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Articles from 2020 In November


Tactics for a rebound

The coming 12 months pose challenges and opportunities for retailers. In the comments below, market observers offer advice for negotiating a shifting terrain:

"Retailers may want to re-engineer their operations in response to the changing market. “Business models are evolving. Consumers are now accustomed to buying through digital channels and it should not be assumed that they will return to their pre-COVID-19 shopping patterns completely. Retailers with no online or delivery channel will struggle to survive, which means that they need to expand their capabilities beyond just buying and selling products. They will need to either create their own online platform, or more likely, partner with online platform companies to provide fulfillment, home delivery and data analytics.” -  Darcy Down, a partner in the Los Angeles office of Baker McKenzie.

"A changing market may require new metrics. “There are many new and actionable data points that retailers should be examining. Rather than worrying about whether a customer came in from a coupon or an ad, retailers need to be more concerned with conversion: Did the customer stick around long enough to join our club, or send us an order or leave us a review? Those are going to be the new metrics that are going to need to be added to the traditional KPIs.”

“The idea that a retailer has to wait for someone to walk in the door to make a sale is gone when you can use social and virtual selling. If someone's on your website, you can have a video pop up where you can interact with them and virtually put items in their cart. Rather than a matter of an online and offline multichannel, it's going to be more of a store that's connected to customers in all sorts of different ways. - Bob Phibbs, a retail consultant based in Coxsackie, N.Y.

"Engage more intimately with customers. There has been a lot of attention paid recently to ‘buy online and pick up in store,’ or BOPIS. Retailers may want to extend that idea to what I call ‘click and connect.’ Once the customer arrives, how can you improve their experience? You might invite them into the store to see something new that has just arrived. You can even offer them a mask if they have not brought their own.” - Anne Obarski, director of Merchandise Concepts, a retail consulting firm in Dublin, Ohio.

 

Retail forecast 2021: Return to normalcy

Neon open sign

Relief is in sight. Battered by the pandemic and scrambling to shore up finances, retailers can look forward to an easing of the pain over the next 12 months. Economists anticipate a gradual but noticeable recovery fueled by a strong housing market, a surge in corporate profits and the successful roll out of a vaccine.

“The COVID-19 recession is over, and the economy is currently in an early-cycle expansion,” said Sophia Koropeckyj, managing director of industry economics at Moody’s Analytics, a research firm based in West Chester, Pa.

Retailers should see notable gains over the next 12 months. “Our current 2021 forecast is for 6.2% growth in core retail sales,” said Scott Hoyt, senior director of consumer economics for Moody’s Analytics. Such a performance would be a substantial improvement over 2020, when the estimated 2.1% increase reflects a deceleration from the 3.9% growth of 2019. (Core retail sales exclude the volatile auto and gasoline segments.)

The healthier the economy, the greater the potential for wage increases that can fuel retail sales. And Moody’s expects the nation’s Gross Domestic Product (GDP) to increase at a 4% clip for 2021. That’s a welcome rebound from the previous year’s decline, expected to come in at 4% when figures are finally tallied.

The Joe Biden presidential win should support an economic rebound in three areas. “Biden has proposed significantly more fiscal stimulus, which will pack a punch in the coming year as aggregate demand is still recovering from the pandemic,” said Koropeckyj. “Second, Biden would not resume Trump’s tariff wars with China, which have acted as a tax increase for consumers. Finally, Biden will liberalize international immigration, which will boost the supply of labor and in turn the economy’s potential.”

Faster economic growth, said Moody’s, should in turn help boost corporate profits by an expected 17.1% in 2021 -- a dramatic turnaround from the 13.8% decline of the past 12 months, and reason for optimism about a return to the aggressive capital expenditures so critical to an economic rebound.

Corporate America seems to share Moody’s optimistic assessment of the coming year. “Even though there's still a lot of uncertainty out there, many companies have a positive outlook,” said Tom Palisin, executive director of The Manufacturers' Association, a York, Pa.-based regional employers' group with more than 370 member companies. “Maybe they're being overly confident, but our members seem to feel that in six months’ time things will have turned around significantly.”

