The Retail Apocalypse is Old News. Now What?

In 2019, regardless of size, tenure or segment of business retailers, brands and suppliers must recognize that they can no longer navigate the new landscape with old maps.

Tomorrow’s retail winners will be nimble, data-driven, fast-to-market and cost efficient. They will have the foresight, fortitude and fearlessness to disrupt their own identity and legacy models.

“Do or do not. There is no try.”

The rate of change will escalate. There is no time for deep contemplation. Winners will leap, measure and then optimize.

Failing fast will be a requirement, not an option. Succeeding fast will be a requirement, too.

The Alchemist’s Retail Prophecies for 2019:

Warning: One can identify prognosticators who use a crystal ball to predict the retail future. They’re the ones with glass shards in their bleeding hands and smoke issuing from their charred eyebrows.

20 Companies Account for Nearly All Retail & Fashion Profits

20 “super winner” companies now account for 97% of economic profit in the retail and fashion industry, a dramatic increase from 70% in 2010.

This finding is one of many interesting insights released in the “State of Fashion 2019” report from McKinsey & Company and The Business of Fashion.

The study shows increased polarization, with luxury and value advancing and mid-market players falling behind. “Well-known European luxury companies tended to be overrepresented in the top 20, with North American companies coming in a close second.”

Over time North American department stores lost out, with none remaining in the top 20, compared with three 10 years ago — a stark illustration of the fragility of the traditional retailing model.

The report states that 20% of companies represent 128% of the total industry economic profit.

Immersive Retail Experience, Fully Caffeinated

The Starbucks Reserve Roastery opened its doors today in New York City. A further example of mortar & brick retail expansion.

The 23,000 sq. ft. flagship showcases coffee’s journey from bean to cup and joins locations in Seattle, Shanghai & Milan, with future openings coming to Tokyo & Chicago.

The store is a fully working coffee roastery, where small-batch and rare single-origin coffees and blends are created. “We designed the Roastery as the pinnacle experience around all-things-coffee, there is nothing else like it in the world…

It serves as a Starbucks brand amplifier and a platform for future innovation,” said Kevin Johnson, Starbuck’s new ceo.

The Roastery will debut the Arriviamo (aperitivo) Bar, where mixologists will serve cocktails and “spiritfrees” featuring coffee and tea, Drinks will include the Nocino Notte, made with cold brew coffee, barrel-aged gin and black truffle salt, and the Triomphe, made with Teavana Darjeeling Tea, gin, dry Riesling, aquavit, passionfruit sparkling water & orange saffron bitters.

Customers will also discover the Milanese bakery Princi with on-site baking of fresh breads, Pizzas, cornetti, focaccias, desserts and more.

Where Do Young People Hang Out?

Fortnite

If young customers are no longer hanging out at shopping malls, where are they hanging out?

Owen Williams of char.gd may have it figured out. Fortnite replaces the mall, Starbucks or just loitering in the city, it’s become the coveted ‘third place’ for millions of people around the world.

“Fortnite is a different kind of video game, because it’s not about the game, it’s a place. A place where we hang out together, regardless of whether we’re playing.”

“Fortnite, for anyone not a teen-ager or a parent or educator of teens, is the third-person shooter game that has taken over the hearts and minds—and the time, both discretionary and otherwise—of adolescent and collegiate America. Released last September, it is right now by many measures the most popular video game in the world. At times, there have been more than three million people playing it at once.” – The New Yorker

Fortnite is influencing American culture, shopping, and fashion. Its effects on streetwear are clearly visible on the runway. Oh, and the goal of the game is simple. 100 people parachute onto an island together and search for weapons. The winner will be the sole survivor, everyone else must die.

UNTUCKit Valued at $600 Million

UNTUCKit, the company known for its untucked shirts, is looking to raise money at a valuation greater than $600 million.

As reported by Lauren Thomas for CNBC, the “digital first” company, launched in 2011, now has roughly $150 million in sales, 50 stores and is profitable.

Untuckit has hired investment bank Morgan Stanley to raise money to fuel growth

UNTUCKit now offers women’s dresses, T-shirts, jackets and shirts, in addition to boys’ shirts and bottoms.

Congratulations to co-founders Aaron Sanandres and Chris Riccobono.

Notably, several companies including J.Crew, Proper Cloth and Gap Inc. also produce shirts in an “untucked” fit.

Five Below is Way Above

Five Below, Inc., which sells everything from basketballs to yoga mats for $5 or less, might be the most successful retail chain you’ve never heard of.

