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The Weekly Consensus

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The Weekly Consensus – December 3, 2018 (Volume 10, Number 46)

The Big Story
For Retailers, Is Being Political Ever Correct? – Part III
Paul Alexander, CFA

Retail brands appear to be taking public political stances at an increasing rate, a move that has traditionally seemed foolish to many in the industry.  This is a phenomenon we have written about in this space twice in recent months, as our colleague Mark Lenz chronicled in parts one and two of this series Patagonia’s public opposition to the Trump administation’s moves to reduce the size of national monuments, and Walmart and Dick’s Sporting Goods’s decisions to raise the minimum age at which the companies will sell firearms to a customer from 18 to 21.  Presumably, these decisions were carefully weighed, given their political, moral, and business-related implications.  They also seem to be a sign of the times, of the increasing difficulty that any person or brand has today of remaining politically neutral.  But a recent report suggest that it may be even more difficult to remain politically neutral than we ever realized.  In fact, from now on, it may be effectively impossible.

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The Weekly Consensus – November 26, 2018 (Volume 10, Number 45)

The Big Story
RetailWire Discussion: FAO Schwarz Makes an Iconic Comeback in the Big Apple
Matt Stern, RetailWire

FAO Schwarz, the toy retailer that closed its famous Fifth Avenue flagship three years ago, has just as suddenly returned to the Big Apple. The retailer opened the doors of its new store in Rockefeller Center store on Nov. 16, according to Boston.com. The 20,000-square-foot store features some of the touristy attractions the original flagship was famous for including a clock tower-style entrance and a giant playable piano floor mat familiar to Baby Boomers and Millennials from the iconic scene in the 1988 film “Big” starring Tom Hanks.

The then owner of the original FAO Schwarz flagship, Toys “R” Us, blamed the closure on escalating rents in Manhattan. Toys “R” Us also closed its own Times Square store that same year. ThreeSixty Group acquired FAO Schwarz in Oct. 2016.

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The Weekly Consensus – November 19, 2018 (Volume 10, Number 44)

The Big Story
A Tale of Two Cities
Mark Lenz

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness…” starts A Tale of Two Cities, the Charles Dickens novel from the 1850s.  For many U.S. cities this past week, there was a similar maelstrom of opposing emotions and headlines after it was finally revealed that Long Island City, NY and Arlington, VA were chosen as the winners in the Amazon HQ2 lottery.  While the politicians in New York and Virginia puffed out their chests, questions percolated in many corners of the country: who were the real winners and losers in Amazon’s decision?  Who was wise and who was foolish throughout the whole pageant?

While this appears to be a win for New York and Northern Virginia, was the dripping of copious incentives in front of Amazon smart?  Based on reports, the total incentives from the two cities will be in the range of $2.3 billion, tied to the expected creation of 50,000 high paying jobs and the occupancy of or construction of related space in the two locations.  There will certainly be other infrastructure costs related to accommodating that many new employees in each city.  The mayors of these two cities are happy, but other local politicians are asking if this is foolishness with already difficult housing, school and transit/traffic situations in those cities as well as alternative uses for the incentive funds in their cities.

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The Weekly Consensus – November 12, 2018 (Volume 10, Number 43)

The Big Story
Midterm Grades: A Mixed Bag for Retailers
Douglas Stebbins

 

Last week’s midterm elections were unlike any we had seen in recent years.  They had all the drama and buildup (and money) of a presidential year.  After months of campaigning the ballots were finally submitted.  And when all was said and done, it seems like nothing was said and done.  Was it a Blue Wave?  Was it a Red Wall? It all depends upon which news channel you happen to turn on.  But I guess it should come as no surprise that days after the polls closed, Florida would still be counting its ballots.

But in the lead up to the election there was a lot of talk about the strength of the economy and the appreciation in the stock market.  Since the day before Trump was elected president, November 7, 2016 the stock market has enjoyed a nice run, with the S&P 500 up 31% since that date.  During the recent midterm campaigns, nearly every candidate for any office, from both parties, tried to take credit for the stock market’s growth.  Was the nice performance of the market just a continuation of Obama’s momentum, or was it due to Trump’s bold new policies?  While the cause may be unclear, there is little question that the stock market has generally performed well during Trump’s first two years.  But as advertisers like to note, “individual results may vary.”

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The Weekly Consensus – November 5, 2018 (Volume 10, Number 42)

The Big Story
What Tomorrow’s Election Won’t Change
Marshall Schleifman

While everyone is focused on tomorrow’s election, with control of the U.S. Senate and House of Representatives, 72% of state governorships, and many state legislatures up for grabs, the most pressing news for U.S. consumers and consumer businesses may actually be the ongoing trade war with China.

Article 1, Section 8, of the U.S. Constitution states: “The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises” and “To regulate Commerce with foreign Nations”.  However, laws passed over time have delegated the authority to unilaterally impose tariffs under certain circumstances to the President.  In imposing 10% tariffs in June on $50 billion of imports from China for allegedly stealing American technology and intellectual property, President Trump cited Section 301 of the Trade Act of 1974, which empowers a President to impose tariffs when “an act, policy, or practice of a foreign country…is unjustifiable and burdens or restricts United States commerce”.  Fortunately for consumers and consumer businesses, the list of affected products was limited to industrial sectors and excluded goods commonly purchased by consumers.  In retaliation for the U.S. tariffs, China promptly imposed tariffs on $50 billion of imports from the U.S.

