Inflation, Recession And Market Uncertainty Are Top Of Mind To A Healthy Retail Market That Is Looking Towards Holiday Planning
Reports from today update that the US Economy shrank 1.6% instead of 1.5% even as consumer spending still went up during the period. A bigger trade deficit — from Americans’ buying more foreign goods and services — reduced 3.2 percentage points off the change in January-March GDP and was the primary culprit.
Source: Google Trends
For the full year, the economy is still supposed to grow a healthy 2.5% according to the world bank. But there is still a lot of talk about recession. In fact, it has overtaken inflation in Google Trends search volumes.
Consumer confidence is falling as well, dropping below the pandemic nadir and to levels we haven’t seen since the 2008 financial crisis. NPD researchers found that 83% of U.S consumers plan to make changes to reduce their product spending in the next three to six months. So what’s a retailer to do in planning for the holiday season? “They’re guessing. They’re all guessing. And any one of them that tells you they’re not guessing, they’re lying, because they don’t know,” John McQuiston, managing director and global head of originations, receivables and trade finance with Wells Fargo, said in an interview on retailers’ inventory plans. “The demand levels are entirely unpredictable. Consumer behavior is unpredictable. … This is a bit of a crystal ball Christmas.”
As a result of the uncertainty even amidst projected healthy annual growth, retailers are weighing what to do with the excess inventories. Target has aggressively been marketing promotional discounts to reduce its inventory, for example, and slashed earnings projection twice in June. Some retailers are trialling new programs to allow customers to donate returns instead of ship them back, because why exacerbate the inventory problem, especially if the economics don’t work on resale.
Grocers are looking at ways to turn this environment to their advantage. Private label has been one way that they are looking to capture spend, especially with discount searching shoppers who have learned to be less brand loyal following periods of uncertain inventories and out-of-stocks. 41% of shoppers surveyed by the Food Industry Association (FMI) this spring bought more store brands than before the pandemic. Shoppers that are buying more private brands chose value (63%) and price (55%) as their leading reasons for doing so.A 77% said they plan to continue to add store brands to their carts in the future, making this a powerful opportunity to grab share and drive profitability.
Source: eMarketer
For the near term, the industry is closely watching key shopping events including Amazon Prime Day, which is July 12th and 13th. According to eMarketer, “Over the two-day period, non-Amazon retailers will rake in $5.22 billion in ecommerce sales in the US, up 17.8% from Prime Day 2021. Meanwhile, Amazon will gross $7.76 billion in digital sales, up 16.7% from last year’s shopping holiday.” What will also be interesting is to measure the lift of competing sales from retailers like Target. This will help address the excess inventory from retailers, so we expect sales to be robust. Eyes will also quickly shift to back-to-school shopping in August as a bellweather for retail.
Source: CNBC
Even though Revlon announced its bankruptcy recently, 2022 has been a record low year for retail bankruptcies, with just 4 bankruptcies to date as of June 16th, 60% less than any year in the last decade. But with rising interest rates on debt, profits will continue to be squeezed, especially if consumer demand growth reverses based on inflationary and economic pressures.
“Some retailers have been able to cancel orders to not create more of a bubble on inventory. But a lot of retailers can’t cancel those orders,” Malfitano said. “So if the retailers that can’t cancel orders don’t knock it out of the park during the holiday season, their margins are going to go way down.”
The Latest Retail Technology News – Cashierless Checkout To Triple, Walmart’s New AR Tools, Cool Amazon Robots And Metaverse Launches
Every week we cover the top retail technology news in the industry. Brick-and-mortar retail has often been overlooked and is experiencing a technology renaissance from the ways products are sourced, managed, inventoried, merchandised, marketed, sold and delivered. New technologies are being delivered from computer vision, QR codes, RFID, loyalty programs, lift and learn sensor technologies, smart shelves and electronic shelf labels, supply chain management, in-store analytics, personalization and payments. We believe in the bright case for the future of brick-and-mortar retail, and we highlight the technology underpinning it all. And if you are looking to the future check out our annual Retail Industry And Technology Predictions from our CEO Trevor Sumner.
