Retailers of all shapes and sizes have grappled with some pretty stormy times in recent years and we’ve seen many high street favourites such Toys R Us, House of Fraser and Sears sunk by their inability to change course quickly. Whether they were hit by the wave of recession, got carried away with their physical footprint or were wiped out by disruptive online retailers, the past few years have been labelled the ‘retail apocalypse’.
However, Moody’s Investors Service’s new report suggests a change is on the way. The urgent board meetings filled with panic stricken faces, the brutal restructuring and the investment in those ominous digital transformations seem to be paying off. Here’s a breakdown of brighter forecast painted by their findings:
- The first time since 2015, Moody’s Investors Service has raised its outlook for the retail sector from “stable” to “positive.”
- The ratings agency sees sales growth forecast for the year of 4.5% to 5.5% vs. 3.5% to 4.5% prior.
- Online sales in the USA will grow from 15% to about 20% of total sales in the next five years.
- Amazon will continue to dominate in e-commerce, but brick & mortar companies will gain more of the online market share.
- Home improvement retailers, off-price retailers and dollar stores will continue to grow.
- “Department store declines will taper,” with some improvement expected among specialty retailers, supermarkets and drug stores.
- Business has improved through a very strong macro-economic environment, with improving consumer confidence and low unemployment.
- Technology has helped to implement greater efficiencies, increasing overall operating profits.
- Retailers have been working hard to integrate the the online and in-store shopping channels and improve the customer experience.
The Watch Outs
- A tight labour market means retailers will need to pay more for good employees.
- Freight costs, due in part to a shortage of truck drivers, are another ongoing concern.
- More store and malls will close in the US as retail space contracts and sales move online.
- Uncertainty with continue back and forth of trade war and tariffs.
- No one knows what kind of shoppers the elusive Gen Z will be.