Hawaii’s retailers continue to face challenges amid Covid-19, but businesses are evolving with the times.
Pacific Business News
In recounting the past nearly two years of the Covid-19 pandemic, Tina Yamaki, president of the Retail Merchants of Hawaii, said there have been so many times that what retailers thought was the “light at the end of the tunnel” turned out to be a train instead.
First, the reopening after the initial shutdown seemed like the light at the end of the tunnel, but then cases increased and a second shutdown followed. Later, just as vaccines seemed to promise widespread rebound, businesses were hit with labor shortages and supply chain disruptions. And yet again, toward the end of 2021, the holiday shopping period was strong for many merchants, but now the omicron variant is cutting into both foot traffic and labor capacity.
“It’s just this circle, and we are waiting for that light to be at the end of the tunnel and not another train,” Yamaki said.
Through it all, though, retailers have adapted to each of those hurdles — ramping up online operations, finding new ways to collaborate, and reimagining their businesses in order to survive in the new environment.
It’s those shifts and solutions that keep Yamaki and the other panelists on this year’s PBN Retail Roundtable feeling optimistic for the industry. The event was held virtually on Jan. 7 and Yamaki was joined by David Cianelli, general manager of Pearlridge Center; Tanna Dang, owner of Eden in Love; Angèl Foster, owner of Island Olive Oil Co.; and Jacob Wilson, vice president and senior general manager of Ala Moana Center.
Dealing with disruptions
At least compared to 2020, Yamaki said that many retailers generally had a “pretty good year” in 2021. Most easily exceeded their 2020 revenue, and a number even exceeded 2019 levels.
But that doesn’t quite tell the whole story, she said.
“A lot of these retailers have incurred a lot of debt because they had to close down during the shutdowns,” Yamaki said. “And they still had to pay their lease rent, they still had to pay their taxes — a lot of debt got incurred because of this and they are still trying to dig themselves out of it.”
As they do, a new slew of pandemic-related challenges has cropped up.
One of the main pitfalls retailers are facing right now, the panelists said, is the industry-wide labor shortage.
The panelists theorized a range of reasons why hiring is such a struggle. Some people may have been making more money on unemployment. Others, perhaps, were close to retirement age and opted to leave the workforce early. Others exited the industry for a job where they can work from home and not risk exposure to the virus. Still others have perhaps reevaluated their lives and careers and went to pursue another passion.
Whatever the cause, the effect is an added burden on existing staff. Owners like Foster — who’s had hiring signs up at both Island Olive Oil locations in Kailua and at Ward Village for more than a year — have to spend extra time on the sales floor versus focusing on bigger-picture business development.
That type of strain has only worsened in recent weeks with the rise of the omicron variant, as more and more workers are out sick.
“Certain retailers and restaurants during the holiday season, they were so short staffed that a lot of their staff had to work double, triple time, so they were just getting burnt out,” Yamaki said.
Wilson said filling open positions is what many of Ala Moana’s tenants cite as a primary challenge, particularly among small businesses, but even within some of the larger national tenants. With the current surge in cases of Covid-19, he said, “I am seeing more stores tell us ‘hey, we are going to have to close a little bit early,’ or ‘we are unable to staff today.’” That’s even given the center’s current reduced operating hours, he noted.
And with workers hard to come by, the cost of labor is going up. “In order to keep employees, people are paying them more than minimum wage. And you can’t have your entry-level employee making more than your supervisor, so everyone’s pay kind of had to go up,” Yamaki said.
In addition to increased wages, retailers are offering added perks like larger employee discounts, referral and signing bonuses, or 401(k)s.
Foster said Island Olive Oil is looking to fill a handful of part-time and full-time positions in sales and management, as well as warehouse and delivery. But in the past year, she has only received about 15-20 applicants — half of which “never even follow up or show up for the interview.”
“The candidates that are looking for these types of positions have a lot of options. … They’re expecting more money, and they are expecting added benefits and bonuses, which is a real pinch on what we have all been dealing with,” Foster said.
The panelists also cited supply chain disruptions as another challenge.
Clothing and accessories boutique Eden in Love, for instance, had been scheduled to receive a 40-foot container of goods in July that didn’t arrive until late November.
That’s not even the worst of it.
“Some of the stores are only now getting their Christmas products when they were thinking they were going to get [them] in July, August or September,” Yamaki said. “I actually saw Christmas cookies being unloaded at a store yesterday.”
