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‘Fashion is not dead’; consumers will lose the sweatpants trend after COVID-19 vaccine: Jan Rogers Kniffen

Jan Rogers Kniffen, J Rogers Kniffen Worldwide CEO, joins Yahoo Finance’s Julie Hyman, Myles Udland, and Brian Sozzi to discuss retail outlook as COVID-19 cases continue to surge.

Video Transcript

JULIE HYMAN: We're talking holiday shopping season on "Yahoo Finance Live" today and on this Cyber Monday as we sift through some of the numbers that are coming in from the holiday weekend. We are looking at projections for how Cyber Monday is going to be, how the holiday season is going to be overall. Jan Rogers Kniffen is joining us now. He's the CEO of J Rogers Kniffen Worldwide, longtime retail consultant.

And Jan, I know that you look a lot at department stores specifically-- which, as we know, some of them at least have been having sort of a long, slow decline. Is this the year that finally pushes them over the edge or is this year that really sifts out who is doing it right from those who are not?

JAN ROGERS KNIFFEN: Oh gosh, you know, that long, slow decline started way back 50 years ago when I got in the business. We had 200 department store names in the country. Now, what have we got? If you count it broadly, we've basically got Macy's and Dillard's. So is this when it pushes over the edge? It was pushed over the edge a long time ago.

Macy's is still going to be with us. Nordstrom's is still going to be with us. Kohl's is still going to be with us for the long-term. The rest of them we have questions about, I admit.

So yes, we're seeing them push really hard, because traffic's down a lot. And even though it was a slow decline for many years, it's been a fast decline since March 12 of this year. And I do think that we'll see-- you know, Penney's already went, right? And they're being reconstituted. But they went. Neiman's already filed as well.

So yeah, we're seeing the transition completed now. But digital is where the world is. And the stores have to be both digital and physical. But the growth component is no longer whether it's going to be online or in-store or omnichannel or something like that. It's digital and physical. And it's just retail.

And so we're going to see fewer stores, and we're going to see more competitive structure. And yes, we need fewer department stores even than we have today.

BRIAN SOZZI: Jan, I exchanged an email with you on Black Friday. And I asked you, where are all the traffic in New York City? I went into the Macy's Herald Square store. It's 11 floors, 1.1 million square feet of retail space.

It was really virtually tumbleweeds. I could have brought my football there and had a tag football game or a flag football game. Once we leave the holiday season, if we continue to see these double-digit declines in traffic from malls and the department stores, how many stores, mall stores do you think could close in the first half of next year?

JAN ROGERS KNIFFEN: Oh my gosh, I mean, there's 110,000 stores in America in total. And we think there's going to be at least 25,000 of those 110,000 stores closed over the-- from now through the time that COVID ends and we get to the other side of it.

So in the malls, of the 1,100 closed malls in America, we could see half of those go dark or be changed dramatically in nature. And we could see a whole lot of stores close. But yeah, sure, we could see 15,000 stores closed that come out of the malls, 10,000, some number like that.

So that's not going to be surprising, because it's been going on before COVID. We were seeing 10,000 stores a year close pre-COVID. There's only been about 8,500 so far this year of officially announced closures. But that'll just be a tail, right? We'll see that continue.

And the reason you haven't seen the announcements yet is because some of those dark stores may reopen, may not. They haven't been announced. So we'll see a lot better number than the 8,300 or so that we believe has already happened this year.

And I believe-- haven't we all believed all along? I think I wrote in 2014 that by 2030, we'd see 50% of all non-bar, non-restaurant sales online. That's back when only about 3% was actually online.

So yeah, sure, that's coming. But it was coming anyway. It's just been accelerated by COVID.

MYLES UDLAND: You know, Jan, we're talking about the few retailers that might make it through. You mentioned Macy's and Kohl's among them. But a lot of these gains are accruing to Targets, Walmarts, Amazons. They're the monoliths now.

Is it time to start thinking about the next leg of retail? What could challenge those business models at some future point when there is 50% online penetration? Because the decline of the mall-- I mean, we can look back and talk about it. But it sounds almost like that story is over, and it's time to think about what's next maybe.

JAN ROGERS KNIFFEN: Hey, man, I've been doing this a long time. I lived through the rise of the mall and the destruction of the downtown, and all the things that we saw happen in the creative destruction of retail. This is not new.

Once upon a time, when Walmart was 20 years old, it was 3% of national sales and it was getting $0.50 out of every new dollar of sales. Amazon's a little over 20 years old. It's 4% of national sales. It's getting $0.35 out of every new dollar of retail sales. That's already happening.

So going forward, do I think that Walmart, Target are big winners? Yeah. Home Depot, probably Lowe's. Costco for sure, best retailer in the world. Yeah, I think those guys are going to continue to gain market share in this current environment, because they're healthy.

They can invest all they want. They were deemed essential. They got to stay open. All the good things happened with them. And they're all really great retailers. They were winning before COVID, and now they're just winning more during COVID.

But do I think there'll be new rising things to fight the battle with Amazon and Target and Walmart? Yeah, sure, I absolutely do. I don't know what they are yet. I have three or four, actually six now little retail tech startups that I stood on the advisory board of. Will one of those be the next Starbucks or the next Walmart? God, I hope so. But something will be. This is not going to go away.

So yeah, we're going to see that change continue. And we're going to see the decline of the mall. That was already started. We're going to see the rise of the surviving big box.

But we saw the destruction of the big box. How many of those are already gone? And think about it. Walmart and Target are the only discounters really left. All those guys like Gold Circle Land, Zayre, and Kmart, and all those-- they all got taken out by their own kind.

So this is not-- there's nothing surprising going on here. And we've all known it was going to happen since 1999 when I walked in a distribution center with Jeff Bezos. It wasn't hard to figure out that the world was going to change.

You know, I also [? stocked ?] 26th Walmart ever built. Think about it. There's 4,500 just in America now.

JULIE HYMAN: Wow. So Jan, let's talk about the changes that might be coming that we might not expect, or at least there's some debate about. We've all been talking about what changes that are happening right now are going to remain permanent. Are we all going to be sweatpants clad for the rest of our lives? And I think--

JAN ROGERS KNIFFEN: Lord, no.

JULIE HYMAN: --you were in the camp who says no.

JAN ROGERS KNIFFEN: No way.

JULIE HYMAN: So talk to me about pent-up demand for looking better.

JAN ROGERS KNIFFEN: Fashion is not dead. Consumers wanting to look good is not dead. You will see the Roaring '20s start in about April of this year when we've got wide distribution of a vaccine. We've also got a Tamiflu-like cure for the vaccine. People are less afraid of it.

And on the first pretty day in April, every woman in America is going to look in her closet and go, I hate all this stuff. I need new clothes. And it's not just going to be some crummy sweat outfit that they can sit in front of their computer in all day.

They're going to go, I don't know. I could be back in the office a couple of days a week. Is this what I want to wear? And you're going to see an explosion of consumer spending on fun fashion stuff like you haven't seen in years. The Roaring '20s will be on us by midsummer, at the latest, of 2021.

JULIE HYMAN: Break out the miniskirts, fringe, and champagne. Jan Rogers Kniffen, great to see you. Thanks so much for being with us, CEO of J Rogers Kniffen Worldwide. Really appreciate your time today.