By Michael D. White, author and freelance writer
It’s been said that trying to forecast the future without taking a good look at the past is like speeding down a crowded highway without a rear view mirror.
To look, then, at what 2021 might well hold in store for the nation’s retail sector, it’s critical to take a look back at the year that was 2020.
In short, the COVID-19 pandemic presented challenges that retailers had never before anticipated—challenges that served to either aggravate existing institutional flaws or unveil previously unanticipated issues that promise to linger far into the future.
Blended with a tectonic shift in consumer behavior and light-speed diversions in market trends, the internal changes that retailers, both large and small, have been forced to adapt to during the year meant the difference between survival for some and abject ruin for others.
The pandemic has, thus, set in motion a domino-effect radically affecting everything it takes—from logistics and distribution to the implementation of new technologies and a rethink of ‘brick and mortar’ retail—to satisfy consumer demand in a revolutionized social environment.
Predictions: Out the Window
In January 2020, IPG Media Lab released its annual Outlook Trend Report.
In it, the company “envisioned 2020 to be a year of sustained, steady growth of an increasingly digitized economy and algorithmic culture as big tech companies continued the race to establish the post-mobile platform of their respective choice.”
Enter stage left…COVID-19 and the world was turned on its head. “Everything was quickly reoriented around surviving a global pandemic,” according to the New York-based business analyst. “As a result, some emerging market sectors were rapidly accelerated, while others were disrupted seemingly overnight.”
According to data compiled by IBM, IPG says, “the gradual shift from brick-and-mortar retail to eCommerce was sped up by about five years, while food delivery apps are expected to grow its U.S. users by 25.2 percent in 2021, per eMarketer, a trend that has prompted millions of shops and restaurants to pivot and explore digital sales channels.”
Meanwhile, “the lights went out on the booming location-based experiential economy, which, along with travel and hospitality brands, had to contend with major disruptions to the foundation of their businesses.”
In July, the House Small Business Committee in Washington, D.C., reported that more than 110,000 small businesses across the country had closed permanently because of COVID-19 related issues, while an additional 7.5 million were facing the same fate.
By October, 58 percent of the U.S. labor force had shifted to working from home either full-time or part-time.
The latest survey from Tech.co found that 80 percent of small business owners say that COVID-19 has hurt their businesses.
Domino One: Last year, fashion giants such as J. Crew, Neiman Marcus, Lord & Taylor and Jos. A. Banks joined icons Sears and JC Penney, GNC, Guitar Center, Toys R Us, Pier 1 Imports and Circuit City in the ranks of the barely walking wounded to log some of the biggest retail bankruptcies on record.
According to business consultancy BDO Global, approximately 60 percent of the retailers that filed for bankruptcy in 2020 through August listed more than $100 million in assets, compared with 50 percent of filings during the same period in 2019 and 36 percent in 2018.
More than three dozen large chain retailers filed for bankruptcy liquidation this year, marking an 11-year high, BDO reports.
Chapter 11 bought time for some to restructure, but for others – some 9,300 retail stores nationwide – last year marked the closing of their doors permanently.
To be clear, while the COVID-19 pandemic did not cause last year’s wave of bankruptcies and it’s true that a number of retailers were already struggling to stay afloat pre-COVID-19, the pandemic’s burst onto the stage resulted in initially temporary federal, state and local lockdown orders aimed at slowing the spread of the virus turning into protracted on-again/off-again store closures for many businesses deemed “non essential.”
“Retailers that started 2020 already in a tough spot were hit harder. Liquidity was strained and sales went into a freefall,” according to one CNBC business report.
Shopping malls, those beehives of retail activities and social intercourse, have been slammed in a transformational sense with California-based Green Street Advisors forecasting that more than half of the department stores located in U.S. malls will close their doors permanently in 2021.
Malls are typically multi-floor complexes that are occupied by smaller, often one-off specialty retailers who offer consumers everything from customized T-shirts and soft pretzels to massages and jewelry and ‘anchored’ by large, big-name retailers that cover tens of thousands of square feet of floor space.
Like dominos, though, “when an anchor goes dark, the specialty stores that occupy the concourse leading to the department store anchor struggle because traffic is vastly diminished,” Mark Cohen, who heads the retail studies program at Columbia Business School, recently told Marketplace.
“Malls,” he added, “that have been suffering from this phenomenon start to invest less in housekeeping and in security,” he said. “Parking lots are not as pristine. The mall becomes less attractive as a destination.”
Take a Number for a Berth
Maintaining a finely-tuned supply chain is critical for any retail business as, even in the best of times, moving goods from Point A to Point B economically and in a timely fashion can be a Tylenol-inducing exercise fraught with potential pitfalls.
