Retail in 2021 Part 2

Don Unser – is a 1992 graduate of the college and UCF College of Business Dean’s Advisory Board Member. He is Group President, Retail Business Group, at The NPD Group, the leading source on consumer spending with Point-of-sale data from over 600,000 retail locations, plus e-commerce and mobile platforms. Don is especially qualified to speak on this topic…….

The COVID-19 pandemic has caused massive and unprecedented changes in U.S. consumer spending that will have short-term and long-term implications for retail. As a result, the purchase trends we saw in 2020 will certainly set the stage for 2021.

Heading into 2021, U.S. retail spending remains strong. The NPD Group recorded a $100 billion increase in U.S. retail spending in 2020 versus 2019. I expect this strong performance to continue in the beginning months of 2021. In a time of such drastic challenges, many are surprised that retail is performing well. But it’s important to consider that the pandemic is leading to decreased spending for experiences (travel, live events, etc.)outside the home. Consumers are using much of this freed-up source of cash to buy products that facilitate working, learning,and eating at home. For instance, rather than eating out, consumers are increasingly preparing their own meals. In 2020, this shift drove a 14% increase in household grocery spending.Relatedly, consumers are investing in their kitchens leading to a rise in sales for small appliances and housewares. 

There are numerous other examples of instances where U.S retail spending is increasing. The need for consumers to work, learn, and stay entertained at home has led to strong performance in the consumer technology space. Toys, homefitness, and video games are additional examples of industries that are growing. I expect these trends to continue until vaccines are more broadly distributed later in the year. 

Looking further ahead, once restrictions begin to ease, I expect to see a strong uptick in spending for leisure entertainment such as travel, live events, gyms, and movies. I estimate the annualized spend for those activities in 2019 was nearly $500B. That’s a huge figure with implications that extend beyond consumer spending given the employment linked to those industries. A rise in leisure entertainment spending, however,will likely cause a pull-back in some of the product categoriesthat have grown due to the pandemic as consumers re-allocate their spend. On the other hand, industries that have recentlysuffered at retail, like apparel and footwear, will benefit as consumers look to refresh their wardrobes to partake in activitiesthat take place outside the home. 

A return to leisure entertainment spending in the U.S. is inevitable as more people get vaccinated and feel more comfortable leaving their homes. Many families have not had their annual vacation in 2020 and cabin fever will lead to pent-up demand for a variety of experiences. I expect many will splurge. In this regard, companies in the leisure entertainment space should bolster their premium offerings to capitalize on this behavior. 

In light of all these factors, I expect 2021 to be another roller-coaster year for consumer-facing businesses. Overall, however, I remain optimistic about the resilience of the U.S. consumer.

Retail in 2021 Part 1

Retail, especially bricks and mortar retail, has seen a lot of disruption in recent years. This week we focus on what is in store for 2021 as we hopefully start to dig out of the strange world brought on by COVID. Anand Krishnamoorthy is an associate professor of marketing here in the college and is our go-to person on retail. He gazes into his crystal ball below…

To understand what is in store for retail in 2021, let us look at four shifts brought about — or accelerated — by COVID in 2020:

Mode (online vs. B&M): In 2019, about 16% of all retail was online. While that number for 2020 is TBD, it is bound to be record-breaking given the online boom after COVID. Obviously, physical retail suffered: for instance, B&M traffic was down over 50% during Black Friday in 2020 relative to 2019.

Store (big-box vs. mom-and-pop): COVID fears have led consumers to minimize the number of shopping trips: one trip to a big-box store is more efficient — and less risky — than visiting multiple mom-and-pop stores. This trend paid huge dividends for the behemoths. What about small businesses? Many of them have not survived to tell us.

Product (tangible vs. experience): Demand for experiences (e.g., travel and dining) took a serious hit from COVID. Outside of pandemic supplies, sales of smart devices, gaming and toys, home decorations, and exercise goods boomed as consumers spent more time at home — for work and for pleasure.

Consumer (affluent vs. not-so-fortunate): How has retail overcome COVID? The decrease in spending from lower-income consumers was more than offset by the affluent. Yes, job losses and limited government support hurt badly, but the wealthy made it out just fine. More than fine: they rode the stock market to all-time highs.

As the majority gets vaccinated and Congress provides greater assistance to individuals and small businesses, where is retail headed in 2021? Given the aforementioned shifts, a term that comes to mind is hysteresis. Broadly defined, it is the (in)ability to snap back to the pre-impact state. How much hysteresis will the above trends demonstrate?

The growth of online has been unsurprising, but there can be no doubt that COVID quickened that pace in 2020. As consumers return to B&M, online is likely to give up some of its COVID gains. Even so, e-retail accounting for 20% of overall retail over the next few years would have been plausible even without COVID.

