Despite the wave of store-based retail bankruptcies last year, 2018 was “one of the best years for the retail industry in a decade,” according to the National Retail Federation. The booming economy and the lowest unemployment rate in a decade contributed to the highest holiday retail spending in the last six years. Store-based retailers are optimizing their omni-channel operations and online retailers are innovating to further enhance customer experience. Wharton School of Business Professor Barbara Kahn and Columbia University’s Mark A. Cohen discuss their projections for retail in 2019 in their article, Knowledge@Wharton radio show on Sirius XM, and podcast, “Retail Resurrection: A Rosy Outlook for 2019?”
The predictions for retail in 2019 are equivocal. The National Retail Federation predicts another successful year for retail. In contrast, Deloitte, the retail consulting firm believes economic growth is slowing and digital disruption will weaken incumbent store-based retailers further. Dr. Kahn and Mr. Cohen make the following observations:
- Retailers who are creative and agile in their response to opportunities and challenges in their external environment will succeed and those who do not will faiil. By opportunistically opening and closing locations, introducing innovative store formats like Nordstrom’s showrooms with no inventory, Amazon Go stores and automobile technology that let consumers can make purchases during their commute is spurring retail sales.
- While sales in digital retail will grow, growth in subscription-based retail will stagnate as the excitement associated with the new format wanes. Consumers will defect as the boredom sets in and increased customer acquisition costs will make it unsustainable.
- Super-regional malls will survive but smaller neighborhood malls will be challenged. Consumers prefer super-regional malls which are multi-use and experiential.
- Sears is facing imminent bankruptcy, a result of poor strategy and leadership.
- Data privacy, especially using and monetizing consumer data without any direct benefit to consumers will attract new regulation and compliance costs.