Retail Radar 19-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.

Top of Mind – More mall mainstays enter bankruptcy

The Body Shop’s U.S. operations were thrust into Chapter 7 bankruptcy after its U.K. parent company filed for administration without prior notice. Sewing and crafts retailer Joann filed Chapter 11 with plans to keep stores open and exit as a private company.

This sudden move by Body Shop’s parent left the U.S. branch unable to meet its financial obligations, as the U.K. parent had been managing the U.S. funds. Consequently, the U.S. entity ceased operations with assets and liabilities in the tens of millions.

The Body Shop has been passed around by holding companies, with the latest sale to Aurelisu for $254M, down from its high of $1.14B. This development follows the brand's attempts to navigate the competitive beauty market, emphasizing natural ingredients and environmental consciousness.

But those are table stakes today, and savvy DTC (Direct to Consumer) and online brands have surpassed their legacy strategy. The same happened with Joann, which saw a surge during the pandemic as stay-at-home everyone turned to home crafting. The company plans a quick return as a privately held business.

An update on the Kroger-Albertsons merger

How many [competitors] is enough?

In their latest filings, Kroger and Albertsons took a more aggressive stance against the FTC's attempt to block their $24.6 billion merger, criticizing the Commission for a narrow definition of competitive markets.

They countered the FTC's allegations with detailed objections, highlighting the extensive competition in the grocery sector from various retailers, including Walmart, Target, Costco, Amazon/Whole Foods, and specialty grocers like Trader Joe’s, Sprouts, and Dollar stores. They particularly noted Costco as a significant competitor. Sprouts, the smallest, has a revenue of $6.8B, and Costco has a revenue of $248.8B. There is a wide range of lawsuits that have the makings of political saber-rattling in a major election year.

The retailers also challenged the FTC’s concerns over the viability of C&S Wholesale Grocers to successfully operate the divested stores, emphasizing C&S’s industry experience and financial stability, contrary to the FTC’s comparison to past unsuccessful divestitures.

They disputed the FTC's novel approach of considering "union grocery labor" as a competitive market, arguing it overlooks the broader labor market which includes non-union and non-grocery retailers and suggested that the merger could potentially enhance union bargaining power. As previously noted, some unions are supportive of the merger.

Both Kroger and Albertsons refuted the FTC’s perspective on the merger's impact on competition, arguing that the Commission's claims are based on misleading facts that overlook the actual competitive dynamics of the grocery market. They described the FTC’s terminologies, like “supermarkets,” as vague and accused the FTC of misinterpreting their statements.

The dispute is set for further review by an administrative law judge in Washington, D.C., and the FTC's preliminary injunction request to block the merger will be heard in U.S. District Court in Portland, Oregon, starting on August 26.

Tech Spotlight

Is there a cure for landfill social media marketing while enabling the side hustle influencer? IWantMyFairShare.com says yes!

IWantMyFairShare.com is a differentiated approach in the social selling economy, enabling people of any size and audience to profit from their online presence.

Amit Rathore and Tom Jones of Awake founded Fairshare —innovators in tech and media entrepreneurship—the platform rewards participation across three key segments: brands, influencers, and sellers.

It champions a peer-to-peer (P2P), content-centric commerce model, diverging from traditional social commerce by financially benefiting all contributors through sharing or selling activities. FairShare uses a blockchain-like infrastructure to ensure connections between all parties. The platform ensures transparency and traceability of conversions, which is always questioned in the CPM (click-per-thousand) world.

FairShare's model is advantageous for local and cost-conscious brands. It offers a chance to enhance sales and brand loyalty through community-driven, word-of-mouth endorsements in a transparent, collaborative ecosystem.

It recognizes and addresses the evolving landscape of online shopping. Pew Internet Research states, “Mobile phone shopping is prevalent among adults under 50. Around nine-in-ten Americans ages 18 to 49 (91%) say they ever buy things online using a smartphone, compared with 69% of adults 50 to 64 and 48% of those 65 and older.”

I live in Seattle, a city with a vibrant year-round farmers and night market community. Imagine a local brand calling local influencers who, in turn, connect with a local community—driving interest and potentially foot traffic through the market via mobile devices.

The essence of P2P social selling facilitated by platforms like FairShare is the democratization of the marketplace. It enables Direct-to-Consumer (DTC) brands to economically rival larger entities by leveraging personal networks and reducing reliance on substantial marketing budgets. The commission-based system minimizes upfront costs, altering the traditional dynamics and expenses associated with traditional digital advertising.

A key strength of this model lies in its ability to foster enhanced customer trust through recommendations from known and trusted individuals, countering the landfill nature of some social media advertising or the cost of mega-influencers. This trust foundation is crucial and, more importantly, affordable for emerging brands seeking to establish a market presence.

Moreover, the strategy promotes brand loyalty by rewarding the referrer and buyer, nurturing a community-centric brand relationship. This approach ensures higher customer retention and facilitates targeted marketing, leading to improved conversion rates due to the relevance of social circle engagement.

The agility offered by P2P platforms empowers smaller brands to adapt to market shifts quickly, leveraging real-time feedback for strategic adjustments. This responsiveness is vital in maintaining relevance and competitiveness, especially in fluctuating markets.

The tl;dr

In conclusion, by embracing peer-to-peer social selling, local and smaller brands can leverage numerous benefits, including a more even playing field, enhanced trust, increased loyalty, targeted marketing, and operational agility. This evolution democratizes incentives for new entrants to the influencer field. The inclusivity and efficiency in the marketplace make platforms like FairShare instrumental in fostering growth and sustainability for the value chain of participants.

The Disruptors – Organized [Retail] Crime Comes to the Department Store

Organized Retail Crime (ORC) significantly impacts returns management by adding layers of complexity and financial loss to the retail industry. ORC involves organized groups' large-scale theft of goods, aiming not for personal use but for profit by reselling stolen items. This type of crime has escalated with the expansion of digital commerce, presenting a dual challenge in physical retail stores and the digital marketplace.

The National Retail Federation (NRF) highlights that ORC is a persistent and growing threat, with a loss of $720,000 for every $1B in sales. That’s about seven cents on the dollar.

The use of online marketplaces for the resale of stolen goods complicates tracking and prosecuting these crimes. It underscores the need for decisive action, including legislative measures like the "Combating Organized Retail Crime Act," to address the issue effectively.

Retailers are forced to navigate the consequences of ORC, which include financial losses amounting to billions of dollars annually. The median ORC fencing operation handled about $250,000 in stolen merchandise before apprehension, with online marketplaces becoming a significant channel for resale operations. This necessitates a robust approach to returns management, emphasizing the need for advanced tools and collaborative efforts between retailers, law enforcement, and government agencies

To combat ORC, retailers and law enforcement must embrace technology and strengthen partnerships. Utilizing real-time data access, identity verification systems, and fraud detection platforms can enhance investigations and curb the resale of stolen goods. Additionally, legislative actions, like the INFORM Consumer Act, which requires online marketplaces to verify the identity of high-volume third-party sellers, represent crucial steps toward mitigating the impact of ORC on returns management.

Overall, addressing ORC in the context of returns management requires a multi-faceted strategy that includes technological, legislative, and collaborative efforts to protect retail spaces, ensure the safety of employees and customers, and secure the financial health of retail businesses.

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Onward.

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