This Week in Retail Marketing Innovation - May 14th, 2018

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The Art of Celebrity and Influencer Marketing is in Authenticity

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Celebrity marketing has its challenges, and at the core is authenticity.  However, Rihanna has cracked the code with her popular Savage x Fenty lines.  Rather than go for a luxury price point, she has brought products at an affordable price point to audiences that are underserved, both minority-focused and size inclusive, for example.

But what stands out most in Rihanna's retail efforts, which netted her an estimated $12m last year, is her authenticity and involvement.  She is authentically involved in the design and manufacturing process (visiting facilities, picking out color palettes with shared videos to prove it) and as a result her fans are 3.7 times more likely to buy from her - and she has a lot of them.  It's no surprise that there was a wait time to prevent the tsunami of interest from downing their web servers (probably a marketing tactic as well).  Contrast Rihanna's approach with the Nick Cannon and Radioshack partnership and you clearly can see the difference.  No offense, Nick.  

But it isn't all about celebrities.  In fact, Gen Z prefers "normal" influencers because of that same perceived authenticity that's missing with most celebrities.  Here's an insightful piece on how Instagram is changing the fashion industry.  By reducing the cost of launching a line substantially from the historic $2-3 million, fashion has been democratized.  Instagram successes nearly always start with an existing audience, and Instagram can even be a good source of wholesaling relationships.  Instagram is dominating visual selling.

However, dealing with the constant pressure of creating Instagram moments can be demanding, which I can relate to personally as an Instagram husband for my wonderful and talented wife, who both works in fashion and is a recognized influencer in fashion, beauty and fitness.  That said, brands and retailers are now obsessed with creating "Instagram-able" moments.  It's a sign of creating a memorable, shareable experience.

What's New in Retail Technology Adoption

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Before we get to the who's and what's, take a read of this great article on the struggle with retail tech adoption due to the concept of technical debt.  The author very successfully argues that technical debt is the silent killer of many businesses and is exacerbated in retail because of decentralization, complexity, data size, network issues and cultural challenges, exacerbated by highly customized existing systems that are difficult to adapt.  Now let's get to it...

The US Department of Transportation approved drone projects for Apple, Uber, FedEx and others.  Notably absent was Amazon, who currently is in the cross hairs of the Trump administration. Coincidence?

Hidden in a NY Times article is the fact that our mobile phone carriers have been selling our exact cell phone locations in real time to location-based marketers without our permission.  This is scandalous and dangerous and ripe for abuse. Cops have been using it to track other cops and judges.  Scandalous indeed!

JD.com's CEO and Chairman Richard Liu announced that his goal is 100% robot automation.  That's pretty audacious but he is investing a whopping $4.6 billion in achieving that goal.  JD is already experimenting with robot delivery.  Expect them to continue set the industry standard for innovation and adoption of robotics and AI.

Tapestry is placing big bets on product customization online and especially in-store to raise price points and create greater customer loyalty (and yes, it mentions Perch's gorgeous Kate Spade Make It Mine project).  

Sears has partnered with Amazon to install car tires bought on Amazon and offer Sears products directly on the eCommerce site.  Increasingly, brick-and-mortar retailers are cozying up to Amazon as a marketing and distribution channel, while differentiating on service.  Wall St loved the deal with Sears shares jumping 21% on the announcement

 

Massive M&A Deals for Walmart/Flipkart and Nestle/Starbucks

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This week saw more news than data. The biggest news is Walmart acquiring the majority interest in India's Flipkart for $16b (valuing the company at $20b).   India is a prized market based on growing GDP at an astounding 9.4% annually for the last decade , middle class growth, favorable regulatory environment and 35% Internet penetration, making it the second largest Internet population globally.  Amazon has been competing and even reportedly tried to scuttle the deal by getting an interest of their own.   This is massive validation for the growing Indian retail market.  Flipkart is expected to incur sizable losses for several years, so this is clearly an investment for the future.  

And in other big news Nestle bought the rights to sell Starbucks branded coffee products for $7.15 billion.  This includes Starbucks branded products at the grocery store as well as Starbucks branded coffee pods for Nespresso (of course, what else).   Starbucks licensing hasn't always been smooth - it paid $2.76 billion to split early from Kraft in 2014.  Coffee is a massive business that Nestle has been investing as a growth area with investments in Blue Bottle and the acquisition of Chameleon Cold Brew.

Together, these 2 deals mark some of the largest transactions we have seen in recent history, all in the same week.   Expect more consolidation throughout the industry as we experience a revaluing of different product categories, distribution channels, brand equities, demographic targeting and technology orientation.  It's an exciting time to be in retail. 

Grocery's Top 50 Players Show Little Shakeup
(Other Than Amazon)

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Mirror, mirror on the wall, who's the biggest grocers of them all?  Well the top 6 are unchanged but Amazon (as Whole Foods) moved up to #7 without its online business counted.  Together, we expect this list to be considerably different next year.  Trader Joe's and Target also moved up, while Meier and Wakefern slipped. 

Mixed, But Generally Positive News From the Apparel Sector

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Happy Socks announced it's expanding into 20 new stores and selling 20 million socks per year (note: I am a proud customer)!  Meanwhile, Land's End reported its best quarterly performance in 3 years and announced it will be opening 40-60 new stores over the next 5 yearsDuluth Trading company wants to double it's 15 store presence this year and add 15 more per year for the next 5 years.  Both of these are interesting data points in apparel, which has been one of the hardest hit categories of brick-and-mortar retail.  That said,  Deutsche Bank sent department store stocks plummeting saying they were overvalued with limited upside. 

On the heels of closing 100 stores, Foot Locker's CEO told journalists who hopped on the "Retail Apocalypse" train that they were dead wrong.  They are also opening up 40 new ones and moving to better in-store experiences with sneaker cleaning, barber shops and local collaboration.  We of course said that the 100 store closure was never about a Retail Apocalypse - sneakers as an industry grew 12% last year - but about the lack of these very experiences.  We think they still need to do more, centered around sports media and aspirational excitement. 

 

Smart Sound Bites for the Retail Water Cooler

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