AlixPartners on Thursday posted its top retail predictions for 2017, and among those on list are the proposed import tax and a spike in cost of goods sold.
The retail consultancy said the Trump administration’s proposed 20 percent tax on imports from countries with which the U.S. has a trade deficit could have a “disproportionally large negative impact on merchants that export much of the goods they sell.” The AlixPartners retail team said that if the plan moves forward as is, retailers may be forced to raise prices on imported goods, which potentially could have them lose out on sales.
Separate from the import tax issue, AlixPartners expects to see cost of goods spike in 2017 due to protectionist stances spreading across the globe. It reasoned that retailers “may have to pass those costs onto consumers,” and concluded that consumers won’t be sympathetic to the price hikes. That means retailers — and the vendors that produce the goods — will likely see a drop-off in demand rather than a positive shift to higher prices.
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As for retailers trying their hand at competing against Amazon, AlixPartners believes they will be met with limited success. The posting cited Wal-Mart Stores Inc. as possibly one of the few who can compete with Amazon head-on, and recently took on free two-day shipping on orders of more than $35. But AlixPartners also noted that the free shipping doesn’t cover the additional benefits that Amazon offers, such as video streaming and e-book lending. Further, the consultancy said perception here is key, where the network effect has consumers increasingly considering Amazon as their go-to, one-stop-shop because they think Amazon has more inventory and lower prices than its competitors.
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As for retail square footage, the consultancy expects to see more store closures this year in addition to the ones already announced. Further, as the retail space becomes available when anchor tenants such as Macy’s and Sears leave, the AlixPartners team concluded that dead malls would create a real problem. The team noted in the posting that there’s a chance there could be opportunities for renewal, such as giving off-price and value brands a chance to gain a foothold in a prime location, but that’s presuming real estate investment trusts and municipalities get serious about how to better utilize unused space or how to rethink the space entirely.
Other predictions for 2017 include retailers relying more on psychographic data to better understand and segment their customer base; mobile commerce taking center stage; specialty stores finding their niche, such as more shops-in-shop to leverage niche markets, and subscription services gaining traction.