Can The Santa Experience Save Brick-And-Mortar Retail This Holiday Season?

Can The Santa Experience Save Brick-And-Mortar Retail This Holiday Season?

This is a quaint idea, but as the data published by ShopperTrak for Black Friday 2019  showed there is no putting the digital shopping genie back in the bottle, especially not after companies like Target and Walmart have ramped up their digital commerce efforts to battle Amazon.

Some holiday traditions are easy to explain — things like wrapping presents, drinking hot chocolate and baking cookies are all neatly summed up with the knowledge that the vast majority of people like opening presents and eating cookies.

Source: Can The Santa Experience Save Brick-And-Mortar Retail This Holiday Season?

Next-day and same-day delivery will take a knife to brick & mortar retail

Next-day and same-day delivery will take a knife to brick & mortar retail

“Retailers closed a record 102 million square feet of store space in 2017, then smashed that record in 2018 by closing another 155 million square feet, according to estimates by the commercial real-estate firm CoStar Group.”

And that’s before Amazon unveiled the shift in its Prime service to one-day from two-day shipping. In short order, we’ve seen both Walmart and Target join the one-day shipping ranks. In our view this will only add gas to the fire that is brick & mortar retail closures and it sets the stage for a painful second half of 2019. We’ll look for confirmation in the volume of truck and van deliveries that are likely to ensue as next-day and even same-day delivery gets those potential digital shoppers off the fence and joint in this  aspect of our Digital Lifestyle investing theme.

Target is among the latest merchants to boost its same-day delivery offerings. The retail chain is making same-day delivery though Shipt available to all of its shoppers. The retailer’s June 13 announcement shows Target is moving to compete with Amazon and Walmart in an ongoing bid to provide customers with the quickest delivery service.

Target said online customers in 47 states can now get items delivered on the same day for a flat fee of $9.99 per order. Target acquired Shipt in 2017 for $550 million. Previously, Target customers could get same-day delivery by being a Shipt member, for $99 a year. That’s still an option, but now customers can also get one-day delivery for just one order.

Not to be undone, Walmart recently said it is expanding its next-day delivery service before the start of the back-to-school shopping season. The retailer is opening up the service to a dozen new states, including in parts of Florida, Georgia, Illinois and Wisconsin. It originally launched in May for customers in Phoenix, Las Vegas and Southern California, and Walmart previously revealed it wants to reach about three-quarters of the U.S. by the end of the year.

Walmart’s next-day delivery is available for customers who spend $35 or more. Orders are shipped in one box to address complaints from customers about receiving multiple boxes.

Source: Same-Day Delivery Wars Heat Up | PYMNTS.com

More troubling signs at retailers as earnings fall 24% 

More troubling signs at retailers as earnings fall 24% 

As we wind up the most recent barrage of quarterly earnings, we are being left with a sour taste in our collective mouths thanks to retailers, particularly those focused on apparel. While some data points to those mall-based retailers, like The Gap being hard hit, other data suggests retailers are not matching consumer preferences either for the apparel they have or investing in their digital shopping platforms. While the former points to the fickleness of the consumer, or the tone-deaf ears of certain retailers, the latter indicate that not all retailers have accepted the growing importance of digital commerce that is a key tenant of our Digital Lifestyle investing theme.

Is it easier to blame the weather and other items in the short-term for a failed strategy? Sure it is, but the real drivers of falling retailer results will come out in the coming quarters. Those like Target, Walmart and Costco that have been investing in digital commerce are likely to thrive while those that haven’t will likely disappoint further as Amazon begins free one-day shipping for Prime customers. 

Clothing retailers like the Gap, Canada Goose and Abercrombie & Fitch are all experiencing troubling sales reports, the likes of which haven’t been seen since the Great Recession a decade ago, according to a report by CNBC.

Many companies are blaming the weather, slow traffic at malls, bad promotions and product blunders. With the industry as a whole struggling, the S&P 500 Retail ETX was down 2 percent on Friday (May 31), and has dropped almost 13 percent in May, which sets it up to be the worst period since November of 2008, when it lost 20.25 percent.

As a group, apparel retail earnings are down 24 percent, although earnings had been growing since Q3 of 2017. In Q1 of 2018, earnings gained 26 percent. In Q1 of 2008, earnings fell 40 percent.

“These are all mall-based retailers experiencing traffic issues,” Retail Metrics Founder Ken Perkins said. “The consumer is holding up … sentiment numbers have been really high.” The problem, he said, is that some companies aren’t investing in attracting customers to their stores and websites.

There are some bright spots. Target and Walmart both had good first quarters, and have been investing in apparel, with positive results.

“It’s not that people are buying fewer clothes,” CGP president Craig Johnson said. They’re going to different places, he said, and some older companies, like Chico’s and Talbots, which are “classic, women’s, missy retailers,” are victims of changing popular culture and taste.

“The demand for that product is a fraction of what it used to be a generation ago. Women aren’t dressing like that,” he said.

Another issue facing the industry is the threat of tariffs, which could worsen the outlook.

There’s the consideration of a 25 percent tax on clothing and footwear from China, and many companies haven’t factored in the effect this could have. There’s also the possibility of a 5 percent duty on Mexican imports on June 10, which would raise to 25 percent by October.

Source: Retail Clothing Sales Down 24 Percent | PYMNTS.com

Walmart entering the low-end tablet market as Google looks to exit

Walmart entering the low-end tablet market as Google looks to exit

Walmart is joining the ranks of the tablet market, which comes at a time when some device owners are balking at the increasing price points for smartphones. This tablet, which will have a price point that is very friendly with cash strapped consumers associated with our Middle-class Squeeze investing theme, leverages Chinese manufacturing and the Android operating system. Odds are this means the key differentiator in a crowded Android playing field for Walmart’s tablet will be the price. This helps explain why Google is pulling engineers off its tablet team, but with Apple looking to tie its streaming video service to its tablets and other iOS devices, one has to wonder if those rumors of a Walmart streaming video service that would tap our Digital Lifestyle theme have any truth to them?

