Will Godiva’s stores ever come back from the pandemic?

Discussion
Photo: Wikipedia/Prosperity Horizons
Jan 25, 2021
Tom Ryan

Godiva on Friday announced plans to exit all 128 North American locations as COVID-19 has forced the company to restrict in-person experiences.

The first U.S. Godiva shop opened in 1972 in New York City, but most are now inside malls.

The chocolatier in 2019 heralded plans to open 2,000 cafes around the world in six years. Its seven U.S. cafes also now face closure.

In a statement, Godiva said that over the past year demand for in-person shopping has “waned” due to the pandemic and changes in shopping behavior.

“Our brick-and-mortar locations in North America have had a clear purpose since we first opened our doors in this market — to provide an in-person experience for consumers to enjoy the world’s most exquisite chocolates,” said Nurtac Afridi, CEO. “We have always been focused on what our consumers need and how they want to experience our brand, which is why we have made this decision.”

Godiva will continue its “aggressive focus” on the food, drug and mass channels as well as online sales. “We are making it even easier for our consumers to enjoy Godiva, whether that’s by treating themselves or gifting, so that everyone can have access to our premium chocolate,” Mr. Afridi said. “Godiva is already available in many retailers in North America, and we will continue to increase our presence there.”

Godiva’s retail operations across Europe, the Middle East and greater China will remain open.

The pandemic has led to the suspension of Godiva’s in-store sampling events and only worsened traffic at malls.

The closures come despite chocolate benefiting from the comfort food trend. The National Confectioners Association (NCA) found premium chocolate sales at grocery grew 21.4 percent from March 15 to August 9, 2020. NCA wrote in a statement, “Consumers appreciate and value chocolate and candy during these uncertain times because of their uncanny ability to boost moods and lighten perspective.”

The strength of the trend emboldened Swiss chocolatier Läderach to open its largest store in December on Fifth Avenue despite light tourist traffic in Manhattan. CEO Johannes Läderach, told Bloomberg, “We don’t have any doubts that after the pandemic, sales will come back and grow again as they have been.”

DISCUSSION QUESTIONS: Do you think Godiva is making a wise decision in closing its North American stores or is it penny wise and pound foolish? Will physical locations become less of an opportunity in coming years for chocolate, candy and other establishments that rely on in-store sampling?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"I would say that I think this is an over-reaction. There will be Godiva stores again in the future."
"A difficult decision I imagine for the Godiva team. High-value locations unable to attain sales in the new “no-touch” environment is going to be a tough one."
"It’s not the short-term decision to close stores, but the long-term plan to re-open them that is cause for concern."

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32 Comments on "Will Godiva’s stores ever come back from the pandemic?"


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Mark Ryski
BrainTrust

Godiva is rightly responding to market conditions. It’s clear that the market for premium chocolates remains, so adjusting distribution to online and other channels beyond their stores makes good sense in the short to near term. I do believe that physical stores will come back to being important for Godiva as a way to showcase and sell their chocolate products, and it seems they’ll have even more store locations to choose from, given the high vacancy rates that we’ll see in retailing for the foreseeable future.

Bob Amster
BrainTrust

Each retailer’s decisions to remain open, suspend operations, or close permanently are dependent on their medium-to-long term financial state, where their venues are located (malls are out of favor now) and, as is the stated case with Godiva, how much their retail sales depend on the personal experience. It appears that Godiva has problems in at least two of the three.

Richard Hernandez
BrainTrust

The great thing about Godiva and even more so about the cafes is the Godiva experience. Just being able to see and taste in real life — it is something special and something to remember. (The cafes are out of this world.) While I think it’s good they are continuing an online presence, it just doesn’t equal actually being there and tasting things made by in-store experts. People still like to indulge — I just think you lose something doing it online.