With its diverse membership in food processing, defense, fabrication, and machinery building, the Pennsylvania trade group can be viewed as a proxy for American industry. The organization’s members are reporting results that seem to position the tail end of 2020 as something of a springboard for future months. “Conditions for our members have improved, with increasing revenues, since the April and May timeframe,” reported Palisin.

Most retailers should experience a gradual return to normal. During the first half of 2021 households will continue to self-quarantine as a wave of bankruptcies boosts the number of permanent job losses. By summer, said Koropeckyj, things should look different. “The economy will regain its stride in the second half of the year, when a vaccine or treatment is assumed to be widely available.”

Mixed results

The positive growth rate for retailers in 2020 has been driven by a change in shopping patterns, as the public has rechanneled its purchasing away from services and toward merchandise. “While consumer spending has been hammered pretty badly, retailers have not been hit nearly as hard as service businesses,” said Hoyt. Moody’s forecasts a decline of 5.2% in services spending when 2020 numbers are in -- a stark reversal from the 4.3% gain in 2019. “Because of people's hesitancy to travel, to go to entertainment facilities and to do things with other people, to a certain degree they're replacing such activities with buying goods.”

Despite the enviable revenue increases for the broad-based retail sector, many operators have had to shutter their storefronts over the past 12 months. One reason for the disparity in results is that shoppers became highly selective during the pandemic, abandoning many merchandise categories in favor of a select few that are either essential to living, or enhance the enjoyment of pandemic-enforced leisure time. A second reason is that goods are being purchased more commonly through digital channels -- a long-term trend that has only been exacerbated by the stay-at-home nature of the pandemic.

“The trend that was already in place from brick and mortar towards online has accelerated dramatically as a result of the pandemic,” said Hoyt. “That was the case particularly at first, when so many stores were closed and consumers had no choice but to buy online outside of essential goods. And then I think even now there's a set of folks that don't want to venture near people in stores, and so they're doing more of their purchases online.”

The shock of the new may spark innovation. “I think there's a lot of optimism and creativity coming out of the COVID-19 lockdowns,” said Bob Phibbs, a retail consultant in Coxsackie, N.Y. “A hungry group of people is coming into the market with fresh ideas. It's almost like opening a new business rather than trying to get back to where a retailer was in 2018.” 

Consumer confidence

Retailers will applaud any return to normalcy on the part of American shoppers, spending by which accounts for some 70% of the nation’s economic activity. Household spending, though, is driven by public psychology, and the most recent reports from Moody’s Analytics show that the nation has a lot of catching up to do: By late 2020 consumer confidence was running as low as it was in March and April during the worst days of the pandemic.

If uncertainty about the course of the pandemic and the availability of a reliable vaccine are reasons enough for anxiety, there’s a more immediate driver of shopper discontent: the noticeable drop in take home pay over the past year. “Wage and salary income, including the value of benefits, is forecast to decline 1.3% when 2020 numbers are finalized,” saId Hoyt. Those numbers represent a reversal in fortune from the 4.4% increase of 2019.

Pandemic-related furloughs and business closings accounted for a major portion of wage declines. Moody’s expects the unemployment figure to come in around 8.5% when 2020 numbers are finally tallied. That’s a sharp increase from the robust 3.5% level consumers were enjoying as recently as last February.

Shoppers might open their wallets more quickly if hiring were on the upswing. The expectations here are, once again, for gradual improvement. The unemployment rate is expected to decline to 7.8% by the end of 2021. “The labor market will not recover all COVID-19-related job losses until the second half of 2023,” said Koropeckyj.

A brightening jobs picture should translate directly into a boost in take home pay that can fuel retail sales. Moody’s anticipates 2021 wage increases to come to 2.5% -- a level high enough to allow shoppers to exhale but too low to spark anything more than a gradual increase in spending. Hoyt’s expectations for improvements in the public psychology are suitably conditional: “We are assuming a slight upward trend in consumer confidence until we get a vaccine or an effective treatment, at which point it will probably move up faster.” Despite the lag in consumer confidence, retail sales are expected to be driven higher as consumers continue to channel their expenditures from services such as travel, restaurants, and entertainment into favored merchandise categories.

