January 2, 2018 Consensus

The Weekly Consensus – January 2, 2018 (Volume 10, Number 1)

The Big Story
RetailWire Discussion: What Retail Apocalypse?
Tom Ryan, RetailWire

While the disruption that has resulted in the closure of thousands of stores was the talk of retail throughout 2017, the industry scored its best holiday period since 2011 last year.

That’s according to Mastercard SpendingPulse, which was the first firm to release its holiday recap at the end of 2017. Sales from November 1 through December 24 expanded 4.9 percent vs. the previous year period, setting a new record for dollars spent. Mastercard tracks retail spending by all payment types.

“Overall, [the year 2017] was a big win for retail,” said Sarah Quinlan, SVP of Market Insights, Mastercard, in a statement. “The strong U.S. economy was a contributing factor, but we also have to recognize that retailers who tried new strategies to engage holiday shoppers were the beneficiaries of this sales increase.”

Some key findings from the Mastercard SpendingPulse report:

  • Home goods: Electronics and appliances jumped 7.5 percent, the strongest growth of the last 10 years. The home furniture and furnishings category grew 5.1 percent, as did home improvement.
  • Apparel: Despite the massive store closings affecting these channels, specialty apparel and department stores saw moderate gains.
  • Heavy early-season promotions: The first three weeks of November saw significant jumps.
  • Last-minute spending: December 23 ranked close to Black Friday in terms of single-day spending.

The holiday gains were attributed largely to healthy job growth, coupled with modest inflation, moderate wage boosts, consumer confidence being at an all-time high, and some timing benefits.

“You had a unique Christmas [in 2017], which fell on a Monday,” Sucharita Kodali, at Forrester Research, told USA Today. “That means people are with their families on the days leading up to it. It’s very conducive to store shopping. This is an unusually good year where a lot of things came together to favor the stores.”

The gains in Mastercard’s survey were led by online shopping, the sector being blamed for disrupting retail in recent years. Online grew 18.1 percent over the holiday period, boosted by a late season rally. On the Tuesday after Christmas, Amazon boasted about a robust holiday performance, including adding more than four million Amazon Prime free trials or paid memberships in one week alone during the holiday season.

Discussion Questions: What do you think drove the apparent healthy holiday gains this holiday season? Are retailers adapting better than many predicted to the overall disruption caused by the impact of online and mobile?

Comments from the RetailWire BrainTrust:

“Retail apocalypse” has been a really great headline phrase for those publications and pundits grasping for attention. The reality is, capitalism always prunes weak competitors from the market, sometimes in bunches like we’ve seen in retail for the past few years. The headline drama is overblown and part of the evolution of the same retail vertical that lost many household names pre-internet.

Still, a decent economy may be behind all the spending right now. If economic factors including employment turn for the worse, it’s likely that physical retailers will bear the brunt far more than digital counterparts and the pundits will rev up the apocalypse predictions all over again.

Importantly though, the seasonal growth numbers reported do portend a message/warning: m-/e-commerce growth is still far outpacing brick-and-mortar growth. If that sustains at rates outpacing GDP growth (as it has), a reckoning has to come.
Ken Lonyai, Consultant, Strategist, Tech Innovator, UX Evangelist

While a stronger economy and lower unemployment rate contributed to opening the pocketbooks of shoppers this holiday season, it is important to mention that many brick-and-mortar retailers stepped up to the challenge of online shopping by offering greater and more engaging shopping experiences in-store. From POP-in@Nordstrom to Everlane’s first store in New York City to the sleek integration of IoT in Fabletics stores, brick-and-mortar retailers gave shoppers many reasons to visit and purchase in-store this holiday season.
Karen S. Herman, Founder/CEO/Retail Design Strategist, Gustie Creative LLC

It was easy to let the record store closings overshadow the record store openings that happened during the exact same time period. Change can cause upset/worry and that’s exactly what we were seeing: change. It looks like retailers are finally starting to address that brick and mortar is changing (not going away) and benefiting from the results. The boost from the economy and holiday timing only helped.
Sterling Hawkins, Co-founder, CART (Center for Advancing Retail & Technology)

I think the holiday gains resulted from a joint effort. As the economy improves, shoppers had more money in their pockets this year. And retailers provided a longer promotions season to make the most of it. With promotional emails, TV commercials, social media posts, you name it, shoppers were reminded at numerous times each day that there were great deals out there, no matter what they were looking for. With mobile driving significant traffic, retail winners optimized their sites to provide a truly omnichannel experience this year.
Min-Jee Hwang, Director of Marketing, Wiser Solutions, Inc.

