As an experienced (old) industry executive, I’m fascinated and very worried while watching the drastic and rapid changes in our business. Some of these have been a long time coming; others were forced by the pandemic. Keep in mind that my perspective is major stores. I believe problems for the smaller specialty stores are even greater since their capital base is smaller. In a recent interview, Chip Bergh, CEO of Levi’s, said the pandemic had accelerated bankruptcies by five years: stores that recently filed were probably on that road anyway but without COVID-19, would have lingered another five years. I could not agree more.
We’ve had a continual and steady shift from bricks to clicks. The standard thinking was this was coming but would take a while so the best solution was an omnichannel strategy. Even pure-play people (like Amazon) were thinking they also needed a physical presence. Now, in a probable over-reaction, no one is promoting brick-and-mortar. I recently visited a major reopened mall in New Jersey with 1.8 million square feet of retail space. Now Sears is gone. Nordstrom is gone. Lord & Taylor is gone. J.C. Penney should be gone. Can Macy’s alone sustain this mall? The food court is closed. It felt like a morgue. How will mall-based specialty chains survive in these mostly empty malls?
This pandemic is training consumers that they can and should shop exclusively on-line. Every day that Amazon package arrives at their door, this behavior is reinforced. Those impulse purchases that used to tempt customers as they walked through stores are no longer happening. Worse still, on-line apparel purchases are now out of need, not desire. Is anyone being rewarded for simply having a great product? PVH just announced the closing of its massive outlet retail business for Izod and Van Heusen. This just keeps going.
The CEO of Barclays, the financial giant, announced that “never again will I have 7,000 people working in one building.” Industry managers have been amazed by how efficient most employees have been working remotely. Despite missing some socialization, this pandemic necessity of working from home has become perfectly acceptable. One apparel owner told me he plans on reducing his five-floor office space in midtown to just one floor, adding that he doesn’t really need even one but can’t emotionally shut it all down. Does anyone really need Manhattan anymore? Does anyone need market weeks? Or trade shows?
A friend in the real estate business told me all his closings are now via Zoom, so don’t even ask what he wears from the waist down. When was the last time anyone needed a suit, dress pants, or a dress shirt? Incredibly, Brooks Brother’s filed. On Monday, Men’s Wearhouse/Jos. A. Bank (Tailored Brands) was at 70 cents a share with a total market cap of $33 million, followed by the announcement on Tuesday of the closing of 500 stores across the company. Does anyone really believe dress clothing is ever coming back?
Some stores that have re-opened are doing well, based on pent-up demand and steep price promotions. But what will happen when the PPP money expires? What happens if Back-To-School doesn’t happen? Walmart and Target stayed open as essential businesses since they sell food. I fear we’re training Macy’s/Kohl’s/J.C. Penney shoppers that it’s just fine to buy apparel at these stores.
Sourcing is changing. The goal to ‘Shop America’ will never work for the apparel business: the consumer will not accept the much higher retails plus we now have almost zero infrastructure for textile/apparel in the United States. China is absolutely a problem. Vietnam is full and I’m certain will soon lose their favored status. Where will future product be made? All of this is exacerbated by the traditional stakeholders: the banks, vendors, Asian suppliers, and others’ interest is in keeping these businesses alive. Most significant are the shopping center owners who, facing no replacements for empty stores, are actually buying bankrupt retailers. These stakeholders are disturbing the evolution of the failures.
As I review this note I become even more concerned. Absolutely our industry is having a huge sea change. This is a perfect setting for a disrupter. Something will happen. I just have no idea what it will be.
Fred Rosenfeld is an industry consultant; he can be reached at firstname.lastname@example.org.