Off-Price Un-Amazonable?

“Off-price retailers are resonating with fashion and cost-conscious consumers alike, and are stealing department store business for good reason,” said Marshal Cohen, chief industry analyst for The NPD Group, in a statement. “Off-price is second only to the online channel in terms of growth rate.”

This is true within apparel. Off-price continues to thrive as long as they have the inventory to choose from. The excess inventories of department stores has fueled the off-price players.

No doubt Amazon’s “explosive growth” and online shopping are eating into sales and margins at both brick-and-mortar stores and malls, said Oliver Chen, retail analyst with Cowen & Co., in a July research note. But stores such as T.J. Maxx, Burlington Coat Factory and Ross Stores ROST +0.26% are “un-Amazonable,” he said.

I don't believe this to be true. The off-price players have plenty of runway with the current state of retail disarray but they will inevitably need an ecommerce strategy at some point. I would also argue that they would be growing considerably faster now if Amazon and subsidiaries wasn't in the picture. 

Source: http://www.forbes.com/sites/barbarathau/20...

June Retail Sales

Strong report for the month of June with sales up 0.6% from May to June and up 2.7% versus June 2015. On the downside, May was revised down to 0.2% versus the 0.5% previously reported. 

The top 3 growth businesses remained the same:

  • Non-store/online retailers posted a record 14.2% gain over last year. Keep in mind that last month was already a stellar 12.2% year over year gain. Also keep in mind that July should be healthy based on the Prime Day reports already surfacing. 
  • Heath and personal care stores posted the 2nd largest year over year increase for June with a 8.4% gain
  • Building material & garden equipment picked up on the growth pace prior to last month posting a 7.6% year over year gain 

On the downside, the bottom 3 (excluding gasoline) remained the same:

  • The Electronics vacuum of sales to online continues with a decline of 4.7%. No surprise here as Non-store's gain is usually electronics' loss.
  • Department Stores multi-decade decline continued with a decline of 3.7% year over year which is actually slightly better than the 5%+ drop last month
  • Clothing & Clothing accessories stores saw a decline of 0.9% year over year

Non-store (online) is truly at an even steeper inflection point while health, building and restaurants remain hot. The continued weakness in Electronics and Department Stores with combined weakness in Clothing Stores highlights why Non-store (online) is doing so well.

May Retail Sales can be found here.

April Retail Sales can be found here.

March Retail Sales can be found here.

February Retail Sales can be found here.

January Retail Sales can be found here.

December Retail Sales can be found here.

Source: https://www.census.gov/retail/marts/www/ma...

Airbnb Gains Coveted Business Customer

The company said today (July 12) that it’s partnering with three travel management companies—American Express Global Business Travel, BCD Travel, and Carlson Wagonlit Travel—to give their clients a chance to book on Airbnb.
AmEx GBT, whose clients include IBM, McKinsey, and Microsoft, reported $30 billion in 2015 sales. It is adding Airbnb as a “preferred supplier,” meaning Airbnb will be able to offer negotiated rates and business expenditure tracking. Carlson Wagonlit Travel handled $24.2 billion in sales in 2015, with 92% coming from corporate bookings. BCD did $23.8 billion.

The coveted business customer is within reach for Airbnb. Note that Airbnb is already offering more room nights than any other legacy hotel provider (including the combined Marriott and SPG corporation).

Source: http://qz.com/729878/its-time-for-hotels-t...

Apparel Inventories At Historic Highs

Apparel inventories were released by the Census with Mish updating the various charts. One point to note is that apparel inventories to sales continue to sit at historic highs. What does this mean for apparel retailers and brands? 

  1. Huge markdowns and sales for the holidays to clear inventories
  2. Off price and discount apparel players will have their pick of the litter from wholesale brands and licensees. Everyone from TJX to Ross to Burlington will have large inventories to pick from.

Looks like this will be another holiday with low margins for traditional retail and huge discounts for shoppers. The world is awash in apparel.

Reduce Your Apparel Footprint

Urban Outfitters recently unveiled Rework, a new in-house line made from “limited runs of remnant fabric,” a.k.a. reused and recycled materials. (Racked)
So next time you think of buying a new piece of clothing, take a moment to consider how much you’ll wear it, how much you already own, and how long you think it will last. It may give you a new perspective on the price tag. (Quartz)

 

Low cost fast fashion continues to drive "one and done" outfits ensuring millennials don't post the same outfit to Instagram twice. Might the move to recycled clothing and incentive to buy based on number of wears be upon us? Doubtful. Low cost throw away apparel provides just the right fix for most of today's current customers. 

