2021 in Review: 10 of the Top Retail News Stories
This year has been a tumultuous year for the retail sector to say the least. Just when we thought the COVID-19 pandemic couldn’t cause more harm labour shortages, out of stocks and price increases reared their ugly heads.
Retailers are struggling to keep their heads above water and if you are curious about the challenges as well as the opportunities facing them then take a look at some of the top retail news stories of the year.
1. Retailers are sounding the alarm that they may not have enough stock for the holiday season this year. The COVID-19 pandemic has wrecked havoc on global supply chains. Factory shutdowns, labour shortages, a lack of shipping containers and longer shipping times are just a few of the problems plaguing retailers. Supermarkets are only getting around 40% of what they have ordered while other retailers are finding it takes months to replenish out of stock items.
2. Despite a strong job market in the United States there is a labour shortage affecting many retailers. Some believe the shortage is due to generous unemployment benefits. But many argue it is due to retailers not paying enough or not providing roles with enough hours. In response to this many retailers including Costco, McDonald’s and Chipotle have increased wages. Some retailers are even offering signing bonuses to entry level workers which are usually reserved for higher level positions.
3. In a sign of the times Dollar Tree is raising the prices of many of its items to between $1.25 and $1.50. For more than 30 years Dollar Tree stayed firm with its pricing strategy to sell most of its merchandise for a dollar while other dollar stores raised their prices. Dollar Tree, like many retailers is suffering from labour shortages and supply chain disruptions which is putting pressure on costs. Dollar Tree expects to pay an extra $200 million in freight costs this year.
4. By 2024 online sales in the United States will comprise an estimated 28% of retail sales. While there was a surge in eCommerce last year consumers still prefer to shop in stores. The top reasons for shopping offline include: ability to test products (47%) and being able to have your purchase right away (38%). More than 33% of consumers surveyed said returns discourage them from shopping online. That should be good news for retailers since profitability tends to take a hit as the return rate increases.
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5. With the surge in eCommerce buy now pay later companies are growing quickly. Square bought Afterpay earlier this year for $29 billion. Klarna is valued at $46 billion and earlier this year Amazon signed a deal with Affirm. These companies allow shoppers to buy now and pay later in installments. But critics say these organizations need to be regulated since Millennial and Gen Z consumers which are the largest users of the service don’t realize they are going into debt.
6. Amazon is reportedly planning to open department stores. At 30,000 sq. ft. these stores will be much smaller than traditional department stores which on average are about 100,000 sq. ft. But the stores will be similar in size to smaller sized Bloomingdale’s and Nordstrom stores. Department stores will allow Amazon to showcase several categories where it has a growing dominance like clothing and household items both categories which are department store staples.
7. Earlier this year Hammerson, a mall landlord, sold all of its seven retail parks located in the UK to Brookfield Asset Management. Hammerson was forced to do this after it faced its greatest decline in rental income ever during the pandemic. The deal, worth $479 million will allow Hammerson to strengthen its balance sheet after reporting a loss of $2.4 billion in 2020.
8. Last month YouTube launched a weeklong shoppable video event called YouTube Holiday Stream & Shop. During the event popular creators were able to promote merchandise during a livestream while viewers were able to buy goods directly on YouTube. This year during the world’s largest online shopping event, Alibaba’s Singles Day, Li Jiaqi, a Chinese livestreamer sold $1.9 billion of merchandise in one day alone signalling the potential of this sales channel. Livestream shopping hasn’t taken off in the United States yet but sales are expected to reach $25 billion by 2023.
9. Under Armour, similar to Nike, is rationalizing its wholesale partners. It plans to cut 2,000 to 3,000 of these partners. "And what we'll be left with, when we're through that journey, is really what we believe are more appropriate doors for us — doors that we feel are going to win, " says Under Armour’s CEO Patrik Frisk. "The idea that a brand will grow to the moon and sell anywhere is a thing of the past. And the retailers that relied on them ... will have to look inward,” says BMO Capital Markets analyst Simeon Siegel.
10. Online grocery shopping grew quickly during the pandemic with sales up 63.9% last year in the United States. But as these sales grow retailers struggle to make them profitable. 86% of grocers surveyed said they are unhappy with the profit margins from their delivery business. Many grocers lose money on each delivery transaction. Grocers are also concerned about losing their connection with their customers when using third party platforms to deliver goods and the majority of grocers believe these platforms will become competitors in the future.