For example, last November, a ONE Apus container ship managed by NYK Shipmanagement Pte, en route to the Port of Long Beach from Yantian, China, lost 1,816 containers in a mid-Pacific storm. Two months later, an AP Moller-Maersk container ship carrying goods from Xiamen, China to the Port of Los Angeles lost part of its cargo—about 750 containers—in heavy seas.
While information from both vessels’ cargo manifests was not readily available, analysts are certain that a large percentage of the cargo consisted of retail goods destined for stores across the U.S.
Had both ships arrived at the Southern California ports, they would have encountered a veritable traffic jam at what are, in ‘normal times’ the two busiest container ports in the country as container-laden ships continue to anchor in San Pedro Bay racking up cost and eating up time waiting for a berth space to unload.
On one day in late January, there were 33 container ships at anchorages in the Bay and 26 at berths. Including all ship types, there were 55 vessels at anchorages—a new record, with all Los Angeles/Long Beach anchorages full, according to the Marine Exchange of Southern California.
In short, say industry analysts, container volumes in the Asia-U.S. transpacific trade—the busiest trade lane in the world— have hit their limit, as sailings are now being blanked, canceled, not because of lack of demand, but because of lack of tonnage as ships are stuck awaiting berths.
Excessive waiting times at ports compel carriers to add so-called recovery vessels to their vessel rotations in an effort to maintain weekly services. The fact is that, currently, virtually all carriers in the transpacific trades have no more recovery vessels left to deploy.
Gene Seroka, executive director of the Port of Los Angeles, recently delivered a State of the Port address stating that cargo volume at the port had climbed 50 percent in the second half of 2020 compared to the first half, but that it’s become “common” for loaded ships to have to wait, anchored at sea until a dock opens up for unloading.
“The port is strained,” he said. “We’re shipping back two times the amount of empty boxes then we are American exports across our docks,” adding that the increased volume is all due to “the change in the American consumer,” explaining that during the pandemic, “we’re not buying services, we’re buying goods.”
According to FreightWaves, “port congestion is being caused by high inbound volumes combined with surging COVID cases among dockworkers.”
As a result, at one point in late January, almost 300,000 TEUs [twenty-foot equivalent units] were waiting to be offloaded from ships waiting offshore.
“It’s difficult to segregate the factors,” said Port of Long Beach Deputy Executive Director Noel Hacegaba. “We have a historic cargo surge induced by the pandemic. There is a considerable percentage of dockworkers out sick because of COVID.”
The impact is far-reaching, he added. “It also goes beyond the ports. For example, to the warehouse and distribution sector, which has implemented new safety protocols due to COVID that affects their capacity. It’s a convergence of all of these factors.”
Now You See It, Now You Don’t
Still another domino. To add insult to injury, like sharks circling their prey, cargo thieves—never known to let an opportunity go to waste—have found that the COVID-19 pandemic has created a buffet of choice options that create even more headaches for the nation’s already struggling retailers.
For 2020, CargoNet reports recording 1,676 supply chain “risk events” across the United States and Canada, a 16 percent increase in activity year-over-year. Forty-eight percent of events involved theft of at least one heavy commercial motor vehicle, like a semi-tractor, semi-trailer, or intermodal chassis or container, while 61 percent of events involved the theft, or attempted theft, of cargo-packed containers.
“The average cargo theft was worth $166,334 in 2020, a jump of more than $27,000 per incident from the previous year,” the analyst reported, with Texas recording 232 theft events in 2020, a 93 percent increase year-over-year. California placed second in the nation last year with a 12 percent year-over-year increase in cargo thefts.
At the county level, according to CargoNet, Dallas County, Texas; Cook County, Illinois; San Bernardino County, California; Los Angeles County, California; and Shelby County, Tennessee reported the most theft activity in 2020.
All five counties serve as major logistics distribution and intermodal hubs and currently account for nearly one-quarter of all recorded cargo theft activity in 2020.
“Truck stops and retailer parking lots were the most common locations for theft to occur. Texas recorded 39 more events at truck stops than in 2019 while Florida and Georgia recorded 16 and 13 more events, respectively. For parking lots, there were 27 more theft events at parking lots in Florida and 20 more in Texas. Parking lot thefts were also high in California and Illinois.”
While due to the increased theft of expensive shipments of pharmaceuticals and medical supplies related to the COVID-19 pandemic, household commodities were the most stolen kind of freight in 2020.
