Q2 was a solid
three months for retail, with
major players such as Walmart, Target and TJX posting some of the strongest results. The National
Retail Federation (NRF) was vastly encouraged by the recent numbers, boosting
its 2018 sales growth forecast to a minimum of 4.5% after initially predicting that retail sales would
climb 3.8% to 4.4%.
But just as people
were overly eager to declare a “retail apocalypse” in 2017, it might be too
early to presume that the next few quarters will go as smoothly. Caution is
particularly indicated with macroeconomic factors such as front-loaded tax cuts
and the potential for more tariffs — both of which encourage higher spending
now instead of later.
The RTP team discusses whether the Q2
results show that the industry is in the clear from last year’s struggles, or
if the quarter is just an example of the biggest performing the best.
Debbie Hauss, Editor-in-Chief: Being the cynic I am, I wouldn’t want
to be overly optimistic about how the rest of 2018 will play out, particularly
considering all the global controversy around tariffs and the U.S. relationship
with other countries. I do continue to agree with Deloitte’s
Kasey Lobaugh, who shared his insights on the “Retail
Bifurcation” during the 2018 Retail Innovation Conference. The
high-end/luxury brands and the low-end/dollar store type retailers will
continue to flourish, while companies targeting more middle-income consumers
will suffer. It’s a value vs. experience game that will weed out weaker, less
progressive companies. I think shoppers who identify as middle class will be
wary of over-spending during the holidays and will focus more on necessities
during the gift-giving time frame.
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Adam Blair, Executive Editor: Unfortunately, one good quarter
does not necessarily signal that it’s time to start singing “Happy Days Are
Here Again.” Any number of macroeconomic developments could cause retail’s
revival to sputter. For one, the continuation of largely pointless trade wars
sparked by the imposition of tariffs could raise the price of a wide range of
consumer goods. That would shift household budgets from high-margin luxuries to
the necessities of food, fuel and health care. Additionally, while unemployment
remains low, so does wage growth, meaning consumers’ actual purchasing power
remains limited. It’s also worth noting, as my colleague Glenn Taylor did in
his story, that the retailers doing the best financially are the ones making
significant (and smart) investments in their stores, e-Commerce operations and
customer experiences. At the risk of being labeled Peter Pessimist, I’ll keep
the champagne corked until I see the results from holiday 2018.
Glenn Taylor, Senior Editor: For once, it’s great to see the
positivity, since many of the retailers highlighted here have clearly made
significant investments in their business. These retailers weren’t relying on
half-measures dedicated to shoring up one side of the enterprise, tactics that became
too common as Amazon jumped ahead of the pack. Covering retail in 2017 often
felt grim, so a quarter chock-full of positive news was going to get highlighted
by media outlets regardless. With that said I have faith that those retailers succeeding
now will keep the good momentum through the holiday season. It’s going to come
down to the identity established via their own investments. Steven
Dennis noted at RIC18 that physical retailers that haven’t “picked a
side” — either price/convenience/assortment
or experience — were bound to suffer
in the middle and “end up not really good at anything.” The retailers that win
will continue to acknowledge the need to think about their stores as assets,
all while introducing more AI-driven personalization across the business.
Bryan Wassel, Associate Editor: While one good quarter isn’t
necessarily a sign of a complete recovery, it may be proof that reports of
brick-and-mortar’s death were greatly exaggerated. Proclamations of the Great
Retailpocalypse may have been overblown to begin with:
e-Commerce pure plays are finding success by opening storefronts, and 81% of 13- to 16-year-olds prefer shopping in-store over other methods.
What’s undeniable is that the fundamentals of physical retailing are changing –
technology’s role continues to expand, and no one can afford to ignore their
e-Commerce operations. The success of the largest retailers may be a sign of
their technological investments paying off as they adapt to the desires of the
modern consumer, while still-struggling retailers need to rethink their overall
strategies. The entire industry isn’t in the same boat, and this shift will no
doubt have its winners and losers, which will play out in the financial
results.