Housing surges

Cash registers tend to ring louder and longer when more people buy new and existing homes. Retailers will benefit from the accelerated housing activity anticipated for 2021. “Housing demand has bounced back thanks to very low mortgage rates and the release of pent-up demand,” said Koropeckyj, who cites healthy builder confidence as the nation enters the new year.

Moody’s expects housing starts to surge by 16.8% in 2021, after slowing to a 2.9% rate in 2020 due to the early impact of lockdown orders on construction. The comparable 2019 figure was a positive 3.8%.

Median prices for existing homes are also increasing at a healthy rate, expected to top 7.6% when 2020 figures are finally tallied, which would surpass the 5% increase of the previous year. One key reason: tight supply. “Housing has been a seller’s market with low inventory levels as homeowners have been reluctant to offer their residences up for sale for fear of contracting the coronavirus,” said Koropeckyj.

The industry itself has engaged in practices that have contributed to its success. “Real estate professionals have done a great job of adapting to social distancing, enabling the buying and selling of homes, appraisals, title insurance policies and closings at the same pace as before the pandemic,” said Bill Conerly, principal of his own consulting firm in Lake Oswego, Ore.“With the shift to suburban living that is beginning, more new homes will be built.”

Despite its recent success, the housing industry faces its own headwinds. “We expect prices to fall by 0.3% in 2021 as foreclosures mount due to an unwinding of forbearance measures by the federal government and private lenders,” said Koropeckyj. “According to the latest Senior Loan Officer Opinion Survey, banks have tightened standards across all sorts of mortgage products.”

And the housing sector faces other issues that will sound familiar to anyone who has watched the industry over the past several years. “Construction costs are rising quickly, and builders are still grumbling about the inability to find buildable lots and skilled labor,” said Koropeckyj.

As for construction of non-residential buildings, the bag is equally mixed. “Although office and retail construction will be soft in the near future, they account for less than one-fourth of private nonresidential construction,” said Conerly.  “The big categories of power production, manufacturing, health care and warehouses should do fine in the transition to post-COVID business.”

Capital investment

Retailers benefit when corporations invest aggressively in capital projects, sparking faster economic growth that fills shoppers’ pockets with cash. Here, the picture is a little less sanguine. The nation’s decision-makers, faced with uncertainty, are reacting in a predictable way by keeping their powder dry. By the end of 2020 total real fixed investment had fallen by 27% annualized, according to Moody’s Analytics. “In uncertain times, investors hold onto cash and delay investments,” said John Manzella, a consultant on global business and economic trends, Amherst, N.Y. “This undoubtedly puts downward pressure on economic growth. As a result, uncertainty has become the enemy of prosperity.”

More robust investments in commercial buildings and machinery is not expected to arrive any time soon. “Low capacity utilization and still-high uncertainty will make expansion decisions difficult, though the declining cost of corporate borrowing will provide some offset,” said Koropeckyj. “Major segments of investment will be weak, with transportation equipment and structures especially hard-hit. Structures investment will fall more than 20% in the months ahead, led by the collapse in retail and reduced demand for office space.”

Bank loan availability poses one barrier to a rapid return of capital investment. “While interest rates are low, many companies have taken financial hits that can affect their ability to qualify for capital,” said Palisin. “With corporate financials changed so drastically from the prior year, there is some tightening of access by lending institutions.”

Moody’s identifies technology as one bright spot in an otherwise shadowed capital investment picture. Palisin concurred with the observation, reporting an increase in spending by his members to boost efficiencies. “The pandemic will probably accelerate the trend toward more automation and robotics,” he said. “Such technology will be needed to increase manufacturers’ resiliency.”

