REELING RETAILERS
Pandemic on top of online competition tests shopper loyalty for clothing brands
“The ability to shop and get information online taught consumers more options. Retailers have been reliant on promotions and they’ve created a monster of promiscuous shoppers.”
Steve Dennis, president of SageBerry Consulting, a retail consultancy
NEW YORK – When Archie Jafree heard that Lord & Taylor filed for Chapter 11 bankruptcy in early August, he was sad about the fate of the storied retailer with roots dating back to 1824.
Still, the 36-year-old northern Virginia resident acknowledged he hadn’t shopped there in months, preferring instead to go to Nordstrom and Zara, where he feels the customer service is better.
“It had good quality clothes,” Jafree said of Lord & Taylor, “but they hadn’t evolved with the times.”
Many shoppers like Jafree are seeing iconic labels vanish or become mere shadows of themselves, driven in part by a pandemic that has shoved them into bankruptcy but also by changing consumer habits that put less emphasis on brand names and more emphasis on experience.
So far, more than 40 retailers have filed for Chapter 11 this year, including roughly two dozen since the pandemic. That’s more than double what was seen for all of 2019.
Lord & Taylor announced recently that it was liquidating its business and closing all of its remaining stores. J.C. Penney filed for Chapter 11 in May and announced plans to permanently close nearly a third of its 846 stores.
Ann Taylor parent Ascena Retail Group said it would close all of its Catherines stores, a “significant number” of Justice stores, and a select number of
Ann Taylor, Loft, Lane Bryant and Lou & Grey stores. And Brooks Brothers, which will be sold to the nation’s largest mall operator Simon Property Group and licensing firm Authentic Brands Group, will shrink to about 125 stores from more than 400.
Although loyal customers bemoan their loss, the brands have been losing favor for years because they hadn’t kept up with the online buying shift and failed to stand out. The pandemic forced non-essential retailers to close this past spring in order to mitigate the spread of the coronavirus, pushing them further in peril.
Before the pandemic, shoppers were faced with an abundance of choices online and were becoming less loyal to clothing brands, particularly those that were stuck in the middle. Shoppers were also focused on getting the best deals, often waiting for merchandise to go on sale before they were willing to buy – a habit sharpened during the Great Recession.
According to a March survey by McKinsey & Co, 40% of the 2,500 shoppers polled in France, United Kingdom, Germany and U.S. tried new brands or made new purchases with a new retailer; that number was 46% for U.S. shoppers.
“The ability to shop and get information online taught consumers more options. Retailers have been reliant on promotions and they’ve created a monster of promiscuous shoppers,” said Steve Dennis, president and founder of SageBerry Consulting, a retail consultancy.
Now, the pandemic is testing brand loyalty even more as shoppers, worried about going to physical stores, want quicker deliveries and curbside pickup, says Robert Passikoff, president of brand research firm Brand Keys.
Amber Atherton, CEO at Zyper, which connects brands with the top 1% of their fans and enlists them to become brand ambassadors, says shoppers have been increasingly hanging out in community groups online and the pandemic just accelerated that trend. She cites Gucci’s recent collaboration with tennis mobile game Tennis Clash, where shoppers can buy exclusive Gucci outfits within the game as well as on the company’s website.
most of her salary and has taken nearly $15,000 out of savings to keep her Las Vegas-based publicity firm running. Kelly says she lost almost all her clients in the entertainment and restaurant industries within hours back in March.
Kelly, owner of PR Plus, was forced to lay off two of seven staffers and cut other expenses. A loan from the Paycheck Protection Program helped cover pay
roll for about two months. Kelly was able to get some new clients, but there was still a shortfall and she didn’t want to take on a bank loan.
Luckily, Kelly didn’t have to touch her retirement account; she and her husband had put money aside for a rainy day.
“Who would have known it would have been for this type of emergency,” she says.
Cracking open a nest egg is not a step owners take lightly; it’s a gamble that the business will recover
and they’ll replenish their savings. For many it’s a better alternative than borrowing – they don’t want the burden of debt, especially during an uncertain economy. And as many owners have discovered during the virus outbreak, even a government relief loan might not fully make up for lost cash flow.
John Holloway saw sales at his life insurance website increase when news about the coronavirus broke during the winter, but business plunged when Americans retreated
to their homes in March. A loan from the government “helped a bit but was quickly in and out,” says Holloway, co-founder of NoExam.com.
Holloway and his business partner each turned to personal savings to live on. Holloway estimates he’s taken between $25,000 and $30,000 out of retirement and emergency fund accounts to pay his family’s expenses.
Holloway says withdrawing the money made him feel like he was going backward. But business has been improving and that makes him optimistic.
“I’m banking on the long-term outlook for the business. It might in the future potentially be sold. That in my mind is where we’d be making up some of that money,” he says.
Up in Alaska, Moore has started two other businesses and plans to get a job this winter, hoping that will help her not only replace the savings she pumped into Juneau Food Tours but also create reserves for her companies.
Juneau Food Tours gets most of its revenue from cruise ship passengers who take tours of restaurants and bars in Alaska’s capital; more than 1.3 million people took Alaskan cruises during the 2019 cruise season, according to the industry group Alaska Travel Industry Association. Moore is aware she can’t count on revenue from
cruise-goers for some time.
“I’m not planning for a big rebound in 2021. I’m looking at 2022,” she says.
Business owners have varying strategies when it comes to savings. Those with retirement plans for their employees usually are savers, and those with children are likely to be putting money away for college tuition. But some owners see their companies as their investment. They plow profits back into their business rather than save; they expect to fund their retirement with the eventual sale of their companies.
Financial advisers recommend owners do some soul-searching before dipping into savings.
“It comes down to trying to be realistic with yourself. It’s looking at not only, are you going to be able to replenish what you’re going to take out, it’s also looking at the missed savings that you would have hopefully captured if we weren’t going through a global pandemic,” says Jennifer Myers, president of Sagevest Wealth Management in McLean, Virginia.
Tom Tunney’s three Ann Sather restaurants are breakfast, brunch and lunch stalwarts in their Chicago neighborhoods. Social distancing requirements have curtailed revenue and the government loan Tunney got was quickly spent paying staff.
Tunney, who’s also an alderman in the Chicago City Council, estimates he’s put $250,000 of his own money into running the restaurants. He dipped into proceeds of real estate sales to replace his lost revenue, and says he’s prepared to continue tapping savings until business returns to normal.
“My community and my business are everything, pretty much my family,” Tunney says.
When the pandemic slammed the tourism industry, attorney Tina Willis had fewer clients at her practice in Orlando, Florida. She specializes in personal injury cases, and many clients are tourists who have accidents while on vacation.
Willis has $5,000 in expenses each month and dipped into her retirement savings to help cover them, something she expects to have to keep doing in the coming months. While Orlando theme parks like Walt Disney World and Universal Studios are open, attendance is still a fraction of normal levels.
“We expect that the downturn will probably last at least until next spring in our business,” she says.
Willis is also working at cutting costs; she expects to close her office when her lease is up in November.
“I can’t keep spending $60,000 a year,” she says.