For Island Olive Oil, a worldwide shortage in glassware has caused product delays — not just for its olive oils and vinegars, but also butters and jams that they source from other local businesses. “We have been selling those products for years,” Foster said, “but all of a sudden, they couldn’t supply us because they couldn’t get the glass jars to put the product in. … So for me, I then don’t have that inventory. ”
The glassware that Island Olive Oil can get has doubled in price, along with higher shipping costs. “It is decreasing our already slim margins,” Foster said. “We have not yet raised our prices but will likely have to at some point this year, which is an unfortunate result of these current trends.”
Wilson noted that, in addition to product shortages, supply chain issues can also impede businesses in other ways. “[For] new construction … materials that are needed to build and open stores has delayed some opening dates. Some stores opened without having their full storefront cladding complete or opened without the full experience they wanted to deliver,” he said.
In the earliest days of the pandemic, with non-food retailers not deemed “essential,” businesses suddenly had to go online just to stay open.
But even now, with the shutdowns long over and most restrictions for retailers lifted, the online space continues to hold an increased importance.
That’s partly due, Yamaki pointed out, to changes in consumer behavior. At first, she said, shoppers went online out of necessity or fear of the virus. But even as things opened up, many have continued to shop online.
“People have discovered how easy it is to buy online — nobody is judging you while you are shopping online at 2 or 3 in the morning watching Netflix. We’re seeing more and more subscriptions, too, where people can subscribe and get their daily staples [delivered],” Yamaki said.
In response, many retailers have worked to bolster their online channels.
“We had all already seen consumer trends toward online shopping, but of course the pandemic has accelerated all of that,” Foster said. She said Island Olive Oil had been working to expand e-commerce pre-Covid, but during the pandemic, they have seen a huge increase in online orders — even for people who might live just a couple blocks away from the shop.
It’s not just sales that had to change channels. Pre-Covid, Island Olive Oil hosted in-store tastings and demos. “That was one thing that was so exciting about our stores,” Foster said.
“And so during the pandemic, I started doing YouTube videos and little vignettes and bringing that experience … online.”
Prior to the pandemic, online sales comprised maybe 10% of Eden in Love’s total revenue, with just a couple of orders coming through the website each week. And Dang admitted that she didn’t think very highly of e-commerce as a general concept — she thought customers wanted to see, touch and try things on, and as the owner, she loved to help shoppers style clothes and accessories.
It wasn’t until the pandemic forced Eden in Love to go online that she saw the full potential. Black Friday has always been a huge revenue generator for the brand, but in November 2020, the first year it took the event online, it had its strongest November ever. From there, Eden in Love has worked to further enhance its virtual features and operations. It’s reorganized its warehouse space to facilitate fulfilling online orders, streamlined shipping processes, and created new promotions to entice people to shop online. Dang said they’ve also aimed to display products virtually in a way that recreates the in-person experience.
“We wanted to replicate perusing in the store to perusing online … so when they are online and they are reading a [product] description, they feel like they are talking to us,” Dang said.
With the changes, Dang said, “things completely flipped and online drives the majority of our revenue now. ”
Now, Eden in Love is moving completely online.
Jan.28 marks its last day at its South Shore Market shop as it shifts to an e-commerce model, a transition that has been in the works for more than a year. While Dang said revenue, foot traffic, and cost of rent all factored into the decision, “ultimately, it came down to us, as business owners, making a decision on how we want to spend the next 17 years of our life.”
“We’ve had a brick and mortar for 17 years, so we never really had true weekends off, holidays were always prep days, we were constantly on call even when traveling,” said Dang, adding that she and husband Bryson, who co-owns Eden in Love, took time during the shutdowns to reassess. “After we reopened, foot traffic came back, revenue was stable and we were always able to pay our rent, but something wasn’t aligned anymore. That’s when we knew it was time to pivot, yet again.”
But as e-commerce grows for many brands, the panelists agree that brick and mortar isn’t going anywhere. More commonly, the two channels are merging to work together.
“It’s not a one-size-fits-all approach. The question is where do your customers want you to be? And what I’ve heard a lot, in many cases, it’s a combination of … buy online, pick up in store,” Wilson said.
Cianelli likes to refer to that as a “harmonized retail experience,” a concept he said he finds exciting.
