Retail’s ‘Great Uncertainty’ is over, according to the Chief Economist at the National Retail Federation (NRF) in the US, and “an unprecedented recovery” in the Vaccine Economy is underway.
Given that ‘unprecedented’ has been among the most over-used words bandied around across all sectors over the past 18 months, I suppose it’s inevitable it would be trotted out here to describe what the NRF is seeing as enough reason to up its forecasting for the health of the sector in the US. Chief Economist Jack Kleinhenz says:
It has become clear that the US economy and retail sales are growing far faster and more steadily than anyone could have expected just a few months ago. We are seeing not just unprecedented growth from months of pent-up demand as the economy reopens, but momentum as well.
Our initial forecast was made when there was still great uncertainty about consumer spending, vaccine distribution, virus infection rates and additional fiscal stimulus. Since then, we have seen spending grow, vaccines have become available to virtually anyone who wants one, infections have fallen and additional stimulus in the form of the American Rescue Plan has been signed into law.
It was certainly an encouraging note for the US sector to have plowed into the 4th of July weekend holiday on and one that builds on earlier comments made by Kleinhenz at the NRF’s State of Retail event last month, when he declared:
We are anticipating the fastest growth that we've seen in this country since 1984. It takes a lot to reopen a $20 trillion economy. But in many ways, it's accelerated much faster than most of us had believed possible even a year ago. There will likely be some shifting of spending away from goods towards services. But the retail industry has greatly benefited from this acceleration of spending. This will only help increase employment and incomes leading to more spending creating a virtuous cycle.
We're seeing both business and consumer confidence improving, which would greatly influenced the contours of the economy going forward. Though confidence has recently slipped, likely a reflection of creeping inflation, economic conditions remain robust. The sheer amount of both fiscal and monetary policy intervention has lifted personal income, more than replenishing what was lost back in March and April of last year, and creating an overabundance of purchasing power. In addition, the historic stockpile of savings has a real potential for influencing the growth this year.
But it’s clearly not as simple as ‘in one bound we were free’. As diginomica has noted repeatedly in recent months, the emergence of the Vaccine Economy is one thing; what that economy looks like is quite another, right across the board from how we approach work through how our awareness of healthcare has altered during the COVID crisis to what our engagement with the retail sector now means in practical terms.
The explosion in e-commerce during the dark days of lockdowns and stay-at-home orders is well-documented, but while that genie is well and truly out of the bottle, how much of that societal shift online will remain in place? I noted a couple of months ago that one of the initial pleasures of lockdown restrictions lifting was the ability to roam the aisles of non-essential retailers once more. That’s a pleasure that was frankly short-lived and I’ve found myself doing as much online purchasing as I was before the store doors re-opened.
That said, we’ve seen retailer after retailer in recent weeks reporting a healthy return to footfall in-store as part of their quarterly fiscal updates, so it’s not an unreasonable thesis to argue that there is pent-up demand to get back out there and browse in person. But this brings us back to that perennial omni-channel retail Holy Grail - getting the balance right between online and offline now that real-world shoppers are back, but this time around far more savvy on a mass scale about the potential of digital. The challenge for retailers now more than ever is going to be to get that balancing act to even out appropriately.
The post-COVID consumer
The NRF State of Retail event picked up on some of the tricky manoeuvres that lie ahead as what it called ‘the post-pandemic consumer’ re-shapes the retail industry. Jean-André Rougeot, President and CEO, Sephora Americas, set out his firm’s stall coming off the back of a year in which e-commerce soared as storefronts shuttered:
The big surprise to us at the start of the year is, as our stores are re-opening and more and more traffic is coming back in, dot com has stayed extremely high. We have a very good story now which is that dot com is strong, nearly as strong as last year, but our stores are picking up dramatically. The last few weeks specifically, we have seen a significant pick-up in our stores. We actually had several weeks where stores were performing at a higher level than 2019, but dot com has remained very high.
What has evolved is the awareness of the need to be seen to be part of communities when considering consumers, suggested Vivek Sankaran, President and CEO, Albertsons Companies, as the pandemic has made shoppers a lot more aware of the important societal role of retailers:
As retailers, especially those of us with stores, we operate in communities. We hire from within those communities, we serve people in those communities, we occupy space in those communities. And I think through this pandemic, one of the big lessons we have learned - and we've renewed our commitment to - is that we are actually stewards of the communities we operate in.
Our customers are going to expect us to behave that way, that we actually steward the community, help when the community needs help, whether it's hunger relief, or in our case, to doing everything we can to allow people to get vaccinated quickly. It's making sure that the food supply is available and so on and things like that…So in addition to being faster and being safer and having the right product at the right time and all of those things, I think we as retailers have to add a new dimension of set of responsibilities for the communities that we operate in. Our customers and investors are going to expect it
This was an assessment backed up by Rougeot:
One of our key priorities right now is being really an inclusive community. D&I (Diversity & Inclusion) has always been part of Sephora values from the beginning. But obviously, the murder of George Floyd and the Black Lives Matter movement really had an impact on us as a company. We really had a chance, as a team as a leadership team all the way down to our store teams to talk about this. It basically has really strengthened our commitment to be a better company.
And that’s going to matter as post-COVID consumers decide where to spend their cash, he predicted:
It makes us a better company internally. It also makes us more successful commercially, because it's such a diverse consumer now in America. If we want to succeed long term, we need to be able to talk to consumers and our people, our leadership, has to reflect that diversity and that wealth of differences in America. It's a very exciting time. I've been a CEO for nearly 30 years now and this is the first time, the first year that I see meaningful change in this area. This is a powerful moment for everybody in business today.
I’m going to leave it to Rachel Bonsignore, Vice President at market research firm GfK, to sum up:
It's a complicated time, but it's also an exciting time. There's a lot of opportunities that brands can leverage. I would say a couple of key takeaways would be, number one, really looking inward, being very self-aware about the role that you as a brand, as a retailer play, in this marketplace play in this heightened, polarized environment. That can mean a lot of different things. It can mean being really clear about who your target customers are and how you want to align with them ideologically, but also being comfortable with losing some customers too and figuring out just what place you want to play in the world and what role you want to have.
It also means thinking bigger. This is a time we talk a lot about, post-pandemic, really rejecting the idea of going back to normal and actually imagining a better world and a newer world and something more interesting and more adaptable. So how can you really forecast a new role for your brand? As a retailer in this new environment, what are some new things you could do?
Those are questions that we’ll be returning to time and again as the Vaccine Economy builds out around the world. The NRF economists reckon there’s going to be more money to spend out there; the trick for post-pandemic retail is to wake up to the fact that consumers haven’t emerged blinking from 18 ‘unprecedented’ months ready just to slot back into their old behaviors. The winners will be those brands and firms that can build new relationships with their old audiences, as well as reach out to the new ones.