The National Retail Federation’s Annual Conference, NRF 2018, kicks-off this weekend and runs until Tuesday. Unlike last year, this year’s gathering should provide a far more optimistic perspective regarding the future of retail from a merchandising, online technology, and supply chain capability perspective.
By most accounts, 2017 looks to turn out to be a meaningful year for the retail industry, one that reflects evidence that many retailers are starting to grasp strategies for leveraging combined online and in-store capabilities.
According to the NRF, along with ongoing individual announcements, retailers likely experienced their best holiday fulfillment period since 2010. This week the NRF reported that retail sales in November and December rose 5.5 percent year-on-year, exceeding the original holiday sales forecast of 4 percent. Research from NRF indicates that 174 million U.S. shoppers visited both online and in-store locations during the period from Thanksgiving to the Christmas holidays. Further disclosed is that 64 million consumers shopped both online and in physical stores, spending an incremental $82 more on average than the online only shopper.
Likewise, the U.S. Commerce Department reported that retail sales increased at a seasonably adjusted rate of 0.4 percent in December, the fourth consecutive month of rising sales. Overall sales in the fourth quarter increased 5.5 percent compared with the same period a year ago, according to the government agency.
Thus far, department store retailers JC Penny, Kohl’s and Target have each reported strong holiday related sales, in many cases, highly significant improvements given previous holiday struggles. This week, Target reported that comparable sales in the November-December period rose 3.4 percent, exceeding that retailer’s 1.3 percent decline in 2016 the holiday period. This performance also exceeded the prior flat to 2 percent sales forecast entering the holiday period. If the numbers hold-up, it would reportedly represent the best performance since 2014, when the retailer experienced the consumer fallout from the massive 2013 credit card information breach. Of more significance, Target reported sales gains in multiple merchandise categories with added gains in online sales activity. CEO Brian Cornell stated that physical stores played a key role in fulfilling holiday-related digital orders, and emphasized investments in supply chain and remodeled physical stores helped in the effort.
This week, Walmart made two major announcements, both in the proverbial good and not so good news categories. The first was that the retailer would boost employee minimum wages to $11 per hour and allocate $400 million to payout one-time employee bonuses based on a sliding scale of years of employment. The announcement was characterized as a benefit from the recently passed U.S. corporate tax reduction. That was followed the next day by the announcement that 10 percent of current Sam’s Club warehouse stores, equating to 660 stores, will close over the next few weeks. The closures would reportedly result in the elimination of 10,000 jobs. However, up to 12 of the designated 63 stores are reportedly planned to be converted to become added customer e-fulfillment centers, which could save some jobs. The retailer indicated that affected Sam’s Club workers would be offered jobs at other locations. This seems to be a pattern for Walmart, that being major announcements of store closures in early January, before the close of the retailer’s fiscal year. Last year, there was a significant announcement of store closures just about at the same time.
As NRF begins, there can be no denial that the industry continues in a painful transformation involving permanent shifts in consumer shopping habits. Another reminder came from Sears Holdings which announced yet another round of 100 additional store closings after indicating that same-store sales fell upwards of 17 percent in the first two months of its fiscal fourth quarter. Other struggling retailers will likely add to the closing stores tally in 2018.
On the optimistic side, retailers who are embracing the new integrated online and in-store fulfillment model are starting to see the light. NRF is of the view that the future of retail is online and in-store working together, not against each other. Supply Chain Matters would add that such strategies imply a multi-channel merchandising and supply chain fulfillment strategy that is integrated and technology-enhanced. It should be no surprise that both Amazon and Alibaba continue to invest in physical store presence as well as advanced online capabilities. One equity analyst firm recently speculated that Amazon’s next major acquisition could be Target.
As NRF convenes, attendees should focus on the future model of retail, on what is meant by dynamic response networks anticipating consumer needs and wants, and on advanced consumer intelligence and electronic based buying assistants that provide the supply chain the intelligence and real-time information to respond to the new integrated fulfillment model.
To all NRF attendees, have a great and rewarding conference.
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