Yesterday I shared the first seven of my predictions for retail this year. Here are the remaining six that get us to our baker’s dozen for 2024.
8. Nordstrom
JWN
JWN
Nearly six years ago the Nordstrom family failed to take the eponymous company private at $50/share. With the stock at just over $18 today, one could argue that makes the company a screaming bargain. Looked at differently, they dodged that bullet.
A few things seem clear. Despite its stellar reputation, the brand has been on a road to nowhere in recent years with flat sales, anemic profits, and an embarrassing exit from Canada and San Francisco’s Westfield Mall after 35 years. Shaky execution and broader industry trends make at least the near-term outlook challenging.
Something beyond the timid transformation they’ve attempted thus far is urgently needed, and they are unlikely to be able to do what they must under the harsh light of the public markets. As long-term interest rates come down it’s a great opportunity to seize the moment and mount a bold reset.
9. Apple’s
AAPL
Apple’s face computer went on sale today, and while its generating plenty of buzz, the combination of its hefty price and bulky form factor will prevent it from having anywhere near the impact of the iPhone or even the Apple Watch. At least with this version.
I’m not with Scott Galloway on his prediction of Vision Pro’s abject failure, but I do agree that something so isolating and so likely to make you repulsive to romantic partners is highly unlikely to attract anyone beyond well-heeled neophiles. But there has to be a pony in there, even if it risks getting close to the third rail of predictions—namely anything that suggests that the Metaverse might actually be a thing.
I believe Vision Pro 1.0 is a bold and important first step to the next version of a product that will ultimately possess the potential to bend the culture. That future iteration will have to be far cheaper and far less obtrusive. That’s probably two year away.
10. Sustainability schizophrenia hits news heights.
We’re told Gen Z is all about being purpose-driven, but facts are stubborn things. Consumers may say they care about the environment, treating workers fairly, and brands that are highly transparent, yet Shein and Temu have emerged as two of the fastest growing brands of any kind, ever. These hyper-growth retailers, along with a litany of other fast fashion brands that seem hell bent on winning both the race to the bottom and the race to the landfill, underscore an inconvenient truth. We often say one thing and do another.
And yet many legacy brands, from Patagonia to Walmart
WMT
Clearly, two things can be true at the same time, even if they mean seem at odds. This year expect many new initiatives to be launched or piloted, as well as meaningful progress from retailers that make climate action and other good for society initiatives a priority. Also expect Shein and Temu to achieve (not so) great new heights.
11. Bailing still doesn’t fix the hole among those stuck in the mediocre middle.
There’s no nice way to say this; truly unremarkable retailers—I’m looking at you once again mid-priced department stores—are edging ever closer to a cliff. It turns out watching the last twenty years happen to you is a demonstrably terrible strategy. Macy’s, JC Penney, Kohl’s, and a litany of similar retailers around the globe, have launched various turn-around efforts that literally have not moved the dial. At. All.
Running to stand still is an under-rated U2 song, but it’s no way to run a business. And when a complete reboot is what is desperately needed, there is simply no way that cost take-outs, store closings, and various faster horse initiatives amount to anything more than an escalating commitment to a failing course of action.
I see dead brands.
12. Health-related services are ready for their close-up.
The notion of retailers offering health-related services is not new, but this year it will get taken to the next level by the growing popularity of obesity management drugs like Ozempic, the scaling of various test concepts (like Petco and Lowe’s collab), and the strong growth and expansion of innovative DTC models like Hims. Whether human or pet-focused, greater consumer interest in wellness is colliding with improved technology and exciting new brand offerings to create an explosive growth category.
13. Commercial real estate becomes a slow-motion crisis (if we’re lucky).
While there is movement to force (or strongly encourage) folks to return to the office, in most cities daily office occupancy seems to be settling in at just over 50%. This is already leading to vacancy rates of 20% or more in several major markets, as rates climbed 180 basis points year-over-year. As more leases come to term vacancies seem destined to go much higher. The growing inability for property owners to meet their debt obligations or refinance is already sending (so far) minor ripples through the financial markets. Additional uncertainly occasioned by WeWork’s bankruptcy is not helping.
It’s hard to see how the brewing crisis won’t lead to some level of contagion—which will definitely have impact on the retail sector. The big question is to what degree and how quickly. The prospect of lower interest rates reducing debt costs—as well as making more office conversions to residential uses more attractive—may be the thing that keeps this from becoming a much bigger deal. Fingers crossed.
To hear a discussion of all thirteen predictions check out this week’s episode of the award-winning Remarkable Retail podcast.
Read the full article here