Academy Sports & Outdoors store in Orlando, Florida.
Academy Sport & OutdoorIn the early days of the Covid pandemic, more than 250 stores closed for weeks. But when lockdown orders subsided and those stores reopened, many customers still felt uncomfortable coming into the house to buy camping gear or a new basketball, according to CEO Ken Hicks.
Items such as bicycles and treadmills that the Academy sells have been in high demand as Americans want to chat outside or stay fit without the gym. However, the academy had to find a better way to get their products into the hands of customers. The answer was roadside pickup.
In less than five days, the retailer put together a plan to offer the service nationwide, Hicks said. Parking lots have been designated as pick-up locations, staff reassigned, and paging devices have been issued to notify staff when buyers arrive. The result: 30% of the academy’s online and in-store cash & carry purchases are now often accessed by roadside customers on the day of purchase, the CEO said.
The academy has started to think of its stores as “delivery points,” Hicks said in a recent interview. The back rooms are stocked with additional goods to fulfill web orders. More items are being shipped straight to buyers’ homes from stores rather than warehouses, he said. Even with ecommerce orders up nearly 96% during The third quarter ended on October 31stMore than 95% of the Academy’s $ 1.35 billion in revenue came from its branches.
“We had to change our view of labor input and adapt in a manner similar to how we did in grocery stores,” added Hicks. “We now have people whose job it is to go around and pick up orders for us.”
The Academy is far from being alone in making these adjustments. Retailers out target to Nike to Macy’s For years I have reckoned on what the purpose of their businesses will be when consumption shifts online. This year this development took a leap forward.
For years, the rise of e-commerce heralded that retailer’s businesses would be out of date. However, the requirement for fast same-day delivery and roadside pick-up has given the brick and mortar store a new purpose. Proximity to the customer is a decisive advantage. Stores are being converted into mini-warehouses to place online orders in a fraction of the time – and at a lower cost. And while stores in closed malls close due to slower pedestrian traffic and falling sales, retailers like gap and Abercrombie & Fitch invest in opening smaller locations and outside of shopping centers.
“The ecosystem of a business is going nowhere,” said Joel Bines, managing director of consulting firm AlixPartners. “At the macro level, business remains vital and will be the epicenter of consumer activity for the foreseeable future.”
More than three quarters of US retail sales are still made in stores. Even with this year’s increases, only about 14.4% of all spending was online in 2020, and eMarketer estimates that should climb to 19.2% by 2024.
The pandemic has accelerated the shift. According to John Blackledge, an analyst at Cowen & Co., what would have happened in five years in just nine short months has evolved.
EMarketer estimates e-commerce sales this year will be $ 794.50 billion, up 32.4% from 2019. Before the pandemic, the research firm forecast an 18% increase.
With consumer demand online soaring this year, companies processing e-commerce orders from their stores rather than warehouses resulted in fewer goods on shelves and no more sales.
Urban Outfitters In the three-month period ending October 31, nearly 1 million items were delivered from its stores to customers’ homes. Nordstrom Nearly 25% of online orders, valued at $ 1.6 billion, were in store goods.
“We believe there are a lot of runways – not just to connect the digital and physical parts of our business, but to leverage the physical assets that we already have,” said CEO Erik Nordstrom during a November earnings call. “To take advantage of these existing assets … we need to serve a lot of customers without us having to make additional investments.”
Increasingly, buyers are expected to demand these convenient options. Cowen predicts the percentage of online retail orders picked up with a roadside option could increase from 26% in the second quarter to 30% by the end of this year and 35% by the end of 2021.
Some companies are testing even bigger transformations. Two Macy’s department stores – in Dover, Delaware and Littleton, Colorado – are being converted into pick-up and online order fulfillment centers, not malls. Walmart used four locations as e-commerce laboratories, for example to try out a contactless checkout process.
“This year ushered in a new era in retail and customers are demanding that retailers present themselves differently,” said John Crecelius, senior vice president of associate product and next generation stores at Walmart in the US.
Place, place, place. This has always been important in retail. But the most desirable place is no longer the mall.
“Our strategy is based on moving away from traditional malls,” said Sonia Syngal, CEO of Gap, on a profit call last month. “We have sharpened our real estate strategy so that our customers can shop in our branches today.”
The clothing retailer continues to open Old Navy and Athleta stores, mostly in open-air malls, but plans to close 30% of its locations in Gap and Banana Republic in North America by the end of fiscal 2023. By then, he is expected to drive around 80% of sales in off-mall and online stores.