Neil Saunders
BrainTrust

Sales of chocolate have been really strong during the pandemic, so a lack of demand isn’t the root cause of Godiva’s issues. Rather it is related to a downswing in mall foot traffic and greater numbers of consumers buying chocolate from supermarkets as they consolidate shopping trips or buy it online instead. Of course, some of these trends may unravel once the pandemic is over, so there is a risk that Godiva’s decision is short-sighted. Regardless, Godiva needs a strategy to boost brand awareness and purchasing. There are so many new niche chocolate brands in the market, especially in the premium segment, and a lot of them are really compelling. Against this backdrop, Godiva needs to work hard to stand out and, without a physical presence that they own and control, this will be more challenging.

David Naumann
BrainTrust

With the current restrictions on in-store sampling due to COVID-19 and extremely low mall traffic, it is probably a smart decision to close Godiva, mall-based stores. After the pandemic subsides, it may be economically viable for Godiva stores to return to malls.

Ben Ball
BrainTrust

Whether or not showcase stores paid off for signature brands like Godiva has always come under question. In their case I would say yes, simply because of the wonderful “chocolate experiences” they created in the stores. But the pandemic shutdown has shown brands what they can do without the showcase stores to augment mass distribution and a strong online presence. The only question now is whether the return to pre-pandemic shopping patterns will ever occur. I think not — and Godiva is making a sound economic decision to close these showcase locations.

Phil Rubin
BrainTrust
2 months 21 days ago

This feels an awful lot like selling your portfolio of stocks in the middle of a crash and is similar to other moves that brands have made in abandoning parts of their businesses due to the near-term versus what will happen post-vaccine. It’s also inconsistent with what we are seeing from other brands shifting away from wholesale and towards more emphasis on DTC where the shopping experience is and can be superior.

While Godiva’s online business is consistent with such a strategy; goods like chocolate are literally made for sampling and apparently their economics are better suited to this change in their distribution strategy.

Xavier Lederer
BrainTrust

You are marking great points, Phil. An additional value-added of physical stores is their contribution to brand awareness. Running an e-commerce website together with physical stores is one thing, because e-commerce benefits greatly from the stores’ halo effect; running the same website without support from stores triggers very different economics.

storewanderer
Guest
2 months 21 days ago

They have the data, they know how many customers were actually coming into these retail stores. Were they even seeing 100 customers a day most days in individual locations? I have my doubts. They probably have marketing data that shows they can reach thousands more customers digitally.

The issue is those 100 customers who walked into the store, how many bought something? I suspect conversion rate was close to 100% — how many bought more than they planned to buy? Online sales seem to make impulse purchases and “browsing” much harder for the retailer to accomplish so this isn’t as black and white as just saying the stores had low traffic, so close them. And conversion is significantly lower online.

Raj B. Shroff
BrainTrust

I think a reset could be wise for this storied brand. It makes sense since most of their stores are in malls and malls are facing headwinds, only amplified by COVID-19. Going forward they could be more selective about physical locations, possibly thinking the way Sephora or Ulta have, but being careful not to cheapen the brand. I believe physical locations will play a role, location strategy just needs a reset and new formats and/or creative partnerships also have to play a role going forward.

Paula Rosenblum
BrainTrust

Forgive me, but I don’t think COVID is the only or even major reason the stores were closed. On the COVID front, the article states the fundamental trend — one-stop shopping. Going to a boutique is not a pandemic event. But somehow I think there were pre-existing conditions.

To make a definitive decision, I’d have to look at store contribution to profits before vs. during the pandemic.

I know chocolates seem more popular now, but I’m not convinced that’s a long-term trend. There’s a healthy trend going on. And as a gift, it’s almost better to have it shipped.

Jeff Sward
BrainTrust

Exiting all North American locations on a permanent basis sounds at first blush, rash and unnecessary. A temporary shutdown makes all the sense in the world given the current circumstances, but a permanent withdrawal suggests a pre-pandemic weakness in the business. Sounds like a shift to a wholesale model in the USA rather than a brick and mortar retail model. And keeping the online business going makes sense. After all, they can’t have much of a returns problem. Who would send back Godiva chocolate?

Lisa Goller
BrainTrust

Years ago, Godiva fuelled my chocolate truffle side business, so this news hit me.

Godiva has examined the big picture, accepted market realities and made the right decision.