Five Below’s store count has quadrupled to 750 since its 2012 IPO, with its first NYC location opening Friday. Sales have tripled to $1.3 billion and profits are up. Preteens and teens are Five Below’s core customers. They are encouraged to bounce balls, test-drive RC cars and participate in slime-making—anything that will help them spend their allowance money.

Five Below has items for grown-ups, including cucumber face-masks, storage bins and vintage candy. The company focuses on the treasure-hunt for unique items, not essentials.

As with Costco Wholesale, Walmart, Dollar General and The TJX Companies, Inc. the culture at Five Below keeps costs, and prices, low. The company ships basketballs deflated, without boxes, lowering freight costs, and then inflating once they arrive at the store.

Most products are created from scratch & at these prices ecommerce sales are negligible; shipping costs more than the entire purchase. Similar items are considerably more expensive at Amazon.

Suzanne Kapner, The Wall Street Journal

$1 billion in 85 seconds

$1 billion in the first 85 seconds. Not a bad start to the world’s biggest shopping day. China’s largest company,

Alibaba Group, used televised entertainment featuring Cirque du Soleil Entertainment Group and Mariah Carey to drive awareness. It is reported that Xiaomi Technology, Apple and Dyson products were the top three brands in early sales.

The e-commerce giant is on course to rake in over $25.5 billion in online retail sales today during Singles Day 2018, already ahead of last year, with a few hours to go. That’s more sales than the U.S. Black Friday and Cyber Monday combined. And, it’s greater than Macy’s or Kohl’s annual sales volume.

Celebrating “bachelors” and others not in committed relationships, Singles Day occurs annually on November 11th (11/11) or “double eleven,” because the four numerals “1” represent single people.

Singles Day has already generated 1.5 billion transactions, at a peak rate of 350,000 orders per second. Over 90 percent of sales came from mobile devices.

This year’s event may provide insight into consumer sentiment as a slowing Chinese economy and tariff trade war threaten to dampen the world’s second largest economy. Alibaba reduced its revenue forecast by 6% earlier this month. 

What Can Today’s Retailers Learn from the Captain of the Titanic? Plenty.

Like the captain of the Titanic, leadership of failed and failing retailers has been publicly, and occasionally brutally, criticized. In some instances, this criticism is clearly deserved, in other cases not.

It may not be as bad as it seems.

Despite the painful passing and decline of retail industry stalwarts including Linens ‘n Things, RadioShack, The Bon-Ton Stores, Toys R Us, Sears and Kmart, retail chains including Macy’s, Kohl’s, Walmart, Target and other major retailers are showing financial improvement. Macy’s stock price is up 40+ percent year-to-date, Kohl’s is up 30+ percent, and Target is up 25+ percent. The rumors of the death of brick-and-mortar retail have been greatly exaggerated. And, Sears, Kmart and JC Penney are still open for business.

Recently, I participated in the Annual Retail Forum at Columbia Business School where a keynote speaker addressed a question from the audience: “

How would the speaker approach the precarious position of a challenged major retailer? What steps would you recommend?”

The response was,

“Shut it down…they don’t deserve to stay in business.”

This, “throw in the towel,” response brings to mind a key question we should ask ourselves. What would we do if we found ourselves as CEO of a retailer at risk of complete cataclysmic failure? One obvious metaphor is that of being captain of the Titanic. You may not remember, but the Titanic had a bonafide captain: his name was Edward John Smith.

Continue reading “What Can Today’s Retailers Learn from the Captain of the Titanic? Plenty.”

Stitch Fix Drops a Stitch. What’s the Fix?

Brief:

  • Stitch Fix on Monday reported that fourth quarter net revenue rose 23% to $318.3 million, at the upper end of the company’s guidance but “a touch” below Wall Street estimates, as Wells Fargo analysts, led by Ike Boruchow, said in a Monday note. Shares plunged more than 20% after the report Monday evening, per MarketWatch.
  • The company’s earnings before interest, tax, depreciation and amortization also surpassed its own expectation, reaching $11.1 million as net income in the quarter reached $18.3 million, according to a company press release and executive comments during a Monday conference call transcribed by Seeking Alpha. The online box styling service’s active client count (as of July 28) rose 25% or 548,000 to 2.7 million.
  • On Monday, Stitch Fix also said that signups are now open for customers in the United Kingdom, where it will expand by the end of fiscal 2019, its first launch overseas. The U.K. was chosen because consumers there already buy a lot of clothing online, don’t expect as many discounts as consumers in the U.S. and offer opportunities for personalization, CEO Katrina Lake told analysts on Monday.

Dive Insight:

Continue reading “Stitch Fix Drops a Stitch. What’s the Fix?”