable” after required store closures wiped out 80% of revenue.

The Future of Brick-and-Mortar

Brick-and-mortar retail was already facing many challenges, and COVID-19 will result in a mass closure of physical retail locations. Consumers have been shifting spending from the material to the experiential, and after many weeks of ecommerce buying, post-crisis online retail will surely be the default preference for most product and service purchases. Analysts predict that 100,000 retail stores could close by 2025, accelerated by COVID-19. On the other hand, ‘the big will get bigger’: UBS expects Walmart, Costco, and Target to be among those left standing.

With stores closing, malls as a concept are in trouble. Approximately 30 percent of space in malls is owned by department stores and it is highly unlikely that another retailer will rent those large spaces after they close. The megamalls we thought represented retail’s future have become nearly obsolete in the span of a few months.

  • The Shops at Hudson Yards, part of a $25 billion development, were hardly open a year before the virus hit; in April, 75 percent of Hudson Yards’ tenants refuse to pay rent.
  • American Dream, a $5 billion development, had only opened 8 percent of its total square footage to the public before it closed. It will now allocate 70 percent of its real estate to entertainment and 30 percent to retail; initially, 45 percent of space was dedicated to retailers.

Physical retail stores need to evolve to survive. In the “next normal,” leading retailers will be rethinking their offerings, catering services to generate a new revenue stream, cultivate brand community, boost traffic and dwell time, and strengthen consumer loyalty. Post-lockdown, changed behaviors and new needs will shift the focus of retail stores from volumebased sales to personal added-value services.

Retailers that use smart technology in smart and innovative ways will finish on top.

  • Walmart launched “Neighbors Helping Neighbors,” a new program designed to allow residents to ask for and/or offer help with things like picking up groceries during the pandemic. Walmart spokeswoman Janey Whiteside said the program connects “neighbors to each other so that more members of our communities have access to essential items, while limiting contact and the number of people shopping in our stores.”
  • Everlane launched digital Zoom styling appointments with their styling team.
  • DECIEM is offering a virtual consultation experience on their website.
  • Levi’s is finding early success selling products on TikTok via its “Shop Now” feature. Its TikTok campaign more than doubled product page views of its customized denim items, with a video engagement time twice the platform’s average.
  • Hy-Vee teamed up with DSW to sell shoes through a “digital experience” on Hy-Vee’s website. In the future, the companies plan to open DSW Designer Shoe Warehouse shops inside Hy-Vee locations, but will begin by testing pallet sales of top-selling family footwear at more than 120 Hy-Vee stores.

Meanwhile, other stores, particularly in the grocery sector, are turning their stores into “dark stores,” or local fulfillment centers. With widespread stay at home orders in place, some retailers are voluntarily turning the lights out to accommodate growing online demand.

  • Whole Foods converted at least two locations, one in NYC and one in LA, to dark stores.
  • Giant Eagle and Kroger are operating temporary or permanent dark stores.
  • Bed Bath & Beyond said that roughly 25 percent of its stores in the U.S. and Canada will become temporary fulfillment centers.
  • Kendra Scott is converting its 108 jewelry stores into micro-fulfillment centers.

E-comm Goes Social

TikTok is launching ‘Small Gestures,’ an initiative that enables users to send free, virtual gifts (from a one-month free DashPass subscription to a 90-day trial subscription for Pandora) from brand partners within the app. To send a gift, users can search ‘Small Gestures’ on the Discover Page, tap on a program banner, then select the offer they want to send via message. The platform’s foray into e-commerce might ultimately lead to the purchase of actual merchandise.

The Resale Market Continues to Flourish

Luxury resale hasn’t slowed down. Experts suggest that the pandemic may force luxury brands to partner with resale platforms, providing designers with liquidity by accepting their unsold goods. According to Business of Fashion, Vestiaire Collective had its biggest sales day ever last week. In Europe, its daily sales are 20 percent higher than they were pre-pandemic. Meanwhile, competitor Fashionphile logged its biggest promotion-free sales day last week.

The Future of Fashion Week

Fashion brands are reimagining how and when to show their collections this fall, given that the summer’s Paris couture and men’s fashion shows are being canceled or pushed, and London Fashion Week going solely online.

  • Marc Jacobs announced it would skip New York Fashion Week due to challenges the brand is facing in creating a collection in a Covid-19 world.
  • Saint Laurent stated, “Saint Laurent will not present its collections in any of the pre-set schedules of 2020. Saint Laurent will take ownership of its calendar and launch its collections following a plan conceived with an up-to-date perspective, driven by creativity.” Artistic director Anthony Vaccarello and CEO Francesca Bellettini are imagining a physical-digital hybrid show outside the traditional bounds of the fashion calendar.

Brands Keep Giving Back

  • Sunday Riley hosted a virtual 5K to raise money for the Professional Beauty Association COVID-19 Relief Fund, to support beauty professionals who have been affected by sudden store closures and job loss.
  • The Prada Group announced that they are going to financially aid coronavirus research in Italy, with a focus on investigating the disparity in the impact of COVID-19 on men and women.
  • Ross is donating $1.5 million to local and national organizations providing essential COVID-19 relief services, as well as to the company’s nonprofit partners, including the Boys & Girls Clubs of America and First Book. Additional donations will go to food banks in New York City, Northern California, and Southern California, and to a humanitarian aid organization distributing PPE to healthcare workers.

  • Burger King saluted nurses, and couch potatoes, in its “Stay Home of the Whopper” campaign. Along with an ad, Burger King is waiving all delivery fees placed through its app, and will also support the American Nurses Foundation by giving 250,000 Whoppers to nurses around the country. Consumers can pitch in to the foundation’s efforts by texting “THANKS” to 20222 to make a one-time, $10 donation.

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