If the last several years have been an apocalypse for American retail, the last few months of the coronavirus pandemic can be characterized as a supernova. Stores have shuttered, the supply chain has broken, and shoppers have radically changed their buying habits during weeks of lockdown to stem the spread of COVID-19.
Total retail sales in March dropped 8.7% from the previous month, a steep decline not seen since 1992, according to the U.S. Department of Commerce. The apparel sector witnessed the most precipitous plunge, with sales of clothing and accessories falling by more than 50%.
Even as malls and stores announced plans to reopen this week, the damage is already clear: Mass-clothier J Crew filed for bankruptcy protection on Monday, becoming the first retailer to fall victim to the economic effects of the pandemic. Neiman Marcus is expected to follow suit as it deals with more than $4 billion in debt.
Wharton marketing professor and former dean Thomas Robertson said retail is in a period of “creative destruction,” a term coined by economist Joseph Schumpeter to describe the constant change brought by innovation that kills off old ideas and makes room for new ones. Retail will be different after the dust settles, he said, and that’s not a bad thing.
“Change is inevitable, and we can think it’s awful, but it’s just nature,” says Robertson, who is also director of the Baker Retailing Center at Wharton. “The effect of the pandemic is to accelerate the demise of retailers that had lost their way and that people no longer had a reason to [visit]. There will be a reconfiguration as we come out of this. I don’t know what it’s going to look like, but there will be new players, some existing players will get stronger, and I expect acquisitions will occur. There will be a shakeout. But, in total, retail sales will come back as strong as ever.”
Barbara Kahn, a Wharton marketing professor whose research focuses on retail, agrees that innovation will shape the final outcome for brands navigating through the pandemic, especially when factoring in trends in technology and consumer behavior. Cashless purchasing has been around for years, but it has soared in recent weeks as customers and store clerks seek contactless transactions. Kahn expects the demand for that will continue, along with demand for drone delivery. Sustainability, a hot topic before the lockdowns, is garnering even greater attention as shoppers reevaluate their consumption habits.
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