“The narrative is beginning to shift where we are talking less and less about online shopping versus brick and mortar. Instead, omni-channel retail and hybrid models are the reality for many retailers today,” Cianelli said. “Traditional brick-and-mortar stores are quickly learning that a combination of brick and mortar, app-based options, payment method choices, delivery and pick-up options, and online platforms are the best bet to optimize sales.”
Cultivating a loyal repeat clientele has always been an important part of Island Olive Oil’s strategy, Foster said.
But how do you create those relationships when you can’t interact with your customers in person as often, if at all?
That’s been a key question that retailers have had to answer throughout the pandemic.
For Island Olive Oil, it’s meant increasing communication from afar and adding personal touches when they could. Foster said they upped their regular newsletter to once a week and have personally delivered online orders.
At Pearlridge, Cianelli points to local fashion brand Manaola as an example of a business that’s successfully nurtured relationships remotely. During retail closures, the store produced a series of videos via social media featuring things like cooking lessons, music and dancing, as well as showcasing their apparel.
“Manaola, in my opinion, realized ‘hey my customers aren’t coming to my store while I’m closed, so I’m going to go into their house and I am going to maintain that relationship with them,’” Cianelli said.
Eden in Love took a similar approach, increasing its newsletters and social media posts.
“From day one, we let [our customers] into our lives. … We didn’t pretend that we knew what we were doing as a business, but we were very honest — we said we were scared, we were confused … and I think that created this real sense of camaraderie with our customers,” Dang recalled.
“While we weren’t styling them, we weren’t selling anything to them, just being present and being honest is a whole other level of connection,” she added.
Even when the posts weren’t explicitly promoting anything, Dang found that that type of transparent communication boosted sales.
Both Cianelli and Wilson have noticed a similar trend at their properties.
“The retailers that can form that relationship — whether it’s through Instagram or TikTok, or whether it’s through brick-and-mortar interaction — those are the retailers that performed extremely well,” Cianelli said.
Similarly, the panelists also agreed that relationships with other businesses have become more important.
“Throughout the pandemic … there’s this profound sense that we’re all in this together, and I think that deepened relationships,” Wilson said. “That helped foster some cross promotions … because we had that sense that we are here for each other and we are in this together.”
Eden in Love recently launched collaborations with a handful of local businesses including Tanioka’s, to design tote bags and other customized products. It’s a way to help both businesses, Dang said.
“Hawaii is small and we are all so connected, and through everything I think we realized that we need one another — we need one another to really level up,” Dang said.
Island Olive Oil had long been partnering with local chefs for tastings and demo events. During the pandemic, they’ve had to find ways to continue to work together. In collaboration with M by Jeremy Shigekane, for instance, Foster said she pivoted alongside the restaurant as it revised operations amid Covid, becoming a distribution site for its produce boxes and carrying some of its foods, such as freshly baked baguettes. In turn, Chef Shigekane utilized Island Olive Oil in his dishes, and both businesses promoted one another on social media.
“Hawaii is so much more of a relationship-oriented business world … than transactional,” Foster said.
“It’s been all about the relationship building with other businesses and with our customers over the years that has been what has really sustained us through this time.”
Even as retailers continue to face challenges, the panelists pointed out that some of these hardships have cracked open new possibilities.
In regard to supply chain struggles, Cianelli pointed out that he’s seen businesses launch new products or even new streams of revenue in an effort to diversify away from whatever they can’t get. “A few retailers were able to introduce services … instead of just selling goods. Like Kalena Instruments, for example — they sell instruments, but [now] they also do music lessons,” he said.
Although Ala Moana Center, like a lot of shopping malls, has seen a few store closures over the last two years, Wilson said one thing he is excited about is “reimagining spaces.” He pointed to the recent opening of It’sugar, a giant candy store now occupying the 18,000-square-foot space that formerly housed Ann Taylor, Williams Sonoma, Janie and Jack, and Aloha Confectionary — all which closed during the pandemic.
“Out of [the closures], there became opportunities to make some relocations and then reimagine large sections of space. … It’s just looking at some of the opportunities even out of the difficult situation,” Wilson said.
And the difficulties certainly are not over for the industry.
But as Yamaki sums it up, “Retail is going to be here to stay — it is not dead, it’s just evolving.
“And it keeps changing, no matter what type of hurdles you throw at us.”