Retail Rundown - December 7, 2020 - with Ricardo Belmar and Tony D'Onofrio
Hosted by Julia Raymond Hare from Rethink Retail
Online shopping, If we look at that, it rose nearly 22% year over year on Thanksgiving day. And then on Black Friday, the following it jumped by about the same percentage totalling nearly $9 billion. And that’s not the only good news we had data released by Adobe that holiday shoppers spent 10.8 billion on Cyber Monday. That’s up 15.1% from a year ago. And that set a record for the largest online shopping day in us history. Adobe also found that the number of orders picked up Curbside on Cyber Monday was up 30% from last year and about half of all online purchases were made on a smartphone. So, that’s pretty big number there. Ricardo, I’ll pass it to you. I saw a lot of your comments already on LinkedIn. There’s a lot of buzz. What are your takeaways from this year’s Black Friday, Cyber Monday, any surprises?
Ricardo Belmar:
Yeah. I certainly have a lot of thoughts on this. I think there are definitely some surprises. And some maybe not, although impressive, not quite a surprise. I’m not sure it’s comes as a surprise to a lot of folks that Cyber Monday just blew it out of the park this year. I think that’s probably to be expected. Tony mentioned the 52% drop in in-store traffic in some ways, I’d say that was also expected as particularly in mall environments because people were not going to be going to stores during the pandemic as much as it used to.
Ricardo Belmar:
In some ways, I maybe a little bit contrarian in some of this being, and maybe I’d refer to it as a mixed bag of results because, sure we’ve got this wild success with e-commerce, the Adobe reported numbers while still a record for Cyber Monday. I’ll still point out that their original forecast was even higher than that. So it didn’t quite hit the forecast. I think their number was around 12 billion. So, that was the huge drop in in-store traffic. I see it’s possible the jury may still be out a little bit as to what’s the overall sales figure look like when you add in all of the various sales channels that retailers had.
Ricardo Belmar:
And certainly there’s a different story to be told based on segments and things like that. I can summarize it, maybe five different takeaways here now. So the first one that I think is the most obvious e-commerce, right? E-commerce just massive growth. Somewhere I want to say I’ve seen reports that overall for the seasons of not just Black Friday, Cyber Monday, but so far, this holiday season, it’s probably tracking for a 31% increase in e-commerce, which maybe isn’t quite as big as we saw in the spring during the lockdowns in the pandemic, but still, wow, that’s just an impressive number in one season to happen.
Ricardo Belmar:
And I think that we’ve also seen reports, Shopify send their merchants on their platform saw 76% increase in sales worldwide over the weekend, which I think also gives us an indicator that people also followed a shop small approach, and that they didn’t just focus on the largest retailers that have been so successful this year. So I think that’s probably the biggest positive if I’d take away from this.
Ricardo Belmar:
My second takeaway is something that we’ve also talked about on this show before and that Shippagedon, right. I think Shippagedon is real. I think it’s had some trickled down effects. I’ve seen reports on how both UPS and FedEx are starting to show the strain. I’m not sure if it’s been confirmed, but there were reports that UPS was holding up pickups at some retailers over the weekend so that they weren’t overly straining the influx of new packages to ship.
Ricardo Belmar:
So it’s been shown before we’ve got a 15% increased of shipping capacity across the carriers, but demand is realistically more, more like 30%. So what’s the result. So just about every retailer, I know has been pushing consumers to shop early this season and that means sales discounts, special offers. Everything started out earlier. I think we’d probably all claim it started with Amazon and Prime Day in mid-October. I saw that Digital Commerce 360 reported 76% of the top 50 online retailers offered Black Friday specific deals starting the Monday before Black Friday.
Ricardo Belmar:
So, we can show lots of data and impressive numbers around the long weekend. The reality is it’s really more about the season. I think this year more so than past years because consumers really started shifting some of their spend. And that may also be reflected in why we’re seeing these lower in-store numbers and why the forecast the e-commerce figures for the long weekend were higher than what we even saw. Anyway we didn’t quite hit those marks because of that shift in the spend. Consumers I think are spreading the spend out a little bit more, not everyone was focused on just buying over this one holiday weekend and you can bring that multiple ways.
Ricardo Belmar:
I think NRF is taking the view with their forecast at the holiday games may be up to as high as 5.2% this year. I think their belief is that this spreading out and spending patterns will continue on trend for the rest of the season throughout the month of December. Personally, I think that may be a bit overly optimistic assuming that every consumer is going to keep doing this or in their case, I think they’re claiming that the top one third of consumers are going to help drive that continued trend. I’m just not sure I agree with that view.
