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The Great Retail Reopening Has Begun. Will Shoppers Return?

This week, everyone will be talking about the future of Victoria's Secret, the reopening of American stores and China's 520 Day. Get your BoF Professional Cheat Sheet.
London's Covent Garden Market, normally crowded with tourists and shoppers, was deserted on April 4. | Source: Getty Images
By
  • Brian Baskin
BoF PROFESSIONAL

THE CHEAT SHEET

Does Victoria's Secret's Owner Have a Plan B?

Bath & Body Works | Source: Shutterstock

  • Victoria's Secret and Bath & Body Works owner L Brands reports financial results on May 21
  • This will be the first time executives speak publicly since a plan to sell the ailing lingerie brand to Sycamore Partners fell through
  • L Brands founder Les Wexner has exited Victoria's Secret as originally planned, and the parent company still wants to separate its two brands
L Brands and Sycamore Partners opted to go their separate ways rather than battle over the future of Victoria’s Secret in court. Now, L Brands has to figure out what to do with its troubled brand. The company has assured investors it still plans for Bath & Body Works and Victoria’s Secret to go their separate ways. How that happens is anyone’s guess, and sure to be the focus when L Brands releases quarterly results this week. Can L Brands find another buyer for Victoria’s Secret? If not, can the brand survive on its own, given that Covid-19 has torpedoed in-store retail and turbocharged its online competition? Can Bath & Body Works continue its recent run of success without the cash infusion that was expected from the Victoria’s Secret sale? 
The Bottom Line: Victoria's Secret's unique issues obscure the larger question it and its peers face: What sort of future is there for any brand that operate almost entirely out of shopping malls? 

Early Returns From America's Reopening

Inside a mall in Atlanta, Georgia | Source: Shutterstock

  • Most US states have allowed at least some stores to reopen in the last two weeks
  • Though a few stores have seen crowds, foot traffic has been slow to return overall. Clothing stores' sales fell nearly 80 percent in April
  • J.C. Penney filed for bankruptcy on Friday; Gap will hold a virtual shareholders meeting on May 19
A widely circulated image of a packed T.J. Maxx in Arkansas, barely a mask in sight, is what many Americans picture when they think about what reopening retail will look like. The numbers show that the store was likely an outlier. Dillard’s, a department store chain with plenty of locations in states like Arkansas and Georgia that were early to lift restrictions on shopping, had 84 percent fewer visitors on May 12 compared with a year ago, according to Placer.ai.

Health concerns are surely keeping some shoppers at home. But the pandemic is changing retail in other ways that could reduce brick-and-mortar foot traffic for the long term. Many consumers have undoubtedly gotten used to shopping online. And a Piper Jaffray analyst compared visiting a newly reopened luxury department store in Houston as "jarring" and "more akin to shopping in a warehouse." 

The Bottom Line: Scenes of crowded stores and lines snaking through malls also mask the turmoil happening behind the scenes, including rent disputes, major mall tenants in financial peril and the prospect that tens of thousands of stores may never reopen.

China's Halting Recovery

Cai Xukun Stars in Prada 520 Campaign | Source: Courtesy

  • China's 520 holiday is the first major marketing opportunity since the pandemic
  • Some luxury brands, including Chanel and Louis Vuitton, are raising prices, prompting huge crowds at stores
  • Chinese consumer spending has been slow to recover, raising fears of a double-dip economic downturn

China's retail rebound has been uncomfortably slow. There's even talk of a "W" shaped recovery, where the economic momentum sparked by stores and factories reopening falters as consumers fail to turn up. The marketing around the May 20 holiday (the date sounds like "I love you" in Mandarin) reflects the uncertainty of the times. Prada, Louis Vuitton and others are rolling out their 520 campaigns, the first major marketing opportunity in months, since Covid-19 crushed spending around Chinese New Year and Valentine's Day. The campaigns mainly centre around relatively affordable items and more muted styles that sell well in a weak economy. And though some luxury brands can count on lines around the block outside their boutiques, they are putting new emphasis on digital marketing as well, including livestreams featuring top influencers.

The Bottom Line: Another trend emerging out of China is the bifurcated nature of recovery. Luxury brands appear confident of a quick rebound, while the rest of the fashion industry is bracing for a long, slow return.

SUNDAY READING

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