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March Shows Strong Retail Growth - 0.6% MoM Increase in Sales and Strong Same Store Growth Reports
Retail in 2018 has risen like a phoenix from the ashes, except it never really died. Finally, we are seeing more people cover the "Retail Apocalypse" as "click-bait" headlines as in this Fung Global coverage of World Retail Congress. Welcome to the chorus. It's a retail reinvention and there are so many signs of health and growth, it's just not evenly distributed.
Retail sector reports for March were 50% stronger than expected in the with 0.6% MoM increase in March sales, in part powered by improvements in auto sales.
Same store sales increased well above expectations in March according to Fung Global. Costco beat analytst expectations with a rise of 8.6% vs. 5.9% and Bath and Body works reported a 10% increase! This is big news for a generally slow season in retail.
The NY Times is arguing for retail optimism because retail densities are equalizing, innovation is becoming part of the DNA and debt levels are going down. A lot of eyes are on the credit markets, as increased borrowing costs can stress over-debted retailers. March showed a spike in defaults at the same time as many recovered, as Moody's list of distressed retailers drops from 26 to 20. Meanwhile retailers are concerned about survey data that questions whether tax reform will end up in their pockets vs. experiential spends.
MGA makes a bid to save Canadian Toys R' Us. Toy shopping should be an experiential destination. Imagine aisles full of media rich experiences (powered by Perch preferably); Lego, Playdoh, Chess and game championships and classes, and a Chuck E Cheese style birthday hub in every store. The vision is still there and can be executed if there is room to invest. In the meantime, other stores that carry toys like Walmart, Target or even Barnes and Noble, are seeing dollar signs with the vacuum left in the toy market.
Meanwhile the UK is concerned about the sustainability of High Street shopping amidst retailer woes.
Puma showed strong results posting 21% YoY sales lift in a sneaker market growing 12% YoY overall. So much for the Retail Apocalypse narrative surrounding Foot Locker store closures which we called a self-inflicted wound. Increasingly brands are investing in direct to consumer channels, and there is a new $75m fund, Imaginery Ventures from the founder of Net-a-Porter, to help the hole in the investment market for early stage brands.
Spotlight on Retail Technology
We had a great week last week. Perch won a gold medal for Retail Innovation from the Edison Awards, whose previous winners include Nike, Disney, Apple and others we are humbled to be in the company of. launched a really cool Augmented Reality Makeup try-on experience with Bourjois in Paris with Holition. It's the first of it's kind to leverage what customers are touching in-store in a fully integrated part of the experience. Check out this fun video produced by our friends at Coty.
AR tech is hot in beauty. With L'Oreal's acquisition of Modiface, everyone seems to be knocking down our door for implementations as we are a vendor-agnostic platform that works with Perfect, Holition, Modiface and others. That way if there is a tech shift, you don't have to rip out hardware, you can just update software. Non-L'oreal customers of Modiface are learning that lesson the hard way.
It's important to avoid tech for tech's sake and this Podcast with Lowe's Head of Digital Gihad Jawar does a nice job to remind us that tech is supposed to solve real consumer problems. I liked this piece in Adweek on how retail tech will make the experience more human. Brick-and-mortar retail needs to shed the adversarial relationship with tech as an online threat and embrace it as an enabler of everything that's great about the in-store experience. For example, check out how Men's Wearhouse is supercharging its sales people with mobile solutions to empower them with information and direct marketing capabilities outside of the store. If you like the idea, check out vendors like Tulip and Salesfloor.
And of course expect our own electronics to become a little more human with Alexa now embedded in Best Buy TVs. If you use Siri on your Apple TV remote, you know exactly how powerful this is. Voice continues to be a phenomenal input channel (although terrible for output). Amazon moving to multi-modal interfaces such as the Echo Show is going to be a big shift for the future.
Spotlight on the White Hot Grocery Sector
Grocery continues to be white hot as the digitization of the industry is underway. One of the reasons is that grocery is lagging comparitively in the shift to online. Check out this graph I snapped from my Shoptalk 2018 Summary showing only 2% of grocery spend is done online.
There is a huge opportunity that's predicted to shift in the next 5-7 years with better technology, same day delivery and in-store pickup and meal and subscription services. That's why Supermarket News thinks pure play competitors will not win out (part of why Amazon bought Whole Foods). Fung Global just put out some great research on the shift to online. Here are a couple key points and graphs I snagged.
Amazon is leading the way in online grocery. It looks like a big lead, but the true volume as a percentage of grocery spend is small. This is basically bundling the fact that you may have purchased "a single" grocery item among your many Amazon purchases. That's not representative of grocery shopping behavior.
Another way to look at this data is to compare it to in-store shopping. Here you see that in-store is 3x in terms of population feedback. But again as a percentage of spend, in-store dominates 40-50x.
But the times they are a changing. Here are the predictions of growth showing a great deal of uncertainty about the next 12 months that could in fact double online grocery volume. That's a big deal.
Lastly, this is not a generational shift so much as a market wide one. Every demographic is affected, which means the transition could be fast and furious.
- Land grab consolidation
- Offline to digitized and integrated offerings
- From Pure-play to Multichannel
As we have been covering, grocery is white hot right now.
Sounding Smart at the Retail Water Cooler
India is the new battleground for retail's giants such as Amazon and Walmart. Gap is opening up a couple Indian stores to dip its toe into the market.
You no longer need to sign Mastercard transactions at the POS. No one has been looking anyway. It's time we catch up on security to Europe with Pins and Face recognition.
The Supreme Court is hearing arguments about charging local and state eCommerce taxes. If they rule in favor of enforcing taxes, it's our opinion it will be a win for Amazon who's already enforcing them and now can charge their reseller network for tax management services.
Wayfair is launching a shopping holiday, but it doesn't have the market clout that Alibaba does with Singles Day and just launched with a week's notice. When Amazon undercuts Black Friday with their own shopping holiday as suggested by Chris Walton of Omnitalk, then there will be real disruption.
Mass market retailers want to go upscale (Walmart --> Bonobos/Jet) and Target takes the approach of collaborations with high-end designers to get there. And it's working. Meanwhile Hermes is trying to court hipsters and millennials. Know thy customer.
Bed, Bath and Beyond has a plan to turn reinvent itself focused on merchandizing, service and digital in-store.