FROM: What’s News, a WSJ Podcast: Dec. 28 edition. The past year brought highs and lows for the retail industry. The pandemic forced many stores to close their doors, some for good. Others tried to meet the challenges of the time by shifting focus to fill consumers’ needs, which saw renewed focus on online shopping and spending on homes. Matt Rubel, chairman of the executive board for MidOcean Private Equity and CEO of Empower, a special-purpose acquisition company, joins host Annmarie Fertoli to discuss the state of retail in 2020 and what to watch for in the year to come.


Here are some of the highlights and key takeaways from Rubel’s interview as it relates to retail fulfillment in 2020, the work we do here at Fosdick, and the state of the industry going forward. 


Shipping Speed & Product Sampling


2020 upped the ante for shipping and delivery speeds and customer expectations for the products they ordered. This has surely created some bottlenecking, and will continue to do until carriers are able to troubleshoot solutions for the five year jump in growth for eCommerce and consistent spikes in order volume. This became especially problematic around the holiday peak season. With volume at peak levels for much of the year as a result of online pandemic shopping, the holidays were sort of doomed as far as timely delivery goes. 


If you tried to ship a package with any of the big three carriers (FedEx, UPS, USPS) this season you know exactly what we are talking about. $50 secret santa spending limits are difficult to maintain for out-of-state family members with overnight shipping costs of $40 at the Post Office and $80 at either FedEx or UPS for mid-sized packages no further than zone 4.


In one instance, a friend of a Fosdick colleague tried to overnight a bottle of wine from CT, where we are headquartered, to an uncle in South Carolina. The price came out to nearly $200. 


And still, a CBS news report on Christmas Eve revealed that more than a million of those overpriced packages still did not make it in time for the socially distanced, Christmas morning gift exchange on Zoom!


Consumer Behavior & the Companies that Won


The winners from 2020, and in particular from the pandemic, can be split into two categories: companies in the business of need based products. These are the brands responsible for the inelastic items we rarely think of as being in short supply, and the ones that separate us from the animals.


In the bathroom, it’s the toilet paper, hand soap, shampoos and conditioners, disposable razors, and over the counter meds that folks all over the country keep in supply under sinks. In the kitchen, of course groceries are a need, but specifically we are talking about sustainable items and non-perishables – the packaged foods, canned products, bottled waters, paper towels, dried or frozen fruits, etc.


The second category of companies that won did so not because the stars aligned for their merchandise categories and a sudden massive market demand, but rather because they strategized, pivoted quickly, and adapted to insights into pandemic shopping behavior. 


For an example here, think Walmart. The big box chain quickly narrowed its focus to its eCommerce markets. Physical locations were rearranged and repurposed for warehousing and fulfillment. In addition, the company began offering various creative in-store and curbside options through which customers could procure items ordered online beyond just delivery to the home. 


Last but not least are the companies facilitating our new lives in the home. These are the brands offering home office tools and furnishings, in-home fitness equipment, and more of the stuff we need to build out our home’s infrastructure and limit our trips out into the world. 


The Companies that Lost


So what about the companies that lost their way amid the pandemic and those gone forever? Matt Rubel, chairman of the executive board for MidOcean Private Equity and CEO of Empower, would contest they were already losing, and any missteps made on the part of these brands were made long ago. The pandemic, it would seem, was merely a catalyst, creating a market that “emptied the water out of the bathtub” for companies like Pier 1, JCPenney, and the like. 


There are plenty of business leaders who have spoken out with sentiments similar to Rubel’s contention that many of these companies have long held positions which were not relevant to the current direction of the consumer. These are the brands that were stuck in the middle in trend related consumer products, unable to distinguish themselves and appeal to younger consumers. Meanwhile, former and even existing customers were quickly redirected to cheaper, more convenient and efficient options. 


What’s Changed & What Remains the Same?


In short, the ultimate truism, and that which has persisted despite COVID, and the subsequent economic downturn, is that people are still spending and will continue to do so.


This was seen primarily around mother’s day when stores reopened after a period of government ordered shutdown. Shoppers hit the stores for a necklace, flowers, or kitchenware for mom. 


And just as quickly, when the stimulus checks came in, people found used that money. With that in mind, the biggest change in the retail landscape is where people spent that money and what they invested in. This paper trail reflects a change not just in the market or consumer behavior, but human behavior. 


