‘The pandemic created the urgency’ to invest in e-commerce, analyst says

Steven Spielberg

Wall Street Horizon VP of Research Christine Short speaks with Yahoo Finance on how the coronavirus pandemic is transforming the retail industry through booming e-commerce, supply chain woes, and more.

Video Transcript


KARINA CONTRERAS: Welcome back to Yahoo Finance. Retail in 2021 has undergone transformative change, but are the shifts we’ve seen here to stay? Joining us with her perspective is Christine Short, Wall Street Horizon VP of Research. Christine, thanks so much for being with us today. I want to ask you, how have retail sales this year compare to those of last year, and is a change in the industry a welcome one? Are they here to stay?

CHRISTINE SHORT: Absolutely. I think the changes you’ve seen amongst retailers in 2021 are absolutely remarkable, considering what we were seeing and expecting in 2020, with the onset of the pandemic. And I think the pandemic forced some long-overdue changes in an industry that is pretty slow-moving, right? So I think specifically of big box retailers, the department stores who, for a long time, have been touting their investment in e-commerce and omnichannel. I’m thinking Macy’s, and JC Penney, Kohl’s.

There was a lot of chatter. It was very spotty, the investments and the success of it questionable. It didn’t really move the needle. But the pandemic created the urgency, mostly because consumers were shopping differently, right? So these retailers now have to offer things like buy online, pick up curbside, faster shipping, easier checkout online, investments in warehouse technology, like robotics, other things like vamped up consumer services.

For instance, one thing I thought was really creative was Signet Jewelers. They actually started doing video chats. You’re not going to buy a high-priced item like jewelry without actually seeing it or talking to someone about it. So it forced retailers to get creative, and it pushed them out of this kind of zone many of them were in, with talking about investment, but not really doing it.

And thinking about 2022, the year ahead, a lot of the trends we’ve seen this year that we’ve been talking about with the supply chain, labor shortages and whatnot, and persistently high inflation, you have to think at some time, we’re going to catch up. And when that happens, how are retailers going to adjust, and are they thinking about it? Do they have any timetables for the coming year?

CHRISTINE SHORT: Yeah, I think the tailwinds in 2022 outweigh the headwinds. And to Karina’s prior question, are these changes that are going to persist? Are they going to continue to carry these retailers throughout 2022? And I think so. I think they’ve made some significant progress. You know, there’s winners and losers. I’m talking about those that were able to get through the pandemic and actually end in a better position than they were prior to the pandemic.

And many of these retailers have made sustainable changes. I think you bring up some of the macro econ points, such as supply chain. We’ve heard a lot about that this year. I think about 2/3 of S&P 500 companies mentioned that on their earnings calls as being a great concern. It was something that impacted results in Q3 and something that they were looking at in 2022. Of course, inflation comes into play there as well.

But what we saw was we were, for the most part, able to avoid a pre-Christmas crisis by extending hours at LA ports. So we were able to still– most people get packages on time. Inventory seems to be fine at many of these retailers. Because you have to remember we’re learning about this for first time, as consumers, this summer. But most savvy and sophisticated retailers were aware well ahead of time, and they’ve dealt with this before. So they know how to order inventory in a way that the stocks will be shelved in time– the shelves will be stocked in time for the Christmas season.

So I think many of them are getting through the holiday. It’s about where do we end up on the other side. After January 1, is there a surplus of inventory? I think supply chain woes are here to stay. Although if you heard FedEx CEO Fred Smith this morning from Washington, they’re slowly moving along. They are working out some of those kinks. As labor shortages kind of start to end a little bit, which I think they will, because look at the savings number– personal savings has dropped. That means those that were kind of holding out on getting a job or going back into the workforce might start to enter. So you’re going to see less pressure on labor shortages, which means you can hopefully loosen up some of those supply chain bottlenecks.

KARINA CONTRERAS: And we got that a little bit of a surprise read today. 115 came in for the consumer confidence number, higher than expected, the highest since July. And so I’m wondering. You know, we saw less sales this year, right? Has this sort of landscape shifted, as far as going into next year and beyond? Because many say Christmas came early this year. It came in October because of those supply chain issues and worries. People went out to shop earlier. So does it change the way retailers, then, attract customers to shop online or come in the doors with foot traffic?

And then if you are shopping more online, my question is, if you walk into a department store, you may go in for one thing, but you shop around and you see three or four different things that catch your eye. And maybe you don’t buy them then, but you remember the brand. But if you’re shopping online, you’re so sort of focused on what you need and what you want. How, then, do retailers sort of advertise and try and reach those customers and make sure it’s beyond just people who are loyal to that specific brand?

CHRISTINE SHORT: Yeah, great points. I’ll talk about consumer confidence first. Certainly a surprise, considering in December, we saw the lowest consumer confidence rate in 10 years. But on the flip side, retail sales were still quite high. And yes, maybe we didn’t hit a record this holiday season, but it was still very high and, like you said, more spread out. I think that has to do with, certainly, supply chain issues and discounts being offered earlier. You know, retailers have been doing this for years, even prior to the pandemic. It was like Black Friday used to be just the weekend after Thanksgiving. Now you have sales starting as soon as the day after Halloween. So that period sort of been stretched out a bit.

As far as how do you get more foot traffic– and that’s what many of these retailers are trying to do, create this hybrid model. That’s their omnichannel plan– so the integration of online, but both brick and mortar sales. And one way they did this during the pandemic was you can shop online, you pick up curbside, you pick up in-store. Like you said, that gives you more of an opportunity to kind of look around, see some other things.

The other thing many retailers are starting to do is maybe you want to do your entire shopping experience online, but there is the option to return in-store. Kohl’s added Amazon returns. So they’re finding ways to draw consumers in so that they do have the opportunity to learn about other brands. Because yes, you can be very siloed and focused if you’re just going to a website. But we’ve seen the hybrid model work pretty well for some of these department stores, for Kohl’s and Macy’s, as a way to encourage more foot traffic.

KARINA CONTRERAS: All right, well, we will have to leave it there. Still time to do some last-minute gift-buying if you haven’t done it yet. Christine Short, Wall Street Horizon VP of Research. Thank you so much for your time today.


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