Retailer marketing has undergone a profound transformation. Discover the trends that marketers must embrace to get results.
A tough economy is taking its toll on the retail industry with national chains declaring bankruptcy, closing stores, and laying off workers.
Bed, Bath & Beyond filed for bankruptcy April 23, following bankruptcy filings by David’s Bridal April 17 and off-priced home decor chain Tuesday Morning in February, and Party City in January.
Along with store closures from the bankruptcies, other retailers like Foot Locker, Gap/Banana Republic, and BestBuy are closing some of their stores. This year also has seen thousands of layoffs from scores of brands, including e-commerce giant Amazon.The retail trouble comes as relentless inflation strains household budgets. With soaring prices for everyday essentials like groceries and gasoline, consumers are cutting back, especially on discretionary items.
Retail troubles grow as consumers feel the pinch
Retail sales in the US had been holding fairly steady despite the rocky economy, but began to dip in February, according the US Department of Commerce’s Census Bureau. Estimates (including food services) for March were $691.7 billion, down 1% from February, but up 3.0% from March 2022.
Consumer sentiment actually picked up a bit in April, as estimated by the University of Michigan, which noted: “These improvements were balanced by worsening assessments of personal finances due to higher expenses, reflecting the ongoing pain stemming from continued high prices.”
eMarketer forecasts a slow year for retail sales: US retail sales will grow 3.3% compared to 8.1% in 2022.
Strapped consumers are a big reason thousands of retail stores will close by 2027 according to USB. This year, more than a dozen retailers have announced closures; an estimated 2,100 stores are set to shutter in the US by the end of this year.
Bed, Bath & Beyond’s 896 store closures make up a big portion of that number; FootLocker is closing 420 locations while Gap/Banana Republic is shuttering 46 stores.
In addition to the layoffs at the troubled retailers filing for bankruptcy, other big chains have cut staff this year, including Nordstrom and online clothing retailer Stich Fix.
To curtail retail shrinkage, stores are placing products in locked cabinets, but alternative security measures that don't hurt CX exist.
Bankruptcies highlight lessons learned
Bed, Bath & Beyond’s troubles were brewing for some time. In January, the home goods retailer had warned of a potential bankruptcy and its store shelves were noticeably depleted during the holiday season.
Well before the pandemic, Bed, Bath & Beyond was faltering from the growth of e-commerce. Even though it expanded into online sales, it hadn’t successfully executed an omnichannel strategy — a retail requirement during COVID.
In its bankruptcy filing, Bed, Bath & Beyond cites multiple factors for its struggles, including its omnichannel failures, which reportedly including a slow rollout of BOPIS and curbside options for shoppers.
“Among other operational missteps, the Debtors’ failed to modernize their business model to stay apace with industry wide trends, including through building a robust omnichannel platform.”
The retailer also blames a shift from national brands to private labels, which exacerbated logistics and supply chain problems during the pandemic.
Despite new leadership that tried to right the ship, economic conditions made it impossible for the chain to recover.
“Negative macroeconomic forces, namely record levels of inflation and supply chain problems induced by the COVID-19 pandemic, resulted in higher inventory and labor costs as well as reductions in consumer discretionary spending,” according to the filing.
In the case of David’s Bridal, the CEO cited consumer preference for less formal and even secondhand wedding dresses, and an uncertain economy as factors for its latest Chapter 11 filing.
Faced with ongoing uncertainty, retailers are strengthening their supply chain to keep shelves stocked, inventories healthy, and customers satisfied.
Retail survival strategies
So what do we take from all this retail trouble? To start, it’s not all doom and gloom, of course. For retailers who are agile and keep up with shopping trends, there’s plenty of growth ahead.
In fact, experts predict fast-growing businesses such as dollar stores, nimble traditional retailers, and direct-to-consumer brands will swoop in on Bed, Bath, and Beyond’s vacated real estate.
But the recent Chapter 11 filings underscore key strategies retailers must execute to remain relevant:
- Omnichannel. This has been a must-have retail strategy for years, but the pandemic made it absolutely essential. Today, with online shopping habits firmly entrenched yet consumers eager for brick-and-mortar experiences, retailers must make sure they’re effective on multiple channels.
- Seamless experiences. With consumers visiting both physical stores and online shops, retailers need to deliver frictionless experiences. That includes making sure in-store inventory matches what shoppers see online and providing services such as BOPIS.
- Experiential retail. Modern consumers are looking for in-store experiences, which can mean offering ways for people to connect like Lululemon or adding immersive technologies to ramp up personalization.
- Keep up with changing customer preferences. This kind of goes without saying, but consumer behavior is changing faster than ever, and retailers who don’t transform their business quickly fall behind.
- Supply chain agility. The pandemic forced many retailers to take a hard look at their supply chain operations. Modernization that provides end-to-end visibility and analytics must be a retail priority.
The economy is making it tough for businesses across every industry, but retailers who take the right steps and focus on delivering top-notch customer experience can come out stronger on the other side.