For the past two years the retail industry has been whipsawed by a market landscape that seems to be constantly and dramatically changing. Lockdowns, supply chain disruptions, soaring transportation costs, rampant inflation, the recent knock-on effects of Russia’s invasion of Ukraine, and a new poll showing widespread financial distress among consumers.
What can retailers and brands possibly do to avoid being crushed by all this turmoil? As it turns out, plenty.
For example, Croc’s, the casual footwear brand, reported its 2021 revenue jumped 67% from 2020, with operating income more than doubling in spite of disruptions that included factory shutdowns in Vietnam.
According to trade journal RetailDive.com, Croc’s benefitted from its emphasis on aggressive social media marketing and “high-profile collaborations.”
How about retailer Kohl’s, whose activist investors have been agitating for a buyout due to its lagging stock price? The department store chain reported a 22% revenue increase in 2021 and a similar widening in gross margin.
Besides lean inventory management, the company said it has begun attracting a new base of younger, more-diverse customers thanks to the launch last year of its store-in-store collaboration with French health and beauty brand, Sephora.
Hotter Shoes, a UK-based manufacturer-retailer of footwear, last year swung from a loss of nearly $9 million (£6.6 million) in 2020 to emerge in the black last year thanks in part to a customer-centric revamp of its website and new partnerships with other ecommerce platforms.
What do these and other retailers who seem to have dodged a lot of bullets have in common? For one thing, they are doing less guessing about what will sell and more listening to consumers about what they want and what they are willing to pay for it.
They have all emphasized brand partnerships like Kohl’s with Sephora (which followed closely Target’s partnership with beauty brand Ulta). According to an analysis by Cowen & Co., the Kohl’s collaboration could be “a game changer.” Cowen said the company “has expertly turned stores into omnichannel hubs.”
Crocs, meanwhile, began last year to feature collaborations with cosmetics brand Benefit and apparel brand Free & Easy.
Retailing, as it turns out, is more than best-cost, fastest-available sourcing on one end and promotional pricing and marketing on the other. Brands that are succeeding are working both ends. For example, more and more retailers and brands are collaborating with suppliers based on demand forecasts that are driven by customer research and copious customer data.
A study released last fall by consulting giant KPMG found that, “A customer-centric supply chain is driven by visibility, insightful data, and a shared commitment to customers. It also looks to balance customer expectations with profitability, by delivering the desired customer experience without under or over-investing in capabilities.”
What this means in practical terms is that winning retailers are those that work at squeezing the guesswork out of designing, choosing, ordering, and marketing the merchandise they carry. According to Inna Kuznetsova, CEO of 1010Data, a retail analytics vendor, more than 70 percent of retailer promotions fail because they either cannibalize existing products or they try to sell the wrong products to the wrong consumers.
After two years of supply chain headaches, she says that increasingly, “We see retailers .. sharing data around promotions and improving the effectiveness.” Retailers are also narrowing heir product offerings based on real time customer feedback and margins.
That’s the approach being pursued these days at luxury home furnishings brand RH (formerly known as Restoration Hardware). In a recent discussion with analysts, CEO Gary Friedman bemoaned the fact that supply chain issues have punched a hole in the company’s plans for its spring catalog. It was supposed to go out in March with 450-500 pages. It has now been pushed back to May and will have only 300-350 pages because, “stuff is late and my sense is it might even be later. We want to have some goods in stock.”
Friedman touched on a factor that all retailers should probably be considering.
“The question people have to ask is: ‘Do I want to be a bigger, lower-margin business and chase sales? Or do I want to be a smaller, higher-margin business and come out of this really positioned for the long term?’ And that [higher-margin option] is the view we’ve taken.”
A lot to consider in what you’ve just read as it relates to the current and future economic conditions and consumer point of view.