As mentioned above, the most pervasive investments were made in the home, on at home health and for adapting existing spaces to a remote work lifestyle.


Beyond home gyms and offices, 2020 has been about supplementing for the expertise and self improvement we would typically seek elsewhere. In the digital age, companies like Master Class and Mirror have been able to commoditize instructional services and so significant funding has been allocated for language learning programs, cooking classes, and in home fitness instruction.


All Things Measured 


Rubell expects digital and remote trends in retail to continue into 2021 and beyond with particular favoritism for all things measured. The measured self movement is not a new concept and we have seen these tools come to market in droves over the past decade – the fitness trackers and heart rate monitors, the sleep tracking apps, the calorie counters, etc. But Rubel expects adoption of products like these to become more ubiquitous.

Health, Wellness, & Hygiene 


He also contests that people will go back into the world, but with greater caution and higher standards for health, wellness, and hygiene. We can expect that much of that virus resisting mentality will have taken root permanently. 


Jailbreaking Telehealth 


The last trend Rubel sees as impactful to the greater retail landscape and consumer climate is that of telehealth. For the first time, throughout the pandemic, doctors have been using telehealth platforms with more fidelity. Initially this was just another measure taken to help subdue viral spread throughout doctors offices, but has since revealed itself as a valuable tool. 


Telehealth creates more widespread access to healthcare for more people, while simultaneously providing a greater depth of access to individual patients for doctors. Both parties benefit from telehealth capabilities and as such we can expect the companies behind these products to continue to build out and optimize the platforms. 




Mixed Merchandising

The apparel business was subject to pain points during the period of government ordered lockdown as the market demand for clothing began to shift. With businesses closed, consumers stopped spending on work and social attire and began to rebuild their wardrobes to consist mainly of leisurewear. The brands we typically associate with formal wear – those we rely on for our work slacks, button downs, and blouses – became extremely vulnerable if they were unable to make appropriate adjustments to product offerings. 


Insights, Not Anniversaries


This lends well to Rubel’s next piece of advice for retailers: to let go of the inclination to determine business decisions in 2021 based on what was done and what was successful in previous years. 


Why? Because nothing about this year, and likely the year to come, is conventional or consistent with previous years, especially with respect to retail. Instead, retailers need to step out of their comfort zones and create a strategy for determining insights about what potential customers are thinking and feeling, and how that might affect the way they spend their hard earned cash. 


Consumers Care in 2021


Another important tenet that Rubel predicts will emerge in 2021 is the degree with which customers care about the world and the subsequent value that then falls on brands citizenship. Certainly, value and convenience will always be important to consumers, but perhaps not as important as providing support for the companies focused on sustainability, humanitarianism, and fighting social injustice. 


Then again, at the same time, consumers are still going to shop at the best price in most cases. Retailers should work to deliver both price and “good for you” or “good for the community.” Each must be adapted as foundational to branding and should work in conjunction with one another, ultimately functioning in a compromise of value. 


Enthusiast Groups

Merchants may also benefit from some potentially more nuanced marketing practices that consider natural demography of certain customer profiles. Rubel mentions the enthusiast groups, hobbyists, and mutual interest groups that are most excited about what a brand may have to offer. 


Understanding those communities and how to bring them to networks could be huge for 2021. Brands that are able to communicate directly to potential customers through network platforms will be working smarter by leveraging pre-existing categories of potential customers. 


Rubel is also doubling down on his vision for the digitized retail landscape calling brands to reframe their thinking around the idea of the online network. Beyond just platforms through which marketers may want to direct their efforts, these networks are communities of buyers and each is a key capable of unlocking retail at scale. 


Retail is Boundless


We often equate the idea of retail as having four walls. For many, there is retail and there is omnichannel. 


But retail is ultimately about convenience, and convenience means “I want what I want and I want it now.”


  • The TV show; the late night Amazon order; one and two day shipping times on any and all products…
  • The brands who do not react to the on demand world will be left behind. 
  • Traditional retail will still be there, but convenience will manifest as on-demand everything. 


Retailers can no longer push on demand as a marketing device or value proposition. To the modern consumer “right here and now” is not just a nice to have. It is a condition. 


This is certain to have unique implications on marketers especially as companies seek new ways to engage potential customers and create excitement about a new product or service.