When COVID cases subside and consumers get vaccinated, mom-and-pop stores will begin seeing increased traffic as consumers shop for pleasure and visit multiple stores per trip. Why did Walmart and Target thrive in 2020? They had prioritized online well before COVID. If there is one lesson for the mom-and-pops from COVID, it is that they cannot be completely reliant on foot traffic. Even if they cannot sell online, they must be willing — and able — to provide product and store information online in engaging ways to keep potential consumers interested.

COVID was a boon for home products. As vaccines erase lockdowns and social distancing from memory, “experience” purchases like travel and dining will bounce back. How quickly these sectors rebound will depend on the pace of financial recovery across all segments of the population.

Retail needs more than just the affluent consumer. Its historical strength has revolved around every type of consumer playing a role in stimulating demand. It is unlikely that all the jobs lost to COVID are coming back in 2021. As the last few months have shown, support to prop up individuals and small businesses is slow to come by in Congress and in local governments. Much will depend on additional rounds of stimulus.

Higher Education in 2021 Part 2

We continue our conversation on higher education in 2021 with the comments of Dr. David Klock. David was a faculty member at UCF, went on to be a CEO and a Dean at three different schools. If you’d like to join the conversation, leave a comment to this post. We would love to read it.

The driver of higher ed in 2021 will be focused on delivering the unique mission of each university. For many years the mission of UCF has been access with excellence. UCF is an elite accessible university – demonstrating every day that affordable access does not impede excellence in teaching, research and service. As President Cartwright says, UCF can be elite without being elitist. However, the pandemic is changing the nature of many existing and potential UCF students. An ever-growing, large percentage of UCF’s exceptional students will be nontraditional diverse students who, out of financial necessity, are working more hours and will need flexibility to optimize their joint opportunities in work and education.

I believe UCF is well prepared to create an exceptional set of experiences for both the growing number of nontraditional students and their many traditional and often younger peers. I believe they help to lift up each other—given their unique and diverse set of life experiences.  

Let’s explore a couple of things causing this transition and its potential impact in 2021. Many traditional UCF students are now in the nontraditional group as pandemic-related financial concerns have caused them to seek expanded employment.  Additionally, many bright students who left the Orlando area to enroll in respected campuses around the U.S. may, due to financial issues, now be seeking to work in Central Florida and attend UCF.  Some may have dropped out until their family financial condition improves—or until they are provided a new financial pathway that integrates working with their desired course of study. As Covid vaccinations gradually cause an expanded opening of the Florida economy in 2021, students will likely have more working options that better align with their career plans and respective majors at UCF. 

Nontraditional diverse students seek lower net tuition and education flexibility required by working. By necessity, these students will desire that many of their classes be quality online and hybrid modalities that provide flexibility as to whether they need to travel to UCF. They see quality online classes as uniquely designed and executed for online activities—with a series of focused lessons integrated with interactive exercises and with mentored discussion boards stimulating peer-to-peer joint learning. They appreciate student-to-faculty online discussions/mentoring. They also seek flexibility as to when they focus on their UCF class activities. They may take longer to graduation as they may take fewer classes per term. Proactive retention services become more important. They do want to be geographically close to the highly respected teacher/scholars who willingly lead UCF’s variety of quality classes but seek flexibility in having valued faculty interactions.

Thomas L. Friedman in his recent book on the Age of Accelerations notes that quality higher ed is moving to support working students and their employers by helping create integrated and synergistic learnings, gained both in course work and in the evolving and innovative working environments—in a sense creating a personalized co-op program. He also discusses that a positive working environment will provide both enhanced access to technology and mentored support—both factors in improved progress to a degree.

UCF and its College of Business will continue in 2021 to lead in confronting these sets of challenges—all done in a mixture of traditional classrooms, hybrid and fully online modalities—based on the decisions of competent and willing faculty members. Variations of learning goals and modalities are part of the academic excellence of UCF, as UCF supports the central role of faculty in program and course development. To the UCF faculty and staff members, we say, “Thank You for your special efforts in these evolving times of stress and transitions. CHARGE ON!”

David Klock, Ph.D.

Higher Education in 2021 Part 1

Today, you get my take on what 2021 will bring to higher education. Wednesday you will hear from Dr. David Klock. David is a former UCF faculty member, CEO of CompBenefits, and three-time business school Dean. If you want to join the conversation, leave a comment to this blog post. We would love to hear from you.

Much has been written and will be written about the financial challenges universities are facing because of the pandemic. In this respect, 2021 is likely to be worse than 2020, especially here in Florida where the pandemic has decimated tourism, and state coffers are unlikely to be replenished before budgets are set for the upcoming school year. But truth be told, public universities go through budget crises about once every 10 years or so. The process is painful, but it is rarely, if ever, transformative.