“Specifically, cargo thieves targeted shipments of major appliances, household paper goods, household cleaning supplies like disinfectant sprays, and furniture,” according to CargoNet. “Food and beverage commodities were the second most stolen category of freight. Alcoholic beverages were one of the most targeted goods of the year, along with shipments of non-alcoholic beverages like bottled water and soft drinks. Other food items, such as snack foods and prepared boxed or canned foods increased significantly over 2019. Theft of pharmaceutical and medical supplies increased from 2019.”
Cargo thieves primarily targeted shipments of personal protective equipment and over-the-counter medication, but there were several instances of more brazen thefts like a truckload shipment of ventilators.
The Tectonic Shift to Online
At a time of shutdowns and pandemic-related mandates, the retail experience has become increasingly digital and internet-driven as consumers choose to remain safely indoors, and home delivery infrastructure becomes increasingly sophisticated.
As brick-and-mortar retailers continue to adapt to the ‘new normal,’ they are creatively melding elements of the online shopping experience into their web-based operations in an effort to maintain, as best as possible, enhanced levels of personal customer service.
According to a comprehensive survey conducted recently by Commerce platform, Shopify, young consumers in particular are driving the trend as 67 percent of younger consumers, aged 18-34, shifted more of their spending to online shopping since the pandemic was declared last March, compared to the 54 percent average in a ‘normal’ year.
Eighty-four percent of consumers have shopped online since the pandemic, the survey found, while 65 percent have shopped in-store and 79 percent of consumers say they will shop online regularly in the next six months.
In January 2021, customer data science analyst dunnhumby published a nationwide study that examined the state of the approximately $1 trillion U.S. retail grocery market.
COVID-19, the study found “has led to record highs and lows in economic metrics, along with huge shifts in where and how consumers shop food retail, changing the competitive trajectories of retailers who were winning and those who were struggling before the pandemic,” said Grant Steadman, head of dunnhumby North Amrica.
According to the study, “Amazon accelerated past every other retailer on our COVID Momentum Metric and customer safety ratings, due to its speed to shop and virtual store format. As we begin to emerge from the pandemic, we should expect value perception to come back strongly.”
Looking beyond COVID, he added, “retailers with customer first strategies will best adapt to changing behaviors and deliver what matters most to their customers.”
Light on the Horizon
Though eight out of ten small U.S. business owners recently polled by online industry analyst Tech.co stated that COVID-19 had hurt their business, almost six out of ten have “positive feelings about the future.”
They are, the company said, “utilizing the time of lockdown in learning new skills to grow their business.” In fact, it found that 76 percent of the small businesses surveyed actually have “upskilled” during the lockdown.
“Search engine optimization, data analytics, social media, and learning a new language were the most common new skills small business owners tried to learn during the lockdown,” the company stated. “The trying times of corona virus have not weakened the spirit of small business owners.”
They are, the company said, “optimistic about the future,” while, with lockdown restrictions eventually easing, “more and more small businesses are going to open their operations.”
Tech.co advises that small-and-medium sized retailers – the true backbone of the nation’s eonomy – look to adapting the way they do business by first preparing a timeline for resuming their business operations; and then by drafting an aggressive communication strategy to assure their customers that business will be resumed with safety measures prescribed by the local authorities and going the extra mile to serve them.
While 2020 was defined by uncertainty and loss, retailers are moving past the initial shock of shutdowns and, while laboring to get back on their feet, recalibrating and reinventing their business practices to remain competitive in a new, still competitive economy.
COVID-19 or no, meeting the ever-changing expectations of customers, who are constantly reevaluating where and with whom they spend their dollars, is now and always will remain, key to securing customer loyalty.
As one analyst put it: “It’s not enough to open their wallets, you have to win their hearts.”
Bio: Michael D. White is a published author with four non-fiction books and well more than 1,700 by-lined articles on international transportation and trade to his credit.
During his 35 year career as a journalist, White has served in positions from contributor and reporter to managing editor for a number of publications including Global Trade Magazine, the Los Angeles Daily Commercial News, Pacific Shipper, the Los Angeles Business Journal, International Business Magazine, the Long Beach Press-Telegram, Los Angeles Daily News, Pacific Traffic Magazine, and World Trade Magazine.
He has also served as editor of the CalTrade Report and Pacific Coast Trade websites, North America Public and Media Relations Manager for Mitsui O.S.K. Lines, and as a consultant to Pace University’s World Trade Institute and the Austrian Trade Commission.
A veteran of the United States Coast Guard, White has traveled in both Japan and China, and earned a degree in journalism from California State University and a Certificate in International Business from the Japanese Ministry of Trade & Industry’s International Institute for Studies & Training in Tokyo.