How Did 2020 Change Retail?

As we wrap up the first week of 2021, it has become abundantly clear that many of the issues and challenges we faced in 2020 did not magically disappear when the clock struck midnight. The impact of the past year will no doubt continue to reverberate throughout many aspects of life—including the world of retail. The way people shop, both in what they are looking for and how they expect to get it, has evolved and the marketplace has had to shift in response. But are these changes passing fads or are they really here to stay?

We take a closer look at the current retail landscape, what’s working and what isn’t—and explore some of the predictions for retail in the year ahead.

Let’s Look Back At 2020

From a retail standpoint, this past year was a true rollercoaster. The onset of the coronavirus spread in the US and the subsequent lockdowns spurred on a 8.2% drop in retail sales in March and a record 14.7% in April. Furniture and home furnishings stores took some of the biggest hits, along with clothing and electronics stores. But, as many will remember, this downward trajectory didn’t last long. Retail sales rebounded quickly as lockdown restrictions were eased in the summer, jumping up by 18.3% in May and 8.6% in June.  Since then, month-over-month sales have mostly leveled out to a more reasonable degree.

But the impact of the pandemic has had lingering effects throughout the end of the year—and, interestingly, it has differed along income levels. According to Opportunity insights, a research and policy institution at Harvard University, high-income spending was down by 5.7% heading into December, while low-income spending was up by 1.8%.

Risks Ahead

While 2020 was certainly a logistical nightmare, we may not see the true financial impact of the pandemic right away. Looking to the Great Recession as a model: that economic crisis came to a close in June of 2009, but the retail fallout didn’t reach its full peak until 2010. According to RapidRatings, an organization that assesses the financial health of companies, there are a number of major retailers facing serious difficulties in the year ahead. Some of their most "at risk” retailers include Macy’s, Kohl’s, Sears, Wayfair and Overstock—despite the fact that many other home furnishings stores may get a reprieve in 2021, thanks to continued consumer interest in the home.

“Some companies have failed this year, but that isn’t the entire story,” said James Gellert, CEO of RapidRatings. “What we have seen is a tremendous amount of business degradation. The question for a lot of companies is how can they move forward operating a strong business and what adjustments do they need to make in the long term to stay afloat.”

How 2020 Shifted The Retail Landscape

While many retailers struggled in 2020, a number of them emerged as uniquely well-positioned for this moment for a variety of different reasons. In a recent interview with the Harvard Business Review, Marc-Andrew Kamel, a partner and head of global retail practice at Bain & Co., categorized these retailers into four different types: Regional Gems, Hitchhikers, Value Players and Scale Fighters.

The first are the “regional gems”—companies that are renowned in their specific local markets. These well-branded regional players boast strong ties to their consumer base and good value propositions, which ensure a more meaningful, durable relationship with customers even in the worst of times.

“Hitchhikers” are the retail brands that have opted to piggy-back onto other more technologically-savvy companies, shifting their investments towards aligning with bigger retail platforms that have more resources.

On the other end of the spectrum, the “value players” are those that have built their entire brand around reduced costs and low prices. With clear messaging and straight-forward value proposition, these retailers have been able to remain steady amidst outside economic turbulence.

And finally, the “scale fighters” are the retailers that are still big enough to actually compete with ecommerce “eco-systems” through strategic acquisitions and dedicated investment in technology—namely, brands like Walmart and Target.

While Kamel was speaking more broadly about the entire retail system, these categories can be seen more specifically throughout the mattress and bedding segment as well. The key is understanding where your store stands and what sort of opportunities are most realistic for you.

Kamel also specified two types of retail companies that are not faring quite as well right now. The biggest issues can be found among what he calls the “legacy laggards,” well-known brands that are struggling to maintain profitability. Facing pressure from both the market and their shareholders, these retailers are forced to find new ways to cut costs, including reducing investment. This, ultimately, ends up creating more problems as it limits their ability to implement new technologies, optimize their solutions or even just spruce up their in-store locations.

One of the biggest issues dragging the “legacy laggards” down, though, is lack of clear vision. “Many of these big retailers that are failing have lost sight of who the customers are they want to delight,” Kamel explained. “They try to delight everyone, but they fragment their resources and wind up delighting no one.” The solution? Clarify your ambitions and identify your target customer—then from there, reinvent your value proposition more broadly.

Of course, it’s not just the out-of-date legacy brands that are struggling right now, either. Kamel also pinpointed “unsustainable innovators” as being at-risk. These types of brands have been able to develop something unique and even exciting in the digital sphere—but “have no real path to profitability,” he explained. “As they grow, either they fail or they get acquired.” In the bedding industry, we have seen this time and time again with new online mattress brands.

What will retail look like in the future?

So many different aspects of the retail process have been altered in response to the pandemic, including the technology, supply chains and labor practices each business relies on. And experts predict that a number of these changes are here to stay.

A More Seamless Omni-Channel Experience

Ecommerce has certainly played an important role over the past year, but the lasting effects of that shift are a little more nuanced. Rather than just focusing exclusively on online sales, retailers will need to invest into creating a more seamless omni-channel experience. Even consumers that prefer shopping in-store have simply gotten used to things like contactless payments, faster checkouts and curbside pick-up, explained David Wilkinson, president at NCR Retail, in this article for Cheddar.

In fact, expectations around fulfillment in general have also evolved. Not only do consumers want to receive their purchase as quickly as possible—they also want clear communication about availability and shipping estimates.  "How, when, and where we get our item has become just as important as color and size," explained Chris Shaw, senior director of product marketing at Manhattan Associates. "So I'm making the decision to buy with you, to even finish my shopping experience, based on when you're telling me I can get this item. As consumers, we no longer want to wait until the cart, or even sometimes the checkout, to find out when our item will be available, and we certainly don't want you giving us a promise that says something like five to seven days." For mattress retailers, this often requires a coordinated effort between themselves and their manufacturing partners.

Fewer Stores & Smaller Locations

With the growth of online sales, many retailers have been able to rethink their traditional store footprint. Fewer stores and smaller locations allow operational costs to be better managed. Rather than showcasing every available product and feature in-store, retailers can spotlight more options online and drop-ship directly to the consumer’s home. This not only helps minimize inventory costs, it give them more leeway to get creative with their in-store merchandising.

The Shake-Ups Are Just Beginning

We’ve already begun hearing from mattress industry insiders that they expect to see big changes when it comes to manufacturer/retail partnerships towards the end of the year. The challenges of the pandemic have exposed real fault lines with some manufacturers, not simply with supply chain problems, but communication as well. And while demand for mattresses has been booming, brick-and-mortar retail remains fragile. These sort of issues will be on retailers’ minds moving forward. And that means we may see long-standing supply partnerships going by the wayside and new alliances being forged.

The same goes with retail stores too. Kamel suspects that retail is heading for a “big consolidation cycle.” Rather than seeing certain companies fail and disappear, there will instead be more strategic acquisition and down-sizing. This is, in part, because of how difficult it has become for many retailers to compete against retail platforms like Amazon. “Between 2019 and 2024, Amazon will invest $100 billion more in IT than any of the other top 10 retailers in the world,” he explained. “When you’re competing against a company that can spend like that, and which has a history of successful innovation, it’s not a fair fight. This is part of what will drive consolidation.”

What’s Not Likely To Stick Around?

Experts predict that many of the in-store safety precautions will go by the wayside once consumers are confident the pandemic is under control. This includes metered foot traffic, appointment-based shopping and more spacious store layouts.


Interested in hearing more about the future bedding retail? Check out our newest podcast series: Looking Ahead To 2021.

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