Tight labor

Given the current elevated unemployment rate, retailers might expect the labor market to help fuel an economic rebound as employers of all kinds take on new hires in response to improving revenues. The reality, though, is that job applicants are holding back. “Companies are having problems recruiting and getting folks to apply for work,” said Palisin. “Some things going on in the labor market are probably contributing to that. First, the portion of the workforce still on furlough will probably not take another job but will return to the one they were furloughed from. Second, there are childcare issues as students go back to school online and it’s difficult for those people to get back into the labor pool. Finally, there is some level of health concern by employees going back into the workplace, especially if they are older workers or higher risk people.” 

While the future of the labor market remains unsettled, the opening months of 2021 might provide clues as to whether hiring difficulties will continue. “Perhaps as we get into the new year people will start to feel more comfortable returning to the workforce, the childcare issues may be resolved, and a vaccine is developed,” said Palisin. “But right now there seems to be a lot of hesitancy in the labor pool. People are sitting on the sidelines to see what is going to happen.”

Adding to the scarcity of choice is the level of competition for available workers. “Some sectors of the manufacturing economy, such as the food and automobile industries, are hiring quite a bit,” said Palisin. “And sectors such as construction and healthcare are competing with manufacturers for workers.”

When the labor market gets tight, upward wage pressure can’t be far behind. “To remain competitive companies are restructuring their compensation packages to retain higher-end skilled workers,” said Palisin. “Retirements by the baby boomers and a decline in immigration are also putting higher pressure on wages.” Companies aren’t likely to take a wait and see while attractive people go elsewhere, he added. “Even during this period, talent is one of the top, if not the top, factor to keep a company growing.”

New deal

In the opening months of 2021, some key indicators may help retailers determine how the year will go. Consumer confidence levels will offer insight into how freely shoppers will spend.  “Also look closely at the number of business bankruptcies,” said Koropeckyj.  “And the core unemployment rate, which excludes temporary layoffs, will gauge how much joblessness is attributable to permanent layoffs which leave behind long-lasting scars on the labor market.”

Businesses of all kinds will be looking for increased certainty on matters such as market stabilization, the ability to hire and access to qualified labor pools. “All of these concerns will be on the front burner,” said Palisin. “It would be good to have some kind of resolution around trade issues as well.”

But perhaps the most reliable economic indicator will be the rate of progress toward a cure for the not-so-hidden elephant in the room: the pandemic. “Businesses will be concerned about the timeline of a vaccine,” said Koropeckyj. “The path towards some semblance of economic normality hinges upon its development and widespread distribution.”

Durango launches branded apparel, accessories collection

Durango Boots has launched a branded apparel and accessories collection, including branded t-shirts, outerwear, hats and more. From the iconic flag boot to insulated cold-weather options, the new apparel and accessories collection was inspired by and complements Durango’s best-selling boots. 

"Durango has a longstanding reputation for crafting high-quality footwear our customers love,” said Erin DeLong, marketing manager. “As we continue to innovate and build upon our western heritage, we’re proud to introduce our all-new premium, high-quality apparel just in time for cooler weather and the holiday season.”Introduced in the collection are a Durango-branded ball cap and comfortable unisex t-shirts in eight color options, each complementing popular Durango® boot colorways. Cold weather apparel includes a warm puffer vest and jacket, a heathered grey vest, three unisex sweatshirts and beanies.

Also included in the introductory collection is a branded wooden boot jack, a device that helps remove boots with ease while protecting the quality of the heel.

Items range in price from $20 to $90. The line is available exclusively at Durangoboots.com and are perfect gift ideas for the upcoming holiday season

Founded in 1966, Durango manufactures and markets quality-crafted western and fashion footwear for men, women and children. It is a division of Rocky Brands, a publicly traded company on NASDAQ under the symbol: RCKY.

or more information visit www.durangoboots.com.

Virtual concert honors nation's veterans

Concert For Veterans - Square.png

Musicians On Call (MOC), a nonprofit that brings live and recorded music to the bedsides of patients in healthcare facilities, has teamed up with Wrangler for a Concert For Veterans Presented by Wrangler, which features renowned recording artists from country to pop and soul music sharing the healing power of music with Veterans across the country this Veterans Day.

