Retail’s Modernization Imperative

THE COWEN INSIGHT

The COVID-19 crisis is a catalyst for innovation. We forecast consumers will accelerate adoption of recommerce & online grocery as they pivot toward value and blend digital & physical interactions. Store closures accelerated by the crisis will lead to additional mall closures. Brands & retailers need to pivot to at-home engagement. Retail robotics, automation and artificial intelligence adoption are accelerated.

A Transformation In Apparel And Grocery Consumption

1. Customer focus on value and sustainability is expected to drive apparel market share shifts to Re-Commerce and off-price. Recommerce’s market share forecasts double by 2024 to ~14% (~$60bn) vs. ~7% today
2. Online grocery penetration propelled by curbside pickup could reach 20% by 2025 from ~10% in 2020, yielding a market size of $257bn
3. Step changes in e-commerce consumption also drive an acceleration in store closures and market share losses at mall-based retailers to ~30% by 2024 vs. ~38% in 2019.

Consumer Acceleration: Recommerce & Value Take Hold

Consumers increasingly prioritize value and continue to look to do more with less. Because of this, Cowen expects accelerating adoption of Recommerce and exceptional resilience at off-price retail. 

Cowen’s Consumer Tracker highlights 13.4% of consumers visiting resale platforms within the past 30 days, up from 11% in August 2019, when we began the survey. We forecast a material share shift to recommerce as department stores and mall-based retailers lose share via store closures and consumer shifts toward access over ownership.

Cowen models recommerce – including resale, rental, and subscription – to constitute ~14% of the apparel, footwear, and accessories market by 2024 vs. ~7% currently. Robust growth of recommerce is fueled by resale platforms, growing at an estimated +34% CAGR. We forecast mall based retailers’ market share contracting to ~30% from ~38% today.

Unfortunately, Department Store Closures Drive More Mall Closures

Cowen forecasts malls in the US could decline to ~600 from ~1,000 today. This is below our previous forecast of 800. The growing significance of “at-home” engagement and contactless retail will likely accelerate the demise of lower productivity stores.

Stores remain critical, but we see them redefined as “hubs” and customer acquisition tools and connected entities, as well as important content drivers for at-home media.

Retail Robotics & Automation Underpin Transformation: Micro-Fulfillment And Artificial Intelligence

We expect the growth of online grocery will accelerate the importance and necessity of several trends.

1. The rise of Micro-Fulfillment Centers and other picking and packing automation to increase labor efficiency. 
2. The rise of the “connected store,” resulting in improved inventory accuracy, operating efficiencies, and labor savings.
3. Artificial Intelligence will become increasingly important to improve pricing models, inventory planning and allocation, image recognition, and the connected and cloud driven store. We expect an acceleration in automation to improve profitability and throughput capabilities.