Ricardo Belmar:
Some other impacts I would attribute to Shippagedon, too, not every retailer wants to overdo the discounts. So they’re not just adding more discounts and more sales over the season. They’re changing things up a bit and messaging a little differently.
Ricardo Belmar:
Now, one example that I thought was net worthy Costco. I’m a Costco member and members have received multiple emails from Costco CEO, practically begging and pleading us to shop early and outright claiming that we will experience shipping delays, If we wait till the last minute to buy things. You’ll log into the Costco Mobile App, you see that message right at the top of the screen. So, it’s really being emphasized that retailers want you to shop early this season.
Ricardo Belmar:
Another interesting from what I’ve seen there too, is gift cards sales. I think gift card sales are likely to increase and there may be a side benefit to that that retailers will see because come January after the holiday season, I think there’d be a lot more people holding onto those gift cards and wanting to spend them. So, I think there’s a good chance we could see in January a sales boost that may even offset any increase in returns that retailers may see from the holiday spend.
Ricardo Belmar:
Coming back to the in-store sales, we mentioned the decrease in foot traffic numbers. I think that’s primarily coming from the malls. I’d rather look at statistics around what were the average transaction values for the purchases that were made? What were the conversions from the shoppers that did go in store? I very much agree with what many people are saying that shoppers have a lot more intent this season. If they’re going into stores, they’ve got a purpose and they have an intent to buy. So for me, the real question is, are they buying more and they are putting more in their basket or those transaction values going up?
Ricardo Belmar:
So the conversion numbers that we’ve seen are higher, but the average transaction value I think was only about in the single digit percentage higher. So that tells me that, well, there wasn’t a lot of intent maybe people weren’t buying more than they did last year when they were in-store. But I think here what really matters is to start looking at what product categories that retailers are selling.
Ricardo Belmar:
And if we’ve seen that apparel continues to struggle this season, but categories like toys and electronics, they’re booming. We can expect that the same essential retailers throughout the year had been doing really well and your target Walmart, folks like Best Buy and maybe Dick’s are in all likelihood going to come out and tell us that they’ve had an absolutely stellar holiday season but other specialty retailers may not be on the winning end of that equation, as much as they’d like, because different categories are seeing different results.
Ricardo Belmar:
We’ve seen all the kinds of shifts in spending. And that’s a big factor here. I think my last takeaway that I’m going to call this more of an unanswered question that I hinted at earlier. To me the question for December is, are consumers done shopping for the holiday or they have more purchases to make?
Ricardo Belmar:
I think it’s great that they’re not going to be so dependent on the one long weekend this year, but that leaves an open question, are consumers still buying more and more? Is this trend going to continue into December? And our effort would have us believe that the answer is yes. And I think they’re leaning heavily on the top one-third of consumers by income as being the ones who are going to leave the way there. I’m not completely convinced. I look at the luxury segments for some data there to see are luxury buyers buying more? Are they buying the same as before?
Ricardo Belmar:
My one interesting tidbit there, because I like to follow Amazon’s luxury stores since that’s new this year. I’ve seen that they’re offering 50% off sales. So for me, when the luxury brands are timing 50% off, I’m not so sure if that spend level’s going to continue into December. Because all that said, I think the one caveat allowed to do that is if our Congress manages some new stimulus package this month, I think all bets are off. Everything could change. If there is a real stimulus of consumers get that from the government, I think there will be a spending boost and everybody will come out happier in retail as a result. If that doesn’t come true, then I’m not as confident that these trends are going to continue for the rest of the season.
Julia Raymond Hare:
Great recap Ricardo, and I’ll pass it to you, Tony. I would say the big things I took away from your excellent in-depth analysis there is that, Adobe did predict a higher e-commerce number, maybe around more like 12 billion versus 9. And that Shippagedon is still at play. It hasn’t gone away. I know that our producer our Gabriella actually messaged me yesterday and she’s like, “UPS just dropped off a package using a U-Haul.” So I know that people are getting creative out there. And then you said, are people still buying or not? That’s also big. And I know you went over a lot more. Those are the top three things, I think that are really spot on. Tony, what’s your recap?
Tony D’Onofrio:
First of all, Ricardo did a good recap in terms of the trends that I saw in Black Friday and Cyber Monday. But my view is you got to take a step back and look at it from the point of view, is this an unusual holiday season, or is this a holiday season that’s just changed because of how consumers are shopping? And to me, all it’s really showing is the pandemic is accelerated the digital trends that were already underway between what was happening inside physical stores and what was happening online.