Self-checkout terminal shipments could triple to 300,000 in 2027, up 50% from 2021 according to Retail Banking Research (RBR)’Global EPOS And Self-Checkout 2022 Report, growing 11% CAGR. Interestingly self-checkout terminals that accept cash dropped 47%, increasing the need for less expensive credit and debit processing. Six in 10 respondents to a 2021 Raydiant survey said they preferred self-checkouts over store employees, but 67% said a self-checkout station had malfunctioned while using it, and 65% were worried about their cleanliness.
RBR also reported that the number of checkout-free cashierless stores around the world has increased 189% from 87 in 2020 to 252 in 2021. RBR projects that cashierless stores will increase by more than 90% a year to over 12,000 by the end of 2027.
Walmart has launced an AR inventory management app that is extensive, interesting and effective. Srini Venkatesan EVP at Walmart Global Tech wrote, “instantly maps and tracks every box in the backroom for store associates. Rather than the old method of associates manually moving and lifting boxes to read the label on each to determine the contents, the solution we built relies on camera-readable labels affixed to each box, highlighting boxes to show which items need to be moved to shelves. This technology reduces the need for manually scanning each box to find the correct one.” The AR app is currently live in ~3,500 stores and will roll out to all remaining stores this summer. Take a look at the video below.
Walmart is clearly investing a lot in AR. Walmart has launched an AR app that lets you see whether home furnishing will fit in your home. The app is similar to other home goods apps from Wayfair and Amazon with a little more focus on exact measurements of your environment vs. general aesthetic placement of more primitive versions.
Walmart isn’t the only one investing in this type of tech. Ikea was caught unprepared for Covid’s rapid shift to eCommerce. They recently launched a similar AR tool for visualizing home goods. Ikea also bought Geomagical Labs in 2020 to use its technology for 3D, photo realistic images of its products through its online catalogue. And Ikea is fostering a culture of technical innovation with its EverydayExperiments.com, a platform highlighting “experiments” with AI, machine learning, AR and spatial intelligence tools that their teams have been working on.
Ethan Allen has taken the next step in creating an interactive metaverse, a virtual Design Center with three different concepts to start to see how their products can be styled in the home. The technology continues to become more sophisticated and photo realistic, showing the power of the types of virtual interior design environments that are being touted by Wayfair and Lowe’s, that we’ve covered in the last couple weeks. Take a look at the video.
Hugo Boss is going all in with RFID, selecting Nedap’s RFID inventory management solution. Tom Vieweger, RFID Business Expert at Nedap, says: “We believe that real-time, item-level inventory data is crucial for developing successful omnichannel strategies for brands and retailers. By adopting RFID technology, our iD Cloud Platform and its global user community, Hugo Boss remains amongst the frontrunners in the industry.”
Amazon has announced its fully autonomous warehouse robot named Proteus. This Amazon blog post shows how Amazon has evolved its vision of robotics over the last 10 years from how it tackles package mobility, specialized robots for handling heavy packages to improve safety, scanning robots, and automated containerization systems. Here is a video fo Proteus below.
Amazon appears to be hiring to ramp up a local advertising business, and Google and Facebook would be right to worried. Amazon has purchase history and is increasingly looking to provide services for local vendors. “Amazon’s ambitions for advertising span significantly beyond turning more of Amazon into advertising space. That’s where I think efforts like local ads will play a part, “ said Founder and CEO of Marketplace Pulse Juozas Kaziukėnas.
Instacart has partnered with Walmart to offer a virtual convenience store that offers 4,000 items with 30 minute delivery or less. The concept may be a way that Walmart quickly out maneuvers the GoPuff, Gorillas and many others in the fast delivery of convenience store goods, with Walmart’s existing network and fulfillment centers capable of expanding faster than new entrants.
DC licensor and toy maker Mighty Jaxx is using NFTs to give access to owners the ability to buy physical manifestations of their NFT artwork. It’s a smart blending of digital and physical ownership that increases the value of each, and one of our 2022 retail predictions on how retailers and brand will adopt and use NFTs in 2022.
American Eagle has launched an NFT Shop for shirts and hoodies featuring eight items with graphic designs from Little Lemon Friends, Starcatchers, The Littles and WonderPals NFT collections. The NFTs were $1 and also came with a physical patch to help bridge digital and physical.
Puma announced a Web3 collaboration with Japan’s New Tokyo, with a virtual streetwear shop 10KTF. Speculation began during NFT week when a video previewing the new release of a classic sneaker camouflaged a frame with the shop’s logo and Wagmi-san at his New Tokyo storefront.