This week, the exclusive concert featuring Jimmie Allen, Leon Bridges, Terri Clark, Sheryl Crow, Charles Esten, Chris Janson, Scotty McCreery, Brad Paisley, Jon Pardi, Michael Ray, Walker County and Alexis Wilkins is being shared at the bedsides of Veterans in 144 VA facilities through MOC’s Virtual Bedside Performance Program. The artists offer songs of encouragement and messages of thanks to all Veterans for their service to our country. 

“At Musicians On Call we make sure every day is Veterans Day by bringing hope and healing through music to Veterans year round. Because of the pandemic, we knew many of the men and women in our nation’s VA facilities would be isolated and without the support of their loved ones this Veterans Day. We wanted to share an extra special concert with them to let them know how much we appreciate them, even if we can’t be there in person,” said Musicians On Call President & CEO Pete Griffin.

“Wrangler is honored to partner with Musicians On Call this year as a way to extend support and gratitude to our veterans,” said Holly Wheeler, vice president of global brand marketing at Wrangler. “We hold servicemen very close to our hearts, with a long history of supporting and funding fallen troops and their families through our Wrangler National Patriot program. Although we couldn’t hold our annual Wrangler National Patriot Tour this year due to the pandemic, we’re grateful that Musicians On Call has allowed us to give thanks in a different way to those who have sacrificed for our country.”

Concert For Veterans Presented by Wrangler is also sponsored by Southwest Airlines, Cumulus Media, Hard Rock International, Grand Ole Opry, Gibson Gives, CMT, CAA, Onsite and Catherine Cate Sullivan.

Musicians On Call is the nation’s leading provider of live music in hospitals. For more than 20 years MOC volunteers have brought the healing power of music to the bedsides of patients, and the organization is proud to play for the nation’s servicemen and servicewomen. More than 80,000 patients, family members and caregivers in VA facilities have received music both in-person and virtually.

In response to the hospital restrictions put in place during COVID-19, Musicians On Call has expanded its Virtual Bedside Performance Program to serve those most in need during this pandemic. The virtual program uses video conferencing technology to broadcast live performances by Volunteer Musicians directly to the bedsides of patients through both one-on-one intimate performances and hospital-wide concerts. Since March 2020 more than 75,000 people have experienced live music through the Virtual Bedside Performance Program. 

To support Musicians On Call’s programs for Veterans you can make a donation or purchase merchandise from MOC’s Veterans collection. 

Musicians On Call (MOC) is the nation’s leading provider of live music in hospitals. For over 20 years MOC has brought live and recorded music to the bedsides of patients in healthcare facilities ranging from children’s hospitals to adult facilities, VA hospitals and hospices. MOC has a vision of a world filled with the healing power of music and continues to expand its Virtual Bedside Performance Program and Music Pharmacy to serve the populations most in need during this pandemic, including hospital patients who are undergoing visitor restrictions, caregivers serving their communities on the frontlines and elderly or at-risk individuals who must remain at home. MOC supporters over the years include Bruce Springsteen, Kelly Clarkson, Luke Bryan, Sia, Keith Urban, Jason Derulo, Blake Shelton, Ed Sheeran, Reba McEntire, James Taylor, Gavin DeGraw, Darius Rucker, Pharrell, Amos Lee, Nick Jonas, Camila Cabello, Kelsea Ballerini, Charles Esten and many more. For more information on how Musicians On Call is delivering the healing power of music, visit www.musiciansoncall.org.

Wrangler, of Kontoor Brands, has been an icon in authentic American style for more than 70 years. With a rich legacy rooted in the Western lifestyle, Wrangler is committed to offering superior quality and timeless design. Its collections for men, women, and children look and feel great, inspiring all those who wear them to be strong and ready for everyday life. Wrangler is available in retail stores worldwide, including flagship stores in Denver and Dallas, department stores, mass-market retailers, specialty shops, top western outfitters, and online. For more information, visit Wrangler.com.