Read the entire RetailWire discussion here:


Headlines of the Week

U.S. retail holiday sales jump 4.9%, biggest increase since 2011

Despite thousands of store closings this year, Americans supplied a final flurry of spending to give retailers their best holiday season sales since 2011, figures released show.  U.S. year-end holiday retail sales rose 4.9% compared to the same period last year, a welcome gift to U.S. retailers amid new signs of consumer confidence.  Online retail shopping similarly increased 18.1%, while overall consumer buying during the holiday period set a record for dollars spent, according to the sales report issued by Mastercard SpendingPulse.



Apparel & Footwear

American Apparel’s Rebrand, Led by Female Execs, Aims to Be Sexy Without the Sexism

It’s a tremendous understatement to say that relaunching a brand like American Apparel in the current cultural climate is a challenge. It is, after all, a cult favorite clothing line perhaps best known for its controversial—bordering on pervy—ad photography favored by infamous and now deposed founder Dov Charney. The Los Angeles-based brand, acquired by conglomerate Gildan Activewear early this year, knows its marketing history and has vowed not to repeat it. The mantra: No more hyper-sexualized, male-gaze images. Though it would be easy to overcorrect, the new executives (the first all-female team in the brand’s history), are clear-eyed about their strategy, especially what they don’t intend to do. “We don’t believe in covering up,” said Sabina Weber, head of brand marketing.

Uncreative Italian Brothers Win Right to Call Clothing Brand ‘Steve Jobs’

Vincenzo and Giacomo Barbato have finally proven victorious after a multi-year legal battle regarding the rights to call their clothing brand “Steve Jobs.”  While at first this might seem like an absolutely ridiculous idea, what better way to get your start-up clothing company into people’s minds than to name yourself after one of the gods of modern day technology? The brothers originally chose the name back in 2012, one year after Jobs’ untimely death, when they found out that Apple had not trademarked his name, a definite head-scratcher from a business perspective.  To take it one step further, the Barbato brothers even created a logo that resembled Apple’s iconic apple logo, a letter “J” made to look like a half-eaten apple.


Athletic & Sporting Goods

Nike Posts Earnings Beat As Sales Grow Abroad And Slump Domestically

With intensifying competition from the likes of Puma and Adidas, Nike’s turned attention abroad for bottom-line growth – and the new geographic focus seems to be working. Beaverton, Ore.-based Nike Inc. reported quarterly earnings of $767 million, or 46 cents per share, beating analysts’ expectations of 40 cents per share.  The beat represented a quarterly dip in net income of 9% year over year, which the firm attributed to a decline in gross margin and a higher selling and administrative expense. Revenue was almost $8.6 billion, an annual increase of 5% and more than average analyst estimates of $8.4 billion.


Maurice Sporting Goods To Be Acquired By Middleton Partners

Maurice Sporting Goods said Middleton Partners has been deemed the successful bidder for the company as part of its bankruptcy process.  Prior to filing for bankruptcy in Delaware on November 20, Maurice Sporting Goods reached an agreement to sell itself to Middleton Partners, a private investment firm. Middleton Partners would act as the stalking horse bidder in a bankruptcy auction to explore a better offer.  The sales procedures were approved by bankruptcy court on December 12 and the date to submit bids was set for December 22. Since no qualified bids arrived by December 22, the auction was cancelled and Middleton Partners was deemed the successful bidder. The purchase price was $39 million.


Cosmetics & Pharmacy


There was one area this year that was a boon: beauty. These last 12 months have seen the arrival of some of the biggest innovations, surprising (in a good way) trends, and #woke brands in beauty. Oh, and celebrities played a pretty major role. So while there were plenty of bewildering (and upsetting) things that happened in 2017, the following product launches were not only what got us through these 365 days in Bizarro World, but also what made us see a bit of beauty amidst the madness.


