A recent report from Moody Investors Service contains some great news for retailers: the industry is healthy, at least “fundamentally.”
The report also notes that the industry is likely making permanent changes in how it operates. Additionally, this adjustment is resulting in retailers filing for bankruptcy at a record rate, on par with the 2008 Great Recession when 18 retailers resorted to Chapter 11 bankruptcy protection.
Although, in 2017, filing for bankruptcy may not be the worst thing. The discount shoe seller, Payless, filed for Chapter 11 in April, and, just four months later, came out of it with a plan to win back retailers.
Payless is focusing a great deal of effort into its website. This move aligns with the Moody report, which states that having an e-commerce presence will continue to drive a company’s growth. However, Payless’s main focus remains on its brick-and-mortar locations.
“People need to actually try things on, and the only way you’re going to do this efficiently is if you have an accessible store,” said Joel Levitin, a partner with Cahill Gordon & Reindel’s bankruptcy practice. “If they’re expensive shoes, it makes some sense for a retailer to send them to you. Amazon probably can’t afford to ship and have you return all or most of the pairs (of less-expensive shoes). It’s just not cost-effective at the lower price point.”
As the Moody reports aptly states, nobody is “immune” from being “caught in the cross-hairs” of Amazon, just ask your local grocer. Yet, Payless has a thoughtful strategy to combat online encroachment, and that’s essential.
Payless is the first retailer to emerge from bankruptcy while several of its brethren still languish in Chapter 11, such as rue 21, Gymboree, and recently Toys-R-Us. Maybe Payless shouldn’t get too cocky, seeing as how a few retailers this year, such as RadioShack and Wet Seal, have filed for Chapter 11 for a second time.
Still, the signs of positivity for the retail industry are there. While department stores and specialty apparel chains are being hit the hardest, some sectors are performing well. Dollar stores, home-improvement chains, convenience stores, and auto-parts retailers are performing the best, while off-price retailers, supermarkets, and office-supply chains are also doing well.
As for apparel stores, off-price retailers, such as Burlington, TJX, and Ross Stores, are achieving success – and almost entirely without an e-commerce platform. This supports Payless’s strategy, but it also emphasizes the importance of a multichannel approach for all retailers that are mid-range and higher.
Consumers that could once be counted on as “loyal” are now savvy price hunters. They have no problem browsing your store for an item they like, checking for better prices on their phones, and then ordering the same item from someone else (often with same day delivery) while standing in your aisle.
To accommodate these always-on shoppers, retailers need to revamp their infrastructure and distribution – and invest in technology. This may mean consolidating several stores into one large “flagship” location or converting retail space into an experiential play space with most merchandise actually warehoused at a separate location.
Higher-end retailers that can’t find a way to reinvent, risk falling by the wayside.
Still, the Moody’ report states there are more “leaders than laggards,” and that’s some of the best news the retail industry has had in a while.
Worried about a retail reinvention? The Trade Group is here to help. Give us a call at 800-343-2005 to see how our grand concepts can help your store appeal to today’s demanding consumers.