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A Turbulent Year in Retail Comes to an End

By Joshua Williams

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Retail

2020 has been a year like no other. Fashion retailers were hit especially hard early on by the Covid-19 pandemic. Since then, they have been racing, fighting even, to adapt, evolve and innovate fast enough to save their businesses. Changes that were once part of a long-term strategic plan had to be implemented immediately, often remotely and with less staff. In some cases, this acceleration of change helped to stave overall losses. For some, it even provided an opportunity for brand growth and scaling. But for many it was an acceleration towards insolvency and bankruptcy.

You can also listen to this story. Joshua Williams' podcast with Massimo Volpe is published here.

For those who made it pass these initial hurdles, the focus turned to the fourth quarter, the most important season for fashion retailers in terms of overall sales. For most retailers, this meant putting more emphasis on e-commerce, restructuring promotional timelines and realigning direct-to-consumer distribution strategies. For others, this included more drastic measures, such as reconfiguring physical stores to be pick-up only locations, or even “dark stores” or warehouses.

Now, as we near the end of the fourth quarter, retail executives are hoping to see that their efforts have paid off and will provide a foundation with which to rebuild their businesses in the short term, post-pandemic.

So, what is the verdict leading into the holidays? How have retail expectations held up? "It's a very interesting and complex question, because we have to speak about different geographies,” declares Massimo Volpe, Co-Founder of the Retail Hub, and Founder of Global Retail Alliance, an association that connects leading global retailers. ”We've seen an increase in Q4, especially in the US market, up by almost double digits. We definitely have seen a higher double digit in the Asian market with China in the leading spot. And we're still struggling in Europe. We had a rebound all over Europe, but because of the last, and current wave of Covid in specific areas like France, UK, Italy and now Germany, we're seeing people have kind of slowdown a lot. So, It depends a lot on the geography you're talking about.”

While that might sound positive at first glance, at least for China and the US, these double-digit number increases are still below overall expectations and below year-on-year growth. But in a turbulent year, executives have had to be more sanguine than usual. ”At the beginning of next year, we weren't expecting to see an increase,” says Massimo. “We're probably not going to match our forecast. We probably have to wait until spring to see a decent comeback in the fashion system.”

But there are silver linings. One of the key accelerations that have led to overall positive growth in the retail industry is a more strategic focus on e-commerce, and its position within an omni-channel retail structure. According to Massimo, e-commerce has grown by 40% for most companies, which represents a large shift. When asked if these increases will continue post-pandemic, he suggests that after Covid, these numbers will likely decrease to 20 or 25%. “But still,” he reminds us, “it's a huge increase compared to last year when for most of the companies e-commerce was 10, 12%, if not lower.” And what’s more, the pandemic forced many companies to finally set up their online businesses, which will inform their businesses going forward.

Massimo emphasizes that many of the adaptations and innovations retailers will continue to employ post-pandemic are related to personalization, a focus on the customer experience. “Innovations like virtual shopping with a sales assistant, can create this omnichannel situation, where you can have a direct relationship with your store, with a person that you trust and eventually know, all in a comfortable situation like home, on your phone, in a safer situation.”

Additionally, Massimo believes that there are key tools and technologies that will become more front and center in 2021, including smart speakers, a technology that Massimo has studied for the past several years. He believes that use of smart speakers will continue to increase post-Covid, especially as this technology enters new realms such as gaming. Because it offers customers a substitute to typing, it can be used in cars. “Now, with smart speakers you can shop when you drive,” he exclaims.

Of course, launching new technologies in a meaningful way is a real investment, financially and operationally. And with money as tight as it is leading into 2021, retailers must be careful to focus on tools that have the most customer impact. While the recent foray of luxury retailers, such as Burberry and Balenciaga, into Twitch and gaming make for very provocative titles and social media posts, these technologies aren’t probably going to be a part of most retailer’s short-term strategies. Massimo stresses that this is more likely a marketing play than a strategy around increasing sales. And yet, he quips, “I might not be in the right generation to judge it...this is definitely my personal opinion!”

Massimo also acknowledges that the fashion industry is changing quickly and companies need to be ready and agile during this moment of compulsory evolution.

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