 

Primark. The Cheapest Fast Fashion & Basics We've Seen Yet.

Recently popped by the 3rd Primark store to open in the US. A couple of takeaways and the store review below:

1. Cheap Fashion - The retailer known for $10 jeans and $3 t-shirts is officially here. Believe it. Cheaper than Macy's, Kohl's, H&M, Forever 21 and even Walmart. 

2. Quick Start - An initial 8 stores with a projected $600-$650 per square foot in sales (well above industry averages) for $325 million in total sales in 12 to 18 months. 

3. The shift to unbranded fast fashion and basics will continue. New entrants like Primark and Uniqlo join stalwarts like Forever 21, Zara, H&M and Old Navy to increasingly steal market share from traditional retailers including department stores.

4. 0% ecommerce.

Bottom line: Primark is the new shiny kid on the block making its' presence and pricing known in the Northeast. Given the trends and the offering I saw, I can't help but see many more stores opening with Primark on the door.

Amazon Dash Program Expanding

WSJ is reporting that Amazon will be expanding the Dash program to dozens of new brands taking the total brand count well over 100. The article notes what Amazon is charging brands to opt into the program:

Companies pay Amazon $15 for each button sold and 15% of each Dash product sale, atop the normal commission, which typically ranges from 8% to 15%, the people familiar with the matter said.
Helping expand Dash’s ranks: Amazon dropped a hefty buy-in fee of around $200,000 required of the first companies that signed up, according to people familiar with the terms.

Slice Intelligence reports that less than half of those who purchase a Dash button use it and those that do use the button purchase an item once every two months. Funded by brands and close to 50% usage? Sounds better than any other ecommerce marketing channel (apps, banners, retargeting, email) I know of. These are first generation buttons. Amazon will improve the buttons and I wouldn't be surprised to see brand agnostic buttons or versions allowing for multiple products.

My review of Amazon Dash buttons can be found below:

There are now over 100+ brands utilizing Dash buttons via Amazon. What makes a customer purchase without a thought? Comfort and ease. When a customer knows an order will delivered quickly, at a reasonable price with one touch of a button...."thoughtless commerce" takes place.

Update: 50 new brands are joining the program bringing the total count to 150.

Source: http://www.wsj.com/article_email/amazon-to...

YouTube Officially Live

We’ve been offering live streaming on YouTube since 2011, before it was cool. Millions of people around the world tuned in to watch the Royal Wedding in 2011. One-sixth of the Internet watched Felix Baumgartner leap from space live on YouTube in 2012.
Today, we are announcing a new chapter in bringing the power of live video to creators everywhere. Soon, we’ll be putting the power of YouTube live streaming in the palm of your hands.

One has to wonder why YouTube didn't go "live" for all creators sooner? With Meerkat dead, Facebook moving full-steam ahead with live video and now Periscope built into Twitter...stage is set for a live broadcast video showdown.

Source: http://youtubecreator.blogspot.jp/2016/06/...

Streaming and Facebook Reign Surpreme

The last time we reviewed top internet traffic properties in North America used fixed acess, Netflix, YouTube and Amazon Video accounted for 58.1% of total downstream traffic. Fast forward six months later and that number has declined to 56.7%. Netflix is down largely due to better optimization of data processing whilst Amazon Video picked up about a percent. On the upstream side, BitTorrent and other file sharing services continue to lose share while storage applications like Google Cloud, iCloud and Box pick up share. 

The mobile snapshot looks a bit different. YouTube and Facebook are #1 and #2 controlling 35% of total downstream traffic. It's worth noting that Instagram and Snapchat continue to grow in both downstream and upstream. Instagram specifically owns the #5 spot for total mobile traffic in aggregate and leapfrogged Snapchat. Also worth noting that Pandora dropped from the top 10.

North America continues to be addicted to streaming video and social media. 

Source: https://www.sandvine.com/trends/global-int...

Time Spent with Media

It's no secret that traditional media like TV and print continues to lose eye share. In 2011, TV took up about 41% of our time spent with media. That number shrank to 35% in 2015 as digital grew from 33% in 2011 of time to 47% of time in 2015. So where do we expect to spend our time in 2018? Actually very close to what it is today.

Digital will remain #1 and the losses to traditional TV and radio are quite small. Print and other are down double digits in percentage but only account for about 10% of time spent. Taking a look at digital shows that even the major growth years of mobile are likely behind us with law of large numbers and time saturation catching up.

The largest growth within the digital category is other connected devices like Roku, Apple TV and video game players. Surprisingly that category only equates to 8% of overall time spent within digital.