Discounters & Department Stores

The U.S. retail sector’s hurting? Dollar General plans expansion with 400 new jobs

Even as the economy soars to new heights, one of retail’s biggest stars is a humble discount chain focusing on rural America. And Dollar General showed again Wednesday why the chain is becoming such a force. The chain’s rapid growth continued as it announced plans for its 17th U.S. distribution center, a facility that’s expected to create approximately 400 new jobs. Projected for an early-2018 construction start in Longview, Texas, the nearly 1 million-square-foot facility will help supply the company’s nearly 1,400 stores across the state, Dollar General CEO Todd Vasos said.


Grocery & Restaurants

Fireman Capital’s Dunn’s River Brands Purchases Tradewinds and Sweet Leaf Tea

Nestlé Waters North America has sold ready-to-drink iced tea brands Tradewinds Tea and Sweet Leaf Tea Company to Dunn’s River Brands, a portfolio company of private equity firm Fireman Capital Partners. Dunn’s River Brands is a Texas-based beverage portfolio management company founded by industry veterans Kevin McClafferty, Lee Brody and Ian Knowles.


Home & Road

Home Depot has considered buying a $9 billion logistics company so Amazon doesn’t

Home Depot has held internal discussions in recent months about a potential acquisition bid for XPO, a $9 billion publicly traded company that offers transportation, delivery and other logistics services for big retailers and brands, according to a person familiar with Home Depot’s thinking. If Home Depot were to make an offer, one main impetus would be to keep XPO out of the hands of Amazon — which the home improvement retailer believes has also considered buying the logistics company, the source said.


Jewelry & Luxury

Jewelry Shines in Upbeat US Holiday Season

Jewelry sales grew 6% this holiday season, in large part driven by last-minute purchases, according to a Mastercard SpendingPulse survey.  Total retail sales grew 4.9% during the holiday shopping period between November 1 and December 24, the largest year-on-year increase since 2011, the survey showed. Online shopping jumped 18% over last year, driven by a late-season push.


2017’s Diamond Merry-Go-Round

The past year has seen a number of changes in management-level employees within the diamond industry. Here’s a breakdown of the new faces and departures for 2017:

Alrosa CEO Andrey Zharkov stepped down to be succeeded by former Sberbank senior vice president Sergey Ivanov.  Blue Nile replaced former CEO Harvey Kanter with James Goldberger, former president and chief digital officer of Target.


Office & Leisure

PetVet Care Centers acquired by NYC investment firm KKR

Global investment firm KKR is acquiring Westport’s PetVet Care Centers for an undisclosed amount. PetVet acquires and operates general practice and specialty veterinary hospitals for companion animals. It provides veterinary services ranging from preventative and primary care to emergency critical care and surgeries. PetVet works in partnership with more than 600 board certified specialists and general veterinarians across its network of 125 locally branded hospitals in 22 states. KKR, which is based in New York City, acquired the firm from Ontario Teachers’ Pension Plan, L Catterton, and other existing shareholders.


Technology & Internet

Overstock.com CEO aims to sell or reorganize biz so he can focus on blockchain

Overstock.com CEO Patrick Byrne said he expects to have a deal in the next three months on selling or reorganizing the company’s retail business to focus on blockchain, the technology behind bitcoin. “My goal is [within] 60 to 90 days we walk away from this,” Byrne told CNBC Wednesday in reference to the plan. He said he has an “ethical obligation” to focus for the next five years on his newly announced De Soto joint venture for a blockchain-based global property registry. “We think we can change the world for 5 billion people.”


Finance & Economy

Consumer confidence slips in December, but 2017 viewed as best year since 2000

Consumer confidence fell in December, a month after hitting a 17-year high, but the level of optimism among Americans this year was the highest since 2000.  Americans were a little less confident in their outlook for jobs and business conditions. Consumers were more cheery about conditions right now. The “present” situation index edged up to 156.6 from 154.9 and reached the highest level since 2001.  The labor market is the strongest its been in years as reflected by a low 4.1% unemployment rate. The economy has grown 3% for two straight quarters, and could make it three in a row for the first time since 2005. And retailers may have just had their best holiday shopping season in a decade.