Expect a resurgence in local shopping centers and a convergence of channels

For all of the talk of the pandemic e-commerce boom, it’s far too soon to write off the brick-and-mortar sector of the retail business. On the contrary, brick-and-mortar are likely to experience a resurgence in 2021 for one simple reason: people will want to get out of the house once COVID-19 is finally under control — and retail establishments are one of the places they’ll be headed.

Retailers and importers will also likely continue to source heavily from China, despite talk to the contrary. (See Peter Buxbaum’s U.S.-China de-coupling – a big red herring)

Still, the pandemic will have left its mark on the retail business. Companies that were ailing before the virus hit did not survive. Stein Mart, Lord & Taylor, Century 21, and Barneys New York are among the retailers that are now liquidating.

E-Commerce Growth Spurt

During the height of the COVID closures, e-commerce packed “six years of growth into six months,” effectively a 12% annual increase, said Craig Johnson, president of Customer Growth Partners, a consulting and research firm. But that growth rate will not be sustainable. The numbers now show that, through 2020, 82.5% of retail sales still happened inside physical stores, a figure that is expected to decrease to only 78% by 2023. That means that, for the next few years, e-commerce will grow at around 2% per year—twice its expected pre-pandemic growth rate but well below the level of the pandemic peak.

One of the downsides of the e-commerce boom was that it caused online systems and logistics networks to become overloaded. One survey from Contentsquare, a software company that markets a digital analytics platform, showed that only 15% of consumers were happy with their online shopping experiences during the pandemic. All of these data point to ample growth opportunities for the surviving brick-and-mortar retailers to cement customer relationships with improved shopping experiences and distribution schemes.

The continuation of home-based work that started during the pandemic will have a couple of consequences. Some outlets like Macy’s, Foot Locker, and Nike are looking to switch from malls to smaller shopping centers and community locations, leading some analysts to believe that neighborhood shopping districts will grow, as workers continue to work more from home than from the office, even after the pandemic is over.

Greg Chapman, senior vice president at Avalara
Greg Chapman, senior vice president at Avalara

The same phenomenon of home-based work will also cause headaches for apparel retailers, as employees continue to dress down for work at home—and maybe for the office as well. McKinsey & Company’s report, The State of Fashion 2021, predicts that, even with effective control of the virus, global fashion sales will decline as much as 5% in 2021. If the pandemic drags on, the apparel industry won’t return to 2019 levels until the end of 2023, according to the same report.

Besides the…

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