Stagnating profits and sweeping changes in consumer behavior triggered by the pandemic presents retail organizations with an opportunity to rethink and restructure.<\/p>\n
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Today\u2019s apparel and discretionary retailers find themselves scrambling to maintain profit levels or recapitalizing and facing a heavy debt load.\u00a0<\/span>Apparel retailers\u2014even successful ones\u2014can only remain stationary for so long. As the market matures and consumer trends change, sales begin to dip and profits plateau or decline if their offerings don\u2019t continue to evolve. Over the past 10 years, the apparel industry has seen it play out time and time again: Those who fail to adopt pay the price in profits.<\/span><\/p>\n Entering 2020, US discretionary retailers were facing challenges on multiple fronts. The ongoing coronavirus (COVID-19) pandemic is exacerbating these challenges and creating new ones that further squeeze retailers\u2019 profits.<\/span><\/p>\n Factors already contributing to retail cost pressures and profit squeezing include:<\/span><\/p>\n Many consumers were conditioned over the years to buy apparel and other discretionary items on sale, in stores, and with high-touch customer service. The COVID-19 pandemic has accelerated changes to consumer buying habits by as much as five years<\/span> and increased the collective power of their demands for convenience and value in every aspect of the retail shopping experience.<\/span> Still, today\u2019s consumer trends are quite different than those of six months ago.\u00a0<\/span>COVID-19\u2013related health and safety concerns have changed the definition of a frictionless purchase, whether it\u2019s in-person or online.<\/span><\/p>\n Having redefined expectations for convenience and value, today\u2019s consumers are likely unwilling to return to their past purchasing habits and lower their expectations to previous levels. Apparel and discretionary retailers should seek to keep current with consumers and understand which aspects of convenience their customers are willing to pay for so they can target their investments accordingly.<\/span><\/p>\n While retailers work through the short-term challenges of mitigating consumers\u2019 COVID-19\u2013related shopping concerns, they should also focus on long-term demands and opportunities, which include efficiently manage costs, strategically invest in retail innovations, and adopt a business model that enables them to stay agile with evolving market and consumer demands.<\/span><\/p>\n Some of those investing in retail innovation focus on building out their existing R&D function. Others\u2014especially those interested in accelerating time to market\u2014decide to acquire new capabilities.\u00a0 As consumer needs continue to rapidly evolve, retail M&A is likely to increase. Reaction time to emerging trends has become a strategic differentiator, and consumer M&A is a way to leapfrog competition.<\/span><\/p>\n There\u2019s an opportunity on the back end of the current health and economic crisis for retail recovery. But organizations should take steps now to rethink and restructure how they do business to stay ahead of changing consumer needs and demands. Our analysis identified five archetypes that can put them on the path to sustained profitability. CEOs and their leadership teams need to pick the right archetype and quickly move forward with confidence.<\/span><\/p>\n The tech trend-setter is an established brand and omnichannel mass retailer with value-driven customers and a traditional buy-and-stock model. Its profit model is high-volume, with targeted algorithmic advertising for white label products and an agile supply chain. Strategies for success include:<\/p>\n \u25cf Emphasize multichannel digital shopping<\/p>\n \u25cf Offer one-click order and subscription services<\/p>\n \u25cf Redefine returns processing (such as one-click, prepaid, and labeled)<\/p>\n \u25cf Expand complementary services for \u201cone-stop shopping\u201d experience<\/p>\n \u25cf Establish in-store model for adjacent brands<\/p>\n The emerging threat archetype is typically a market-disrupting, direct-to-consumer brand with price-sensitive customers and minimal warehouse model. It has scaled profit volume with minimal infrastructure, a vertically integrated supply chain, and highly targeted advertising. Strategies for success include:<\/p>\n \u25cf Establish alliances for omnichannel opportunities or store-in-store models<\/p>\n \u25cf Implement frictionless returns processes (such as home pickup)<\/p>\n \u25cf Utilize minimal showroom-style locations<\/p>\n \u25cf Promote brand awareness through pop-up shops in select target markets<\/p>\n \u25cf Use artificial intelligence (AI) to drive bundled pricing and loyalty programs<\/p>\n This archetype is an established omnichannel brand with flagship stores, loyal consumers, minimized distributors and inventory hubs. They offer high-quality, midpriced apparel through outsourced manufacturing and see revenue growth through innovation. Strategies for success include:<\/p>\n \u25cf Rationalize footprint and minimize locations focused on foot traffic<\/p>\n \u25cf Redirect real estate investment to experiential stores in key markets<\/p>\n \u25cf Identify alliances for dedicated in-store space at mass retailers<\/p>\n \u25cf Prioritize direct-to-consumer online sales<\/p>\n \u25cf Upgrade the digital platform and implement AI-driven loyalty programs<\/p>\n This is an established omnichannel, fast-fashion brand with high foot traffic and trend-focused consumers. These brands profit through high sales volume, in-house supply chains, and cost-efficient production. Strategies for success include:<\/p>\n \u25cf Rationalize underperforming stores<\/p>\n \u25cf Expand online platform with \u201cin-store\u201d services (such as virtual dressing rooms)<\/p>\n \u25cf Provide curated content upon login or purchase<\/p>\n \u25cf Incorporate white label basics to drive margin expansion<\/p>\n\n
The pandemic effect<\/b><\/h1>\n
Retail and innovation: it\u2019s now or never<\/b><\/h1>\n
Five archetypes for retail recovery<\/b><\/h1>\n
1) Technology trend-setter<\/a><\/h4>\n<\/div>\n<\/div>\n
2) Emerging threat<\/a><\/h4>\n<\/div>\n<\/div>\n
3) Brand loyalist<\/a><\/h4>\n<\/div>\n<\/div>\n
4) Fast fashionista<\/a><\/h4>\n<\/div>\n<\/div>\n