Retail Radar 12-Mar-2024

Welcome to "Retail Radar," your weekly insights offering innovative solutions and forward-thinking strategies to navigate the dynamic retail landscape, helping you lead effectively and stay ahead in an ever-changing market.

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Top of Mind? - Express’ De-Listing is a Critical Warning to Malls.

The delisting of Express from the New York Stock Exchange is a critical signal to the mall industry for several interconnected reasons, emphasizing the need for malls to innovate and adapt to remain relevant destinations in the face of evolving retail landscapes.

Financial Health Indicator: The delisting occurred as Express's average global market capitalization dropped below the required threshold, signaling severe financial instability. As of late last year, Express had?530 retail and factory outlet stores, 60 Bonobos locations, and 11 UpWest stores. That’s just over 50% of the top-performing malls in the US.

Such financial struggles of a critical retail player, especially one traditionally anchoring mall traffic, highlight broader challenges facing the brick-and-mortar retail sector. Malls depend on the health of such tenants to draw shoppers, and their instability forecasts potential declines in mall traffic and overall viability.

With limited success, Express tried to shed itself of its “mall brand” in 2023.

Consumer Confidence Impact: Moving to a less liquid market like the (Over the Counter) OTC Pink Market could further volatility in Express's stock price. This shift may erode consumer confidence in Express and the mall experience, potentially leading to decreased foot traffic and negatively impacting all tenants.

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Mall-Based Retailers' Precedent: As industry experts discussed, Express's potential bankruptcy could set a precedent for the vulnerability of mall-based retailers in the post-COVID era. This could serve as a warning sign to malls about their anchor tenants' financial and operational stability and the need for a diversified tenant strategy to mitigate risks.

This is an opportunity for mall properties. Intuitively, they may raise prices or ask tenants for onerous agreements. Now is the time for partnership.

Consumer Preferences Shift: The pandemic has permanently altered consumer behaviors, including a diminished demand for business casual apparel, Express's core product line. This shift emphasizes malls' need to adapt their tenant mix and experiences to meet changing consumer preferences, moving beyond traditional retail offerings to include more experiential, digital, and service-oriented options.

Adaptation and Operational Strategies: Despite Express implementing various cost-saving and operational efficiency measures, these efforts might need to address the fundamental shifts in retail dynamics fully.

The delisting of Express from the NYSE encapsulates a larger narrative of challenges faced by the traditional retail sector, underscoring the imperative for malls to evolve. To remain compelling destinations for consumers, malls must reassess their strategies, tenant mix, and engagement approaches to align with the rapidly changing retail landscape and consumer expectations.

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Tech Spotlight – The first catfishing photo?

The image on the left is not Abraham Lincoln.

It’s one of the earliest examples of audience emotions manipulated by technology. In the 1860s, after Lincoln’s death, news sources were hungry for images of the president. A portrait painter merged the two images to provide the final picture on the left. Ironically, both men were deceased, and John C. Calhoun was a noted role model for Southern secessionists.

Fast forward to today (you know where I am going), AI is being used to enhance product images on e-commerce sites.

Artificial Intelligence (AI) is increasingly used to enhance or sometimes falsely present online product images. For example, generative AI tools like Solidgrids transform casual phone photos into professional-looking product images, significantly altering the original photo to make the product appear more appealing.

Similarly, Adobe Photoshop incorporates AI tools such as Content-Aware Fill and Generative Fill AI, which can manipulate images by removing unwanted elements or creating new objects and backgrounds that were not originally part of the image. These tools can drastically change the perception of a product by enhancing its appearance or context.

Is it ethical…? Is it… right?

What if you found that the image of a jacket being sold on a crowdsourcing website (E.g., GoFundMe) had been altered by AI?

·?????? What if the founding team used inexpensive AI as a trade-off so they could pay vendors instead of a professional photographer?

·?????? What if a human photographer used professional-level photographic techniques instead of AI?

The question is nuanced, and I may be trying to manipulate your emotions by asking it this way. At what point, if ever, are you comfortable with having your emotions manipulated? Isn’t that the point of advertising?

These examples underscore the importance of ethical considerations in using AI for product imaging, ensuring transparency about using such technologies to avoid misleading consumers.

The Disruptors – Zulily is back?

Reviving Zulily: A Reality Star's Quest for a Corporate Renaissance

In the world of e-commerce, where brands' lifecycles often mirror the fleeting fame of internet celebrities, the tale of Zulily's fall and subsequent resurgence stands out as the peak of a Circular Economy opportunity. At the heart of this turnaround is Marcus Lemonis, a name synonymous with social selling, business acumen, and transformation, thanks to his star turn on CNBC's reality show The Profit.

Lemonis’ straight edge and “just the facts style” for the show and now Zulily make for compelling social selling, but let’s go deeper.

Marcus Lemonis, recently named the executive chairman of Beyond—formerly known as Overstock and now the parent company of Bed Bath & Beyond—has the opportunity to create a new brand with a new name and become the next generation of liquidators. How did these high-flying brands get here?

Despite its early success and a valuation soaring to $4 billion post-IPO, Zulily's journey took a downward turn due to heavy competition from other online competitors, culminating in layoffs, liquidation, and legal battles. The company was moved into ABC (assignment for the benefit of creditors), essentially liquidation of assets over a year-long period.

Bed Bath and Beyond closed its physical sites after financial struggles at the end of June 2023. However, its active website offers a “Fresh deal for a spring-ready home” banner.

What’s going on?

While not explicitly stated, the ambitious strategy is to relaunch Zulily by leveraging its existing intellectual property, including its website, domain names, and, crucially, its extensive customer database.

This acquisition, devoid of Zulily's previous liabilities, sets the stage for a revitalized platform expected to contribute significantly to Beyond's revenue goals without burdening the company with additional fixed expenses.

Coupled with Beyond’s customer list, e-commerce strengths, and Bed Bath & Beyond’s outparcel retail locations (at the mall but not in the mall) as points of destination, it provides an exciting mix. The former Overstock website redirects to BBB. The screenshot is the header from Beyond.com.

Spokane, WA-based Wander is following a parallel model, liquidating returned inventory online and distributing it to its physical locations.

The announcement of Zulily's comeback was teased through cryptic social media posts, signaling, "The only purple that saves you money. Coming soon." Spearheaded by Lemonis himself, it generated buzz and encapsulated the essence of Zulily's value proposition—exceptional deals that don't break the bank.

What is the goal?

As the executive chairman, Lemonis's vision for Beyond and Zulily extends beyond mere financial rehabilitation. He aims to achieve a $2 billion revenue mark in 2024 and a $3 billion revenue run rate by the end of 2025. This projection isn't just about numbers but crafting a sustainable, profitable business model that leverages improved margins and a streamlined expense structure.

Lemonis' ability to turn around failing small businesses on television has translated into real-world corporate success. As executive chairman, how much hands-on day-to-day involvement remains to be seen.

The rebirth of Zulily under Beyond’s umbrella is a narrative of innovation, the power of brand reinvention, and the unyielding belief in the potential of a once-faltering enterprise.

The tl;dr.

The Venn diagram of deep e-commerce, customer lists and loyalty, social selling, and off-mall locations (maybe) is a potent combination. We’ll see a lightweight, fast integration of all three companies in less than 60 days.

What do you think?

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Onward.

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