Startups with products that have been in-demand during the stay at home orders over the past few months are using the opportunity to introduce their products to a national audience. It's a tricky time for retailers to advertise right now, but for those who are confident in their messaging, there's a better chance that they can get viewers to remember them as other companies pull back.
Retail customer service lines have remained busy over the past couple of months, fielding questions about shipping delays, how to return items when stores are closed, and inquiries about sizing and material from first-time customers. A number of direct-to-consumers startups say they are seeing an uptick nonetheless and have had to change things up a bit.
Retailers are now being called upon to better diversify the products they carry on their shelves. At the end of May, Aurora James, founder of Brooklyn accessory brand Brother Vellies, launched the 15% Pledge, calling on retailers to up the amount of shelf space dedicated to products from Black-owned businesses to 15%. Last week, the movement scored its most significant win to-date, when Sephora announced that it would sign the pledge.
Over the past two weeks, there's been a flood of direct-to-consumer startups issuing statements about steps they will take to better support the black community, and build more diverse companies. But venture capitalists have remained largely quiet. "People are scared -- even though they want to do the right thing, they're worried that people are going to inevitably drag them down with, 'well look at your website,'" said one consumer investor.
Store closures could grow exponentially this year as brick-and-mortar retailers have seen their sales collapse over the last couple of months. Consulting firm Coresight Research released a study this week projecting that the number of permanent store closures in the U.S. could reach 20,000 to 25,000 this year. The question remains: what will happen to all those spaces?
Apparel retailer Gap is having to make some budget cuts as the company is under tremendous financial stress due to the coronavirus. One of the victims is Hill City, its two-year-old men's athletic apparel brand. The company announced last week that it would be winding down Hill City in the coming months. "The financial impacts of covid-19 have required the company to ruthlessly prioritize and reduce operating expenses," a Gap spokesperson said.
As cities start to re-open, some out of home advertisements are starting to come back. Subway advertisements are still out, but DTC startups are taking to take a second look at launching new out of home campaigns in cities with lots of car owners -- as people start driving to more places again -- as well as in places near where people may be spending a lot of time outside.
DTC startups have responded to events of the past week in a couple of ways. The first is by affirming their support for Black Lives Matter on social media, and pledging to fight against systemic injustice. Some brands followed that with pledges to donate to organizations like the NAACP Legal Defense and Educational Fund and the National Movement for Black Lives Matter. Now, the focus needs to shift to building diverse companies.
Stitch Fix’s decision to lay off the majority of its California-based stylists is something that the company has been discussing for over a year, the company told impacted stylists on Monday. In a recording obtained by Modern Retail, the company explained its reasoning behind the layoffs. Stylists spoke about the ordeal and the lack of transparency.
Dick's Sporting Goods has benefitted some from its product being in high demand. But the company also benefitted from investments it has previously made in its e-commerce business. Case in point, the company said during its first quarter earnings that online sales were up 110% during the quarter, thanks in large part to the rollout of a curbside pickup service in response to store closures.
As apparel retailers are set to re-open their stores, another question they've been grappling with over the past couple of months is exactly what new product or brand launches to move forward with. The way that retailers typically draw customers into store is with new product. But many retailers are hesitant to increase their inventory levels when they have apparel that have been sitting in their stores that they need to clear.
Off-price retailers have historically ignored e-commerce, because their shoppers have proven that they still prefer visiting a store to search through piles of inventory in order to find a good deal. However, the coronavirus crisis has highlighted the shortcomings of that approach. Nordstrom's latest earnings highlights this strategic misstep.
Over the past two months, digitally native startups have been some of the biggest beneficiaries of store closures. Part of this growth was due to the fact that shoppers had fewer options. Now, shoppers have more options as stores open back up in more states. The coming months will prove just how much of the growth direct-to-consumer brands experienced was a flash in the pan.
When Nordstrom opened its New York City flagship last October, it was the epitome of experiential retail. Now, all of those experiential elements that were supposed to make the store a must-visit may deter customers. Retailers are having to rethink their experiential retail strategy, and what experiences will win over customers.
Foot Locker has long been a staple of the mall, with an estimated 80% of its stores being located in malls as of 2018. Now, the coronavirus is accelerating those plans, CEO Dick Johnson said during the company's first quarter earnings call. The sneaker retailer has had to rethink its physical retail strategy over the past couple of years, not only to lessen its reliance on malls, but also to give its customers new reasons to visit the store.
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