So what do you think? Do these numbers seem realistic as we seek to use bots, voice dictation and assistants like Siri and Alexa?

Note: eMarketer stats that include second screening

Online Retail ETF Launched (IBUY)

Amplify ETFs recently launched an ETF allowing investors to place investments in the fastest growing public companies generating at least 70% of their revenue from online and virtual retail sales. The ETF was established to mimic the EQM Online Retail Index launched in December of 2015. Since launch, the index is slightly down and lagged the S&P 500. 

Although one would think there isn't much diversity in the ETF, top 10 holdings are a mix of food service, gifting, marketplaces, travel, streaming video and specialty retail: GRUBHUB INC, ETSY INC, OVERSTOCK COM INC DEL, COPART INC, 1 800 FLOWERS COM, STAMPS COM INC, NETFLIX INC, FTD COS INC, BLUE NILE INC, PRICELINE GRP INC. I was a bit surprised to see Grubhub and Etsy as the top 2 holdings but when looking at all 45 holdings, all the majors you'd expect are there. 

For those as bullish as I on the shift to online, IBUY looks like a solid pick if you'd prefer holding a mix of online players in place of individual picks. 

 

Buy Ahead, Prep On-Time

Frequent readers of this blog know I have been impressed with Domino's ability to continue to innovate in what is thought of as a low tech business. This past week, Domino's announced a feature in which using the customer's mobile GPS, employees will be notified to begin prepping pizza's based on the proximity of the customer to the store. 

Another new service is the "on-time cooking" for pick up customers. With the use of a GPS customer tracker, Domino's will only start making the pizza when the customer is in close proximity to the store. This will help to ensure that customers receive their pizzas fresh.

This may sound familiar as we have seen Square Order use beacons and GPS to alert barista's of incoming customers that placed an online order ahead of a visit. We have also seen similar use cases from Starbucks and Taco Bell. 

Related posts:

Square Order > Seamless Location Based Food/Drink Preparation

Taco Bell Mobile Ordering Test Run

Innovation Award: Domino's Pizza

 

Source: http://www.cnbc.com/2016/06/09/dominos-rol...

96.5% of Products on Amazon Aren't From Amazon

Many customers of Amazon fail to realize how many sellers Amazon has on its site and are often confused when I refer to Amazon as eBay 2.0. In Amazon's most recent quarter, 3rd party sellers were responsible for selling 48% of the units sold on Amazon. Even more staggering is the number products 3rd party sellers offer. Amazon itself has about 12 million listings in the top 20 categories. When you expand the number of listings to include 3rd party sellers, there are over 353 million. Therefore, 3rd party sellers account for 96.5% of products listed on Amazon.com. Because those listings are fixed priced with no expiration in offering period, they can sit idle and unproductive for years. Sellers only have to pay a fee once the product sells but are stuck holding onto that inventory at the same time. Amazon on the other hand has the benefit of offering that product on its' site without having to take on the cost of inventory. The faster the sales of product on Amazon shift to third party sellers, the more profitable Amazon becomes. 

May Retail Sales

Last month everyone was calling for the death of retail due to headlines largely focusing on the doom and gloom of department stores. Eventually the monthly sales came out and April was up 3.0% to April 2015. May was along the same theme. 

Total May retail sales were up 0.5% to April and up 2.5% to May 2015. A few highlights from May:

  • Non-store/online retailers posted a stellar 12.2% year over year gain. The acceleration to online shopping continues.
  • Heath and personal care stores posted the 2nd largest year over year increase for April with a 8.3% gain
  • Building material & garden equipment slowed but still posted a was up 3.6% year over year gain 
  • Department Stores multi-decade decline continued with a decline of 5.8% year over year and now down 4.9% for the March thru May period
  • The Electronics vacuum of sales to online continues with a decline of 3.1%

While building slowed considerably, non-store (online) exploded and we continue to see strength in health, restaurants and sport. The continued weakness in Electronics and Department Stores with combined weakness in Clothing Stores are the reasons why I believe we will see difficult earnings in Q2.

April Retail Sales can be found here.

March Retail Sales can be found here.

February Retail Sales can be found here.

January Retail Sales can be found here.

December Retail Sales can be found here.

Source: http://www.census.gov/retail/marts/www/mar...

Here Comes Primark.

Back in late 2015, I predicted that Cheap Chic will Reign Supreme in 2016 with discount stores seeing continued success in a heavy retail market. One of those new entrants is Primark, a UK based retailer known for selling $10 jeans and $3.50 t-shirts. With over 270 stores worldwide, Primark has set its' sights on the US market with 8 stores planned. The first store opened in Boston back in September 2015. Morgan Stanley believes the chain will generate $650 in sales per square foot driving roughly $325 million with the 8 stores over the next 12-18 months. Wow.

