Initially, the outcome was unexpected. But as summer turned into fall, and as fall moves into holiday, we now know with certainty that Indie retailers are experiencing a very unequal recovery. At Management One, we have been tracking data by location every day since March 12th. (see chart below)
The results have stayed constant and reflect a very strong K-shaped reality. The top 20% are seeing retail bliss, the bottom 20% are experiencing a retail slump, and the middle 60% are either moving up the K slope or fighting to keep from sliding down.
There are a variety of factors that affect results, including location, vertical, and a retailer’s demographic makeup. It is true some retailers were fortunate to be in resort locations where affluent populations fled over the summer, or were already well positioned in their digital e-commerce, social media, and communication, or are happily in verticals that flourished during Covid-19 like Outdoor and Pet Supply.
However, there is also a strong collection of retailers that welcomed the opportunities that appeared, and they embraced change. Some from that group are enjoying gains, as they rest comfortably in the upper slopes of the “K.” Cash is strong, inventories are in great shape, and they are exploring other opportunities to expand, where previous doors were closed.
On the down slope, there is a struggle to find growth and a return to some normalcy. Recovery has been weaker and slower than expected. Less flexible landlords, abandoned communities, a client base that is slow to come back, challenges to adapt to a virtual world, supply disruptions, and stiffer responses from other creditors including their vendors. Some in this group argue the K shape is a consequence of a stalled second government stimulus package, and hope for more stimulus.
Even for this group, on the down slope, there is a window of opportunity. Change is underway, vendors are still negotiating and shipping goods even if factors are denying credit, and they are adjusting orders. Landlords who were not negotiating are starting to face reality. New concepts are popping up like Faire, offering new terms and a risk-free approach to test new vendors.
Great change creates great change.
Looking back at the outcome of a K shape recovery, it should not have been unexpected. My personal belief was that it would be a rolling U recovery. I say it should not have been unexpected because it was staring us in the face almost from the beginning. On the advice of Management One’s new President in May, Michael Alic, we sliced our daily tracking of data into three segments: the top 20%, bottom 20% and middle 60%. The results were dramatic and have remained constant over time.
I never bought into the Uncertainty Principle that was and is still sometimes bandied about. The fact that we are living through dramatic change does not lessen the value of data-based decision-making. I always believed data would show us a path to navigate through, and as expected, data has provided that roadmap by creating clear visibility into what is and is not working. The right data gives us the opportunity to Fail Fast. Today, Fail Fast in your business should be a core piece of your decision-making culture. If it isn’t, you will be depending on luck to place yourself on the positive slope of the K-shaped recovery.
So the challenge is for those on the upper part of the K to sustain and grow, for those in the middle to find a force of change to move up the slope. To those failing at the bottom, it is time to recognize that even if a stimulus package comes out, it will not be a silver bullet, and that your actions matter. There is still an abundance of strategies and tactics accessible no matter where you reside in the recovery.
Retail is constantly evolving, and since March that evolution has accelerated. Retailers who are adapting will be stronger. Retail Darwinism comes from the idea: the strongest will survive. Strength today comes from adapting, not from size but willingness to change to what the market demands. Waiting for normalcy to return keeps you from evolving. Over the last 7 months Management One has delivered 21 retail guidance webinars attended by over 12,000 attendees. The goal of these and future webinars is to facilitate retail evolution, to share what we learn with our community.
On November 18th we invite you to our next webinar titled “Where will you be on January 1, 2021? Our panel will discuss what you can implement now to ensure you are prospering and evolving to be a part of the retail community thriving in 2021.
BRA note: We are very pleased to mention that Management One is a BRA Supporting Vendor Partner. Paul Erickson, a highly respected and knowledgeable Management One Retail Consultant participated in our most recent BRA Retailer Roundtable Panel Discussion. Be sure to stay tuned for upcoming BRA / M1 Collaborative Retail Webinars. You can view recent, relevant and free M1 retail webinars via this link: Management One Retail Webinars
– Doug Works, Executive Director BRA
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