The beginning of 2020 finds the retail industry riding the wave of changes brought by the last decade. The economic recession of 2008 transformed the world of retail everywhere and made US consumers join a wider trend toward moderation in shopping. As the so-called “retail apocalypse” unfolded, the search for discounts grew more and more fierce. With an increasing amount of people doing their holiday shopping online in 2019, e-commerce may remain the best bet in retail this year. But this is by no means the only piece of good news at the start of 2020.
2019 marks the end of a decade when the US economy managed to avoid a recession, making this the longest period of economic growth in American history. Expansion is usually good news for retail, but it seems that one of the reasons behind this constant growth is the fact that Americans remember the financial crisis vividly. But this is as much a liability as it is a benefit, because, despite its longevity, the GDP growth trend remains small, as well as far from what one could describe as a boom period. Political and trade uncertainties are also important factors for the industry, which is why it should come as no surprise that retail stocks are falling.
It’s a Winner-Takes-All World
Retail stocks are now plunging, even though 2019 was a good year for them, comparable only to 2013. The XRT retail ETF was down nearly 2% at the end of December, making it clear to all that the retail industry will continue to face numerous challenges in 2020. The decline was mainly caused by Macy’s (M) and Kohl’s (KSS) fall earlier in December. Once one of the top retailers in the US, Macy’s is now struggling to adapt to the digital age, like most department stores in the country. Adapting is easier said than done, as individualized offers and campaigns must now provide shoppers with new motivation when it comes to mall-based vs. online shopping.
“Even though companies like Macy’s are spending a lot of money getting their e-tailing game, they’re running to stay in place and I think Amazon is really the way to play that, which is to just go digital,” said Gina Sanchez, CEO of Chantico Global. Amazon (AMZN) indeed seems to enjoy profits after a “record-breaking” 2019 holiday season, but what will 2020 have in store for the company?
Holiday Sale Gains Point to Bright Future
According to Mastercard’s SpendingPulse “Holiday E-Commerce Report”, retail sales surged 3.4% in the holiday season, with online sales jumping 18.8%. Considering the fact that the online sales growth rate for the 2018 holiday season was 18.4%, the results seem to herald a great new year for the retail industry. Overall, online sales made up 14.6% of all retail sales this season. Meanwhile, department stores saw their total sales drop 1.8%, along with a 6.9% increase in e-commerce sales.
Steve Sadove, senior advisor for Mastercard, announced that “e-commerce sales hit a record high this year with more people doing their holiday shopping online.” With this in mind, the results seem to point to further gains by online shopping this year. But is that really bad news for US brick-and-mortar stores? It may depend on their ability to adapt to the digital age. Many of them may choose to provide their consumers with hybrid options, such as buying online and either picking up their shopping at the store or going for curbside pickups. In-store delivery has some advantages that customers already enjoy considerably, such as saving time and money on delivery services.
2020 marks the beginning of a new decade, bringing new changes and opportunities for everyone. Retailers and brands are no exception, as they will have to establish and satisfy new wants and needs when it comes to great shopping experiences. Although political and economic turmoil is also likely in this new decade, those who will prove themselves able to satisfy their customers’ expectations, will probably gain new ways of winning market share while minimizing costs. After all, the future is always a double-edged sword, with new opportunities as well as new challenges in store.