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The Weekly Consensus – October 29, 2018 (Volume 10, Number 41)

The Big Story
A Big Month for the Fledgling Legal Cannabis Industry
Michael A. O’Hara

A momentous month for legal cannabis began a few weeks ago, with an edition of Entrepreneur magazine that featured a 28-page special section on tips for operating in the industry. Included among the content covering cannabis-specific software platforms, packaging options, biogenetics, delivery services and branding advice, the section contained ads for a new investment fund for “blue chip cannabis companies” from Sol Investments, a cannabis-focused law firm, and a line of Cannabidiol (CBD) products bearing the name of licensing magnate Kathy Ireland.  All are signs of the emerging acceptance of the legitimacy of the estimated $6 billion market for legal cannabis products.

Halfway through the month (October 17), Canada became the second nation in the world to legalize recreational marijuana.  But this doesn’t mean our neighbors to the north are planning on radically changing their consumption habits.  As cited in the Huffington Post, “Statistics Canada found that, out of 5,000 people polled, 82 percent said they would be ‘unlikely to try cannabis or to increase their consumption with legalization.’” Further, while this act removes much of the criminalization previously associated with the substance, as with American states that have legalized it, Canada’s national government left much of the rule making to its provinces, who can restrict how it is sold and consumed.  As a result, the product will not be flooding the market immediately but instead will gradually find its way into the mainstream.

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The Weekly Consensus – October 22, 2018 (Volume 10, Number 40)

The Big Story
Furniture, Flagships, and the Future
Paul Alexander, CFA

 

The Restoration Hardware catalog arrived at my house last week, and as usual, it contained hundreds of pages of high-end furniture and décor items. However, the page that I found most interesting didn’t have any product on it at all. This season’s book leads off with a short letter from Gary Friedman, the Chairman and CEO of RH (the acronym that Restoration Hardware has been using in recent years as part of a subtle re-brand). Entitled “The Death of Retail Is Overrated,” Friedman’s letter outlines his vision for RH’s stores and makes an optimistic case for the future of physical retail. The letter announces a new 90,000 square foot RH flagship in New York City, complete with multiple galleries, an art installation, and a restaurant, and suggests that compelling stores such as this one are the future of retail. Friedman likely doesn’t mean for all retailers to interpret his letter as strategic real estate and merchandising advice. But since he doesn’t explicitly warn against that, let me do it for him: flagships and expensive experiential retailing are not for everyone.

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The Weekly Consensus – October 15, 2018 (Volume 10, Number 39)

The Big Story
Economic, Social Trends May Keep Halloween Spending Creeping Up
Maeghan Thompson

Halloween is a celebration of all things dark and spooky, but predictions of retail selling this year are hardly scary.  Like prior Halloween seasons, consumers are snapping up pumpkin-flavored everything, fun-size chocolate, fake cobwebs, jack-o’-lanterns and costumes, and industry observers expect that by All Saints’ Day on November 1, Halloween-related spending will roughly mirror last year’s record-breaking figures.

This year’s total spending forecast for Halloween, according to the National Retail Federation’s (NRF) annual survey, is expected to reach $9 billion, which is slightly lower than last year’s record-breaking forecast of $9.1 billion (the survey’s margin of error of 1.2%).  Fewer Americans are expected to participate in Halloween this year, 175 million versus 180 million last year, however, the average spend per person is predicted to be up modestly, from $86.13 to $86.79.  Most consumers will be focusing on costumes this year, as 68% of Halloween shoppers plan to purchase costumes, driving $3.2 billion of sales, according to the NRF survey.

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The Weekly Consensus – October 8, 2018 (Volume 10, Number 38)

The Big Story
New Brands and Old Retail Continue to Converge

Last week, we learned that Eloquii was being acquired by Walmart, and Birchbox would receive a strategic investment from Walgreens. The latter announcement included additional detail that Birchbox “retail experiences” will be created in Walgreens stores – eleven stores to start, but the goal will be to expand to more.

These developments have several similarities. In both cases, digital-first brands are allying with brick-and-mortar retailers to seek new distribution opportunities and new demographics. In both cases, old-guard retailers entrenched in the mass and convenience space are attempting to reach new, younger audiences and enhance their own brands in the process. The new products emerging from these partnerships will not be all that revolutionary. The customer experiences and the makeup of the target customers, however, are intended to be something more transformative, particularly for Walgreens and Walmart.

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The Weekly Consensus – October 1, 2018 (Volume 10, Number 37)

The Big Story
CGBS for the People and the Planet
Betsy White

It was great to see many of you at our Consensus Great Brands Show (CGBS) at The TimesCenter last week, and we hope that you enjoyed hearing from our presenters and exhibitors as much as all of us at Consensus did.  We always strive to showcase a roster of strong, growing, and innovative brands, but looking back on the day, we noted two additional themes that came through – commerce that’s good for the planet, and products that promote healthier living.

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