Store experiences are all about the senses like decadent sample tastings that are now forbidden. Its stores are inaccessible in shuttered malls or racking up expensive overhead in standalone stores that remain under capacity. E-commerce efficiencies and healthier habits have changed consumer behavior.

For many confectionary brands, focusing on e-commerce and partnerships for omnichannel distribution makes sense right now.

Peter Charness
BrainTrust

There’s a tie between physical locations and online sales, as both contribute to the success of the Brand. The decision to close “all” as opposed to keeping at least a few prominent and likely successful locations is a statement of direction. I do find it odd that this is a North American decision, while locations in Europe and the rest of the world (also hit by COVID) will remain open.

Nikki Baird
BrainTrust

Without knowing the specifics of their financial situation, which may necessitate something this drastic, I would say that I think this is an over-reaction. There will be Godiva stores again in the future. There are just too many pressures that will lead them back down this road: the need to define and own “the Godiva experience,” too much competition for shelf space and too much consolidation in retail distribution, which just gives brands less and less power that way. If only for the Instagrammability, Godiva will need at least some physical locations. Maybe not 128 of them, but they will need some.

Dick Seesel
BrainTrust

Godiva’s standalone locations may have already been flagging before the pandemic, and the absence of both mall traffic and sampling didn’t help. But it’s surprising that the company pulled the plug entirely rather than identifying its best sites — and trying to keep them going — when mall traffic inevitably returns. There’s no doubt that these physical locations built a lot of brand equity for Godiva, and it won’t be so easily replaced by online sales and other retail outlets.

Oliver Guy
BrainTrust

A difficult decision I imagine for the Godiva team. High-value locations unable to attain sales in the new “no-touch” environment is going to be a tough one.

It would be fascinating if they have examined new propositions that stores could be used for — such as fulfilling online orders or providing local delivery.

Suresh Chaganti
BrainTrust

Godiva, unfortunately, got caught in the pandemic related headwinds. Unlike coffee and breakfast foods, the segment is not a primary consumption segment. The category is too narrow to warrant its own retail channel, even before the pandemic. Now it doesn’t make sense. Godiva is best served to strengthen their e-commerce to build their Direct to Consumer channel and continue to sell through retail channels.

Shep Hyken
BrainTrust

I get it. Mall foot traffic was down before the pandemic, and is even higher during the pandemic. I don’t know the numbers of Godiva’s US retail operation. Even if they are positive, the storefront is as much for marketing and positioning as it is for profit. Godiva is recognized as a high-end brand. Maybe there are alternative ways to stay in front of the public with kiosk type locations in a mall.

Dick Seesel
BrainTrust

To your point, See’s Candies has run kiosks for years in malls where they don’t have storefront locations. This might be an answer, but it loses some of the “experiential” element that Godiva has become known for.

storewanderer
Guest
2 months 21 days ago

Those kiosks aren’t always run by See’s itself. In some cases they are run by non profit organizations who See’s sells the candy to at a discount, then they resell.

Georganne Bender
BrainTrust

A stop at Godiva during a visit to the mall was a natural. There was always something going on in the stores, like new product introductions and tastings, to entice shoppers inside. But the pandemic has changed how we shop and will continue to do so for a while, and free samples aren’t as easy to distribute as they were pre-pandemic.

I am with the rest of the BrainTrust who suggest there is something else going on with Godiva that would cause it to make this decision. I have a feeling Godiva stores will be back in some form when things get back to normal.

chris-marti
Guest

While this is far from surprising, it’s a bit of a bummer — I feel that their new store format mimicking the Nespresso brick-and-mortar stores was the right ingredient missing from their growth. They’re a recognizable brand and building an in-person consumer experience around that brand was a great move.

Alas, I’m sure it isn’t long before we see the launch of a single-purpose Godiva-branded internet-connected hot chocolate kitchen device with single-use pods delivered via subscription service.

Bob Phibbs
BrainTrust

As Paul Harvey used to say, where’s “the rest of the story”? Just US operations are closing, but still open in malls around the world? This is indeed penny wise and pound foolish. I see Hershey or Lindt making a bigger splash — you’re not selling underwear — it’s chocolate. Geez.