Walmart Inc. is moving into iPad territory.

The world’s largest retailer plans to introduce an inexpensive, kid-friendly tablet computer under its ONN store brand, part of a broader redesign of its electronics department. The device will be made by a Chinese supplier and run on Google’s Android operating system, according to photos found on a database of wireless product applications filed with the U.S. Federal Communications Commission.

After spending last year overhauling its apparel offering, Walmart will make electronics and home goods a focus this year, according to presentations given by senior management at a recent meeting of the company’s suppliers. Rival Target Corp. last year introduced its first consumer electronics store brand, called Heyday, with products including headphones and smartphone cases. The demise of technology-focused retailers like Circuit City has opened up opportunities for other chains to grab gadget sales.

Source: Walmart (WMT) Readies Low-Priced Rival to Apple (AAPL) iPad – Bloomberg

Doubling Down on Digital Infrastructure Thematic Leader

Doubling Down on Digital Infrastructure Thematic Leader

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Adding two Middle-class Squeeze call option positions ahead of earnings this week

Adding two Middle-class Squeeze call option positions ahead of earnings this week

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Weekly Issue: A Number of Our Thematic Leaders Well Positioned for the Holidays

Weekly Issue: A Number of Our Thematic Leaders Well Positioned for the Holidays

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Targeting the Middle-class Squeeze, Target unveils Smartly, but will it work?

Targeting the Middle-class Squeeze, Target unveils Smartly, but will it work?

 

When a company brings out a new product line, more than likely it is looking to tap into a demand channel in order to grow revenues, its consumer base or both. What we see with the new consumer staple brand, Smartly, that is being launched by Target is an attempt to catch the tailwind associated with our Middle-class Squeeze investing theme. That theme focuses on cash-strapped consumers that facing tepid wage gains or rising costs and pressured disposable income are changing where they buy the products they need and in some cases sacrificing well-known brands for more affordable prices. It’s what made the Dollar Shave Club such a thorn in the side of Proctor & Gamble’s Gillette razor and razor blade business.

With Target, odds are they are trying to use Smartly to lure cost-conscious shoppers back into their locations, hoping it can convert the traffic into buyers of other items. It sounds a lot like the loss leader strategies of yore, but even in those cases the question is will the traffic (if it comes) convert to buyers? The jury is out on that for now.

 

Target Corp. is wading into a new territory: $1 toiletries.

The Minneapolis-based retailer said it is planning to launch a new brand for consumer staples called Smartly with more than 70 products, including razors, toilet paper and dish soap, mostly priced under $2. The products will be offered at stores and online in mid-October.

Mark Tritton, Target’s chief merchandising officer, said the new line of consumer staples is an attempt to compete with generic brands at drugstores and discount chains. “It’s about showing people that I don’t have to go to Aldi or I don’t have to go to Dollar General to find what I’m looking for,” he said in an interview.

Meanwhile, the market for generic consumer staples has become more crowded. Last year, Brandless, a San Francisco-based startup, began selling staples such as fluoride-free toothpaste and dish soap, priced at $3. German grocer Aldi has also been opening more locations in the U.S. and gaining traction by selling a pared-down selection at rock-bottom prices.

The competition has forced players such as Walmart to revamp their brands. In 2016, the big-box chain scrapped a discount store brand in sparse blue packaging called Price First as part of a wider reworking of all its private-label products. The company now sells its lowest-priced groceries under Great Value and toiletries under Equate, with boxes and bottles more reminiscent of traditional brands.

Source: Target’s Answer to Discounters Is an Even Cheaper Store Brand – WSJ

Target adds AR, but still focused on stores

Target adds AR, but still focused on stores

Target has been one of those retailers that in our view has been lost between the shift to digital commerce offerings from Amazon (AMZN) and club/warehouse ones from Costco Wholesale (COST) and others. What we find interesting is how Target continues to baby step its way into the Connected Society with GPS maps being deployed for its stores and augmented reality (AR) applications for certain products.

Then again, when a CEO continues to focus the business model on the old way of doing business – retail sales in stores – rather than the business model that consumers are embracing (as evidenced by the monthly retail sales data), it’s bound to be messy. Change is hard, especially given Target’s store count, but Costco and Walmart (WMT) have found digital religion, why not Target?

Target is taking on the beauty market, bringing in augmented reality (AR) to develop its Target Beauty Studio.

A collaborative project with Perfect Corp.’s YouCam Makeup app will allow customers in 10 stores the opportunity to “try on” different shades of makeup using a digital screen before they make a purchase. While Target plans to bring the technology to more stores this year, it still plans to offer in-store beauty experts.

The news follows comments from , who has said he still believes the brand’s brick-and-mortar stores are central to its strategy — even with increasing eCommerce sales.“The winning retailers of the future are going to combine great physical assets with the ease that comes along with that digital interaction,” Cornell told CNBC in February.

“For the foreseeable future, the majority of U.S. retail sales will still take place at stores,” according to Target CEO Brian Cornell.

In addition to investments in its stores, Target has been rolling out delivery services in Florida and Minnesota after acquiring Shipt in 2017.  The purchase “significantly accelerates” its digital fulfillment efforts, the company said at the time, and could bring same-day delivery to approximately half its stores in early 2018.

Source: AR, Men’s Products Come To Target’s Beauty | PYMNTS.com