Retail had a rough year with store closures and bankruptcies happening left and right.

It shouldn't come as any surprise that companies are rethinking their current strategies and testing out new ideas. This is going to require some flexibility from lawyers in the industry, which could make for a period of uncertainty—and excitement.

Corporate Counsel asked a group of prominent attorneys in the retail space to weigh in on what they're expecting in-house lawyers to keep front of mind in the new year.

Deals

“M&A and partnership activity will be interesting as traditional retailers try to adapt,” said Scott Darling, chief legal officer with personal shopping service Stitch Fix, offering Target Corp.'s purchase of Shipt and Amazon.com Inc.'s purchase of Whole Foods Market Inc. as examples. “I would expect more of these types of deals in 2018.”

Chelsea Grayson, former executive at American Apparel Inc. who now sits on the board of directors for True Religion Apparel Inc., also believes retail will see more M&A. She noted that brand acquisitions—in which a company acquires another's IP—could become a preferred structure, because they provide “an easy way to leave behind cumbersome brick-and-mortar leases and other traditional retail practices, and step into an 'asset light' business.” Grayson was involved in a brand acquisition not long ago when Gildan Activewear agreed to purchase American Apparel's IP. 

“Of course,” Grayson added, “buyers will have to be sophisticated in these endeavors, so as not to degrade the acquired brand, so I think 2018 and 2019 will also be years in which we see some brands failing to hang on after a changing of hands, to the extent the buyers undercapitalize the target or shed elements that turned out to be vital to the business.”

Innovation

Elisa Garcia, chief legal officer of Macy's Inc., said she will be watching how the U.S. Securities and Exchange Commission handles regulation of cryptocurrencies. “This is an exciting new way we may all be paying for goods and services in the future, which will eliminate the need for third parties,” she said.

Garcia noted that she is expecting more disruption “in how traditional retailers bring goods and services to market. The innovation I am seeing at Macy's and elsewhere makes me very optimistic about the sector and very excited to shop.”

Christina Zabat-Fran, general counsel of luxury apparel retailer St. John, found that in 2017, “the omnichannel concept was ever present in the legal issues we retail lawyers faced.” She forecasts that “retail is blazing forward into everything experiential, and will demand creativity and great flexibility from lawyers in the space.”

She continued, “From pop-ups to interactive shows, stores with no actual inventory, to meet-and-greets with influencers, the coming year will see licenses replace leases, and short-term agreements that will put greater emphasis on strong relationships than fully negotiated deals. Now more than ever before, I'm convinced we'll be seeing collaborations built on handshakes, and we've got to be ready for it.” 

Culture

Grayson said that retail executives and boards will definitely place a greater focus on culture in the year ahead. They should be asking, “What is the retail organization's tone from the top and does it have a healthy culture? Does it have a code of conduct and is it enforced?”

Grayson noted that if a retailer isn't performing a risk audit in 2018, and if that audit doesn't include an assessment—or rehabilitation, if necessary—of its culture, “that retailer is likely to have a very active set of labor and employment lawyers and PR team this next year.” 

“[Culture] is a particularly complicated area for retailers, who have both a corporate employee population which itself includes everyone from the finance and accounting department to designers and everything in between, and a retail employee population,” she said. “These are completely different sets of people and some of them [are] flung far and wide around the globe.”