The real challenge for higher education and the one that holds the most promise for transformation, perhaps in the form of reaffirmation, will happen in the fall of 2021. By then colleges will be reopening in earnest and it will be more than 18 months since many students have set foot on their campuses. Last year’s college freshmen, those who lost the last part of their senior year of high school, will be on campus for the first time.  Many members of the freshmen class of 2021 will come to campus having lost most of their junior and all of their senior year to virtual classes. 

Many believe the lack of face-to-face education has put these students behind both academically and socially. Today’s media is filled with stories about students who are struggling.  The picture being painted is that performance is down. Many low income students lack access to the electronic resources they need to successfully experience virtual courses. Other students lack motivation due to the stresses of the pandemic and alienation caused by hastily created online environments. Education is after all, social — it is best experienced together. No one in history has ever said: “I can’t wait to experience college online.” Online education is convenient for students who have competing priorities and university leaders worried about the rising costs of campus infrastructure, but 2020 may have uncovered the limits of digital learning and the virtues of being on campus.

A real tipping point may come early in 2021. If current students don’t return for their spring semester (i.e., retention falls) and fall 2021 applications don’t pick up, 2021 could be the beginning of a movement to refocus attention on the campus experience and closing the academic performance gap created by the pandemic through greater access to remedial courses, more partnerships with employers to help students skill up and new co-curricular activities to meet the surge in demand for campus engagement. I’m not suggesting that online education will go away. It plays an important access role for people who are place bound or can’t afford to immerse themselves in a campus experience, but I do think the notion that it is the modality of choice for students and university administrators alike is likely to wane and a new appreciation for face-to-face learning is likely to emerge.

2021 Has to be Better, Right?

Noel Gallagher wisely tells us: “Don’t look back in anger,” but good riddance to 2020. Unless you were Netflix, Publix, or Zoom, it was a downer. As we turn the page to a new year, there is reason for optimism beyond just the arrival of vaccines: The Black Death, or the Plague as it was known, led to the Renaissance. The Spanish Flu gave way to the Roaring Twenties. What will the end of this pandemic bring in 2021?

I’ve asked members of my Dean’s Advisory Board and some senior faculty to write 500 words or so on what they think 2021 will bring and why. We will then feature one industry/topic a week for the first few months of 2021.

To start us out, David Klock and I will offer our thoughts on what 2021 is going to bring to higher education next week. David was a faculty member in the college, a CEO of CompBenefits, a Dean at three different schools and currently is an online education proponent. Not surprisingly, he and I have slightly different takes on the future.

If you’d like to join the conversation, about a topic we posted on or what you think will happen in your industry in 2021, leave a comment on this post. I’d love to read your take.

Happy Holidays

A Gift at My Barbershop

The end of the semester always brings some student emails expressing concerns about an instructor, course or final exam. With more than 8,000 students taking about 4 courses each on average, mostly in remote environments and during a pandemic, it’s not hard to imagine a few people are going to think not everything went according to plan. Some students fear their dreams are being shattered and are in a panic to find someone who will intervene on their behalf.

Student concerns of these types are supposed to go first to the faculty member and then to the department chair, because it’s the department where problem assessment and real change happens (a topic for a blog post next semester). Feedback of this kind can and does lead to continuous improvement (sometimes for the course, sometimes for the instructor, sometimes for the student). When that doesn’t happen and people skip right to the top, long email and phone call chains go from the dean’s office, to the department chair, then from the chair to the faculty member, then from the faculty member back to the chair, and then back to the dean’s office. A few chains even started with the President or Provost’s office, so you can add in two more layers. Suffice it to say, the week of final exams is always one of my least favorite weeks of the semester.

So it was especially nice to get a thank you from an unlikely place this week— the barber shop. I was checking in at the front desk yesterday when a young alum from 2018 introduced himself and thanked me for everything we do in the college to help students network, meet employers and find the right path to success. He commented on how devoted people in the college are to the professional development of students and that Lonny’s efforts really paid off for him. I have more than a few encounters like this each semester, and while I understand that one thank you does not make a successful curriculum or college, it was a nice pick-me-up. That he mentioned Lonny was especially awesome since Lonny lost his dad, an avid reader of this blog, that very morning, and Lonny is always invigorated by a story like this.

More generally, the encounter made me remember that this week is one of my favorite weeks of the semester—graduation week. If I had one piece of advice for our grads it would be this—Don’t expect things will always go according to plan because they almost never do. If flawless execution is your standard, you will shoot way to low and fail. Remain outside of your comfort zone, use the tools and lessons you have gained from your UCF experience to overcome challenges and charge on. Then you can tell me all about it when our paths cross.