FREE WEBINAR JULY 12TH – The Meteoric Rise Of Retail Media Networks And The New In-Store Digital Opportunities For Brands And Retailers
Join Trevor Sumner, Rethink Retail Top 100 Influencer, Retail Tech Innovation Hub’s Top 50 Leader, and Corporate Visions Most Influential CEO In Visual Merchandising Tuesday, July 12, 2022 at 2pm EST, for a FREE, LIVE 1-HOUR webinar, designed to provide insight into the meteoric rise of retail media networks, and the profitable future of store as media. In 1 hour, our goal is to improve your understanding and provide actionable next steps to digitize your in-store experience, maintain brand loyalty, and drive meaningful revenue growth.
Shopper marketers and sales teams at brands and merchandising, customer experience and marketers at retailers should join this webinar to learn about:
How retailers like Walmart, Macy’s, CVS Health, Albertson’s, and Dollar General are leveraging their media networks to include in-store digital touchpoints
Why RMNs are more than just another price tag for brands doing business with retailers. How advertising and shopper marketing budgets will align for 2023
The net new investments being made by brands in retail media networks, and the content driving ROI
The organizational pivots from individual channel buyers (online vs in-store) into a holistic broader front to drive meaningful 4.3% increases in revenue
Using retail media networks to enhance customer loyalty and personalized experiences to drive omnichannel journeys
FEATURED CONTENT – Transforming The In-Store Experience With Vitamin Shoppe’s COO Andrew Laudato, Microsoft’s Ricardo Belmar, Cooler Screens John Gomez and Perch CEO Trevor Sumner
While 85% of all shopping happens in-store today, customer satisfaction with the shopping experience is low. Why is this? What can retailers do to change this situation?
How is technology transforming the in-store shopping experience in retail stores today and tomorrow?
What is the impact of analytics on retailers’ ability to create an elevated experience that will delight shoppers and increases conversion rates and average transaction value?
Which categories of technologies should retailers be focused on in this store transformation?
Stories To Share At The Retail Water Cooler
Nike beat earnings handily by 11% on $12.23 billion in revenue that beat estimates by 1.4%, despite inflation and Covid lockdowns in China. “We continue to closely monitor consumer behavior, and we’re not seeing signs of pullback at this point in time, and so we continue to execute the strategy, and the plan we have which is working,” Nike’s CFO Matthew Friend said. Nike upped their $15 billion stock buy back with an $18 billion stock buy back program.
Bed Bath & Beyond’s CEO Mark Tritton has stepped down as sales have dropped 27% year over year and sames store sales declined 24%. “In our blunt view, this was a cosmetic reinvention—copied from Target—with very little substance behind it,” GlobalData’s Neil Saunders said. “It is little wonder that it has quickly fallen apart.” Revenues missed by 3.4% and losses were double what was expected at $358 million.
CVS, Walmart and Rite Aid had to instill unit limits on the purchase of Plan B pills, as last week’s Supreme Court decision overturning Roe v. Wade have made shoppers scramble to understand their health options by state. Some pharmacies saw surges of 3,000%. Plan B pills are emergency contraception immediately after conception and are different from medication abortion known as plan C, which requires a prescription. CVS removed the limits yesterday as sales returned to normal rates, but there are many state-by-state legislations that will affect legality and customer demand.
Amazon is close to surpassing UPS in packages delivery after passing FedEx last year. Amazon makes less money than the other carriers due to Amazon Prime. As Jeff Bezos famously said generally, “your margin is my opportunity.” Amazon will also invest $1 billion in other logistics companies as part of a new venture program.
The FDA banned sales of Juul e-cigarettes last week, citing a lack of sufficient evidence regarding the toxicological profiles of its products. A court granted Juul’s request for temporary stay on the order the next day. 30% of people who start vape, begin smoking soon within 3 months. In 2020, Juul commanded a 54.7% share of the $9.38 billion U.S. e-vapor market – so this is a massive decision.
McKinsey has a great article on why personalized vitamins may be the future of the $1.5 trillion health and wellness market that grows between 5-10% every year. Personalization of the vitamin regimen can lead to increasing prices to $150-250 per month, and enable more valuable subscription revenue.