A Best Buy employee makes a shopping cart for an online customer at the South Bay Center in Boston on November 10, 2020. Retail trends are changing during the Covid-19 pandemic, and Best Buy is now running its Christmas sales on deals earlier in the month to keep the crowd going.
Boston Globe | Boston Globe | Getty Images
Perhaps no retailer has touted its presence outside the mall more than KohlsApproximately 95% of 1,100+ stores are outside of closed malls, which is what retailers like Macy’s, Nordstrom, J.C. Penney and Dillards.
“They are very practical and very spacious,” said CEO Michelle Gass on a recent media call. “For customers who might want to order digitally, but would like this product on that day, there is our online purchase, which is picked up in the store [option], or now our roadside option. … I think we have a lot of flexibility and agility to continue to manage this successfully. “
Kohl’s off-mall positioning was a key factor in promoting makeup retailer Sephora is on track to open Sephora stores in 850 Kohls stores by 2023. Sephora had been in partnership with J.C. for more than a decade. Penney in hundreds of shopping malls.
“In my opinion, the future of retail in America is the ability for shoppers to park and get on and off right next door [buy online, pick up in store] Order, “said Jean-Andre Rougeot, CEO of Sephora Americas, in an interview.” That’s what retail is about. “
Meanwhile, Macy’s is looking for shopping centers smaller stores, including the new Bloomingdale locations.
“We continue to believe that the country’s best shopping malls will thrive,” CEO Jeff Gennette said of the move in September. “However, we also know that Macy’s and Bloomingdale’s have great potential [off]-small and in smaller formats. “
Target led the way to success with smaller-format locations about a third the size of its big box stores. The 100th location of this type was opened in August 2019and adds more in subway areas including New York City. Following the trend, Nordstrom and Nike continue to open smaller, hyper-local stores with Nordstrom serves as a hub for services such as remodeling and roadside collection.
“We used to talk about retailers having to close 50% of their stores. But now retailers need to reduce their space by 50%,” said Michael Brown, partner in the consumer practice at Kearney, a management consultancy. “They can have the same number of locations, but many of them will be much smaller … with a high level of customer service where that sales experience is really valued.”
Privately owned bookseller Barnes & Noble plans to open more smaller stores in 2021, each more tailored to the local community, according to CEO James Daunt.
“We’ll be opening a much wider range of stores next year,” Daunt said in a recent interview. “You can open a really strong and successful 700-square-meter store … and we’re not going to tell the stores what to do. We ask them what to expect from us.”
Although brick and mortar stores play an important role, they are less profitable when fewer people visit them. As a result, retailers will continue to close locations, likely at an accelerated pace, until real estate footprints align with online sales history. According to the real estate company CoStar Group, more than 11,000 store closings had been announced this year by December 1.
Within this count GameStop plans to close more than 1,000 stores by the end of the fiscal year. But more closings are on the way.
“Given the strength of our e-commerce sales, we now see an opportunity to close additional stores in 2021 and 2022,” said CEO George Sherman during an earnings conference call earlier this month. He didn’t give an exact number, but said the game retailer’s goal is to move investments online.
In its final quarter, which ended October 31, GameStop’s e-commerce sales rose 257% year over year as more people visited the video game and console website to keep busy during the pandemic.
“There have been several years of talks about how real estate can be scaled back,” said Matthew Katz, managing partner of consulting firm SSA & Company. “But nobody was prepared or thought about the extent to which they were going to pull out so quickly. Nobody was prepared for e-commerce to go from adolescent to adult overnight.”
For the retailers who still see the possibility of opening new locations, they will likely have the upper hand of negotiating cheap rental and lease agreements for some time Vacancies continue to appear in malls and popular shopping areas.
According to a follow up by Coresight Research, including., More than 3,400 new store openings were announced by retailers in 2020 Money tree and family dollars, Five down, Ross Stores, Burlington and Ulta Beauty.
Retailers selling goods in categories like off-price, beauty, home decor, and sporting goods, which are not as badly affected as department stores and clothing chains, are the most optimistic about the growth outlook. The furniture store At homeFor example, plans continue to move from 219 to more than 600 locations, with business growing exponentially during the pandemic.
“When you get into the post-Covid vaccine world, a lot will change,” said Stephen Sadove, former executive director of Saks Fifth Avenue. “You have companies that can survive and will restructure, but you will have many companies that will say, ‘This is beyond us.'”
“The real estate market needs to be reset,” he said. “I’ve never seen changes like this before.”