Morgan Stanley recently ran a price comparison shopping exercise within the Boston market and what they found was appalling. On average across 100 similar items, 14 other retailers were an average 200% higher in price. Like for like competition and fast fashion houses like H&M and Forever 21 were at least 100% higher in price. Whilst Primark is likely looking to come out with a bang in the US market, these findings do not bode well for traditional retail or fast fashion houses. 

Consumer's desire for the lowest cost private label merchandise and heavily discounted branded merchandise continues. Primark is the latest entrant to drive private label price points lower. Those lower price points reset and lower the premium consumers are willing to pay for branded merchandise which in turn benefits the discount stores. 

One thing's for sure. Those who discount and those who make shopping convenient are winning. Primark falls into that discount bucket and will thrive.

 

Online > 51% of Purchases

UPS' annual survey of 5,000 online shoppers had a few recurring themes that we are accustomed to hearing, but there were a few milestones:

The shoppers now made 51% of their purchases on the web compared with 48% in 2015 and 47% in 2014, according to the survey by UPS and analytics firm comScore Inc. The survey polled shoppers who make at least two online purchases in a three-month period, excluding groceries.
The shoppers reported that only 20% of their purchases were made in a store the conventional way—going to a store, browsing there and buying—down from 22% a year ago. Forty-two percent chose to search and buy entirely online, while the rest said their purchases were made by combining online and in-store shopping and browsing.

Consider the source of survey (UPS) and that the respondents are already online shoppers, but it's clear that shoppers are becoming more and more comfortable with shopping online. Less shoppers are just searching online and buying in-store...more willingness to press checkout with the mouse or finger and have the item delivered.

Source: http://www.wsj.com/articles/survey-shows-r...

Shoe Dog: A Memoir by the Creator of Nike →

Phil Knight recently released his memoir under the title Shoe Dog. For those in the sports and retail world, I'd believe you would enjoy hearing about the early years pre-Nike. Phil started in the business by selling Onitsuka Tiger Shoes under the company name Blue Ribbon Sports. Ironically he lost the lucrative Tiger distribution deal and was forced to start his own brand, Nike. 

Some of the best lines include:

  • On the idea of Nike Air: “Mr. Knight, we’ve come up with a way to inject . . . air . . . into a running shoe.” I frowned and dropped my pencil. “Why?” I said.
  • On the IPO value of Nike vs. Apple: A company called Apple was also going public that same week, and selling for twenty-two dollars a share, and we were worth as much as them, I said to Hayes.
  • On selling more than just shoes: But first we needed to start selling clothes. Aside from the plain numerical fact that Adidas sold more apparel than shoes, apparel gave them a psychological edge. Apparel helped them lure bigger athletes into sweeter endorsement deals. Look at all we can give you, Adidas would say to an athlete, pointing to their shirts and pants and other gear.
  • On how retail used to work: Why not go to all of our biggest retailers and tell them that if they’d sign ironclad commitments, if they’d give us large and nonrefundable orders, six months in advance, we’d give them hefty discounts, up to 7 percent?

Unfortunately Phil summarizes the most recent 25 years in a short, final chapter with mentions to Jordan, Tiger and LeBron. Despite this, the memoir is supported by strong story telling, honesty and a relatively balanced view.

 

The Future of Money: M-Pesa

60 Minutes recently covered Kenya's M-Pesa. Twenty three million users using virtual currency to pay for taxi's to taxes:

View More: 60 Minutes News|Live News|More News Videos

Q1 Online Sales > 11%

From Forrester:

Online sales grew 15.1% in Q1 and accounted for 11.1% of retail sales when factoring out items not normally bought online. That’s the highest e-commerce penetration in history, as web sales totaled $86.3 billion for the period ended March 31, according to non-adjusted estimates released by the U.S. Department of Commerce.

Quite impressive but not entirely accurate when you consider:

Omnichannel efforts like endless aisle, ship-from-store, and in-store pickup programs have supported eCommerce by enabling merchants to transform slow-turning or “trapped” inventory into incremental sales. Merchants report that these services improve customer satisfaction and directly facilitate faster delivery of products to shoppers. Already, more than $1.5 trillion of total US retail sales are web-impacted

Bingo. To state that online accounted for 11.1% is truly a misrepresentation. If buy online, pick-up in-store/curbside fell into the online sales bucket, we would see a number several percentage points higher. 

Source: http://www.mediapost.com/publications/arti...