Tips to Survive Finals Week

Exam week is always stressful. I remember when I was a student thinking: “This is like having five demanding bosses, none of whom care what else I have on my plate. How am I going to survive this?” Everything in 2020 has just been harder. I’m sure that includes stress around finals. So, if I may, a few suggestions from a guy who survived a lot of finals and has seen others do it too…

1. Focus on what you control: What you control is how you spend your time this week. What happened over the past 14 weeks is irrelevant. The fact that you think one of your professors is unreasonable or that you should have spent more time on this class earlier doesn’t matter at this point. What matters is how you use your time now.

2. You can only eat an elephant one bite at a time: When faced with what seems like a hopelessly big workload, you need to divide it into smaller tasks, and then recognize that progress comes from completing them one at a time.

3. Not all tasks are equal, plan accordingly: Focus your time on those tasks that are likely to push you farthest toward your goal. This is likely to be where you know the professor is likely to asks questions and your understanding is weak. Focusing your studying here might provide big dividends. Don’t make the mistake of thinking that because you find the material hard, that the professor won’t asks these questions. That is a recipe for disaster.

4. Don’t catastrophize: Worrying about the worst-case scenario isn’t helpful. Even bad outcomes are rarely as bad as you will imagine them (see below) and focusing on worse-case outcomes distracts you from doing what you need to get done here— including getting some sleep. Lots of studies show forgoing sleep just reduces cognitive ability.

5. Test results are just feedback: Understand that each test score you get is just one data point on how you are doing overall. Your final grade is not the end of the world. It never is. College is a place where you learn where your interests and talents intersect. Sometimes you have great talent but little interest. Sometimes you have great interest but little talent. Plowing ahead in either of these situations is not a recipe for long-term success. What you really want to learn from college is where your strong interests and great talents match so you can become the best person you can be. Lots of students graduate and enter careers that are different from what they thought they would do when they started as freshmen. This is a good thing.

Finally, remember it will all be over soon. It’s just a little over a week. Charge On.

Don’t be the Detroit Lions

I’m sure your family has a number of Thanksgiving traditions. Some of those were no doubt disrupted this year by the virus. My longstanding tradition was not: I watched the Detroit Lions lose another football game on the way to another lackluster season.

Yes. I grew up a Detroit Lions fan. I did not choose this. I was born into it. For those of you who are not pro football fans, the Lions have been rebuilding since 1957. That’s the last time they won a championship. They have won exactly one playoff game since. They have ranged from mediocre to terrible. Mostly terrible.

It’s not a stubborn adherence to a failed philosophy. No. The team takes risks, changes coaches and general managers frequently. It’s not low standards. They replaced a coach who went 10 and 6, because that record wasn’t good enough, only to get a guy who went 4 and 12. He hasn’t done much better since. So they fired him and the general manager on Saturday. Wind and repeat.

The Lions fail to learn. They fail to learn, not because they are arrogant, but because ownership has no sense of what they want to be. They change for change’s sake in an effort to win. They borrow other team’s philosophies (e.g. the Patriot Way) rather than develop their own. In a game where the difference between winning and losing comes down to small differences in execution, the Lions are still in search of an identity. If you don’t know where you want to go, any path will take you there, and there is mediocrity at best.

Don’t be the Detroit Lions. Develop an identity — a sense of who you are, where you are going and how you want to win. Then relentlessly improve the skills you need to execute the plan.

Virtual Rituals Are Not a Thing

There have been a number of challenges for higher education leaders this year. Among the most important, in my view, has been the difficulty in managing the culture of the institution. There are a number of reasons for this: Zoom doesn’t allow for a lot of unstructured conversation that typically happens before and after meetings, walk-around management is impossible, and with people working from home, the culture is out of sight and too frequently out of mind.

But this week exposed what I think is the greatest challenge: the lack of dynamic, in-person, group rituals. In this weird year of 2020, we are saying goodbye to students before Thanksgiving. So, I have “attended” events to recognize the achievements and contributions of our Professional Sales Program students and our Ambassadors. While everybody, especially my amazing team, did their best to celebrate the moment, having people do so on-line, with masks seated six feet apart, or some combination of both, was no substitute for what we do in person.

Rituals are an important part of creating and maintaining a culture. The bigger the ritual, the more people in attendance, the more buzz in the room, the more important the event is to establishing and maintaining the culture. Nobody would choose to celebrate on Zoom or six feet apart wearing masks. It just falls flat. The culture suffers.

A lot is being written this year about how the pandemic is changing our lives forever. How things will never be the same, etc….It is my sincere hope that when it comes to rituals, that this turns out to be nonsense. Virtual rituals are neither compliments to, or substitutes for, the real thing. People want and need to experience rites of passage, celebrations and competitions together. Hopefully, we can get back to that soon.