One Year Later, the Market Update
We are actually a little over halfway through 2021, but you get the idea. Where were we, and where are we now? Where to begin…
Let’s flashback to July 2020 when we didn’t know much about COVID-19 and things were pretty scary and unknown.
This headline sets the mood: “The Impending Retail Apocalypse”1
It’s an inspirational piece that cites a report by UBS that 100,000 US brick and mortar stores will close by 2025, and tells us:
“Malls are going belly up. Familiar names like J.C. Penney, Neiman Marcus and J. Crew have filed for bankruptcy. Increasingly, Americans' shopping choices will boil down to a handful of internet Everything Stores and survival-of-the-fittest national chains.”
Easy tiger! That’s a lot right there.
First of all, kinda? It would have been a lot more accurate to say ‘some’ malls are going belly up. They had fundamental issues that were plainly obvious before the pandemic struck. On the other hand, well positioned malls with relevant tenants have not. In fact, many of the better malls have used this past year as an opportunity to clear out much of the dead weight and re-tenant with relevant brands that better connect with today’s marketplace.
And yes, those mentioned national chains had filed for bankruptcy, but the statement that “a handful of internet Everything Stores and survival-of-the-fittest national chains” is flat out wrong. In fact, new store openings are outpacing the closures.2
OK, once I got past the doom and gloom out there, I refocused my efforts of understanding the state of the world by diving into tons of articles and hundreds of Industry Zoom calls. I kept hearing two terms over and over.
1. The Roaring 20’s
2. Revenge Shopping
The Roaring 20’s because after the 1918 Spanish Flu outbreak (our last pandemic), the economic bounce back led to the Roaring 20’s.
Revenge Shopping because there would be so much pent-up demand (and also a lot of government money flooding into checking accounts), that when the pandemic coast cleared people would burst through retailers’ doors with fists full of cash raised over their heads ready to buy anything and everything they didn’t buy in during the pandemic.
Both of these things happened.
2019 was a big year for retail. Guess what, 2021 is bigger3.
Ok. But all of that was internet sales, right? People aren’t actually shopping in stores, right? Not really. Lululemon is a prime example of how nimble and relevant retailers have benefitted during the pandemic.
“Lululemon saw big gains during the pandemic. The company’s e-commerce business more than doubled during fiscal year 2020, growing by 92% during the fourth quarter alone. However, the retailer is still bullish on stores. It plans to open 40 to 50 stores globally throughout the rest of 2021. “We have a number of guests that only shop our stores, and we are focused on re-engaging with them at the frequency they shopped with us before Covid-19,” CEO Calvin McDonald said during Lululemon’s last earnings call.
Furthermore, Lululemon’s acquisition of the fitness device Mirror is a big part of its new retail strategy. The retailer began displaying the device in a number of stores following the $500 million acquisition last summer.
Now, the company says the shop-in-shop strategy will reach about 200 North America stores this summer. The investment is part of Lululemon’s plan to scale Mirror’s physical presence even further. Throughout 2020, Mirror brought in $170 million in revenue. That sum is expected to grow by 50% to 65% — reaching $250 million to $275 million — over the next year.”2
So where are we today? Well, the fact is, retail vacancy is slightly up4, but only slightly and that tide seems to be turning. Besides the headline grabbing discounters that are gobbling up space, many other categories such as grocery stores, restaurants, health and fitness, e-commerce, and experiential tenants are actively competing for space and opening with great success.
For the retailers that understood how to compete in the pandemic/multi-channel/omni-channel climate, there is plenty of blue sky ahead.
Sources for this Article
4. https://www.morningbrew.com/retail/stories/2021/06/28/race-postpandemic-retail-space-heats