Tony D’Onofrio:
I think we’re still going to have a hangover but that’s going to continue into December and even in the next year, because the pandemic isn’t going to go away as fast as everybody wants. The latest data that I saw from Brightpearl ~is a 78% of us will be buying online more frequently next year, 38% are more likely to shop online and in stores and 39% even said that in the next five years, they’re only going to shop online. 55% now buy products online that previously they bought in stores and 66% are planning fewer trips to the mall over the next 12 months.
Tony D’Onofrio:
So what was interesting to me is the brand switching that was happening during the holiday season. There was more brand switching as reported by McKenzie. For example, they had 40% of their survey respondents switched to a new brand or made a purchase with a new retailer. And the 40% was actually a McKenzie global average. For [DUS 00:16:46] it was higher at 46% and the top three reasons why they switch brands are the old common rules of retail, lower price, better value to price ratio and to support employees.
Tony D’Onofrio:
So the other thing that was very interesting to me is how the services are getting better this holiday season. I mentioned earlier, the example that I had at Best Buy, and it really was amazing. It was Cyber Monday. I expected them to be really difficult to actually do to the process, but I was able to order online very easily. You show up at the store park and at a designated area, give them the number, open the trunk, they put it in the trunk and you drive away. I didn’t even have to actually see or talk to the person. So it was an amazing experience in those services.
Tony D’Onofrio:
So what’s going to happen to me is what I see is what this holiday set is online is going to play a bigger role until we get the pandemic under control, but retailers have to figure out how they get their model and how do we improve their model to get us back in the stores, by continuing to work on creating those immersive experience and improve on those services. It’s in the retailers best interest to do this. If you think about it, because the most profitable place for the retailer is the actual physical stores online and all these new services that actually take away more profits.
Tony D’Onofrio:
So they got to keep the fine tuning. What happens inside the store, because it’s now going to go online. The last forecast I saw was 34% by 2030 will be online. The rest will be in stores. So stores are going to be important, but we got to get better at what happens inside the store.
Julia Raymond Hare:
That’s so true, Tony and I liked that you said it’s still important to have immersive experience with improved services, because like you said, those numbers are increasing probably faster than anyone had expected as accelerated by the pandemic, over a third of revenue will come from online with incoming years potentially. And I thought it was interesting, this isn’t super related to Black Friday, Cyber Monday, but for example, Volvo is one that they announced they hope to have half of their revenue come in from online channels by 2025, a car manufacturer.
Julia Raymond Hare:
So it is huge, but I think the store is so important for the brand. And that’s not probably going away. One more thing on Black Friday, this season has been peculiar. And we’ve been talking for years about, is Black Friday losing some of its appeal? Is it becoming less important? Do you guys have a new take on that after seeing the results of this season?
Ricardo Belmar:
Yeah. My thought there, I’ve in fact seen some people like Steve Dennis, I think it was referred to this weekend as Bleak Friday. And I think in some ways it’s appropriate, but maybe not in a negative connotation that might be implied in there in the sense that, we didn’t have the annual retail door busters to drive people into the store. And I think buying large, if you ask most consumers, they frankly didn’t care that those didn’t exist because what retailers gave them in place of that to incentivize things like Curbside Pickup and online deals was more than enough, I think, to satisfy people. And that’s why we see the blown away e-commerce numbers that we see.
Ricardo Belmar:
So I would actually claim that maybe we can say after this year Black Friday, as we’ve known it, is pretty much dead. And I don’t think that’s a bad thing. I think it’s good for retailers, it’s good for consumers. I think it makes life easier for a lot of people. It’s going to make life hopefully in the future easier even for shipping things on the logistics side, because the sales, it gets spread out. There’s no need, I think, to try to force everything into this one day. And I think that’s what we proved this holiday season. That it’s just not as important as it used to be because there are so many other purchasing modalities, so many other ways that consumers can attack this. And like we’ve said, even pre-pandemic, right?
Ricardo Belmar:
The trend was conveniences came, consumers want convenience. And compared to every other way we have to shop, I think Black Friday and the idea of massively sprinting into crowds in the store is just not convenient as it might’ve been in the past. So I don’t think anyone’s going to miss that. I do think people will go back to stores. Even given all the data that Tony cited. Yes, people are going to spend more of their purchase dollars online. I think we will continue to see trends for Curbside Pickup. Stores aren’t going to go away. What the purpose of those stores is may change depending on what retail you are and what products you offer.
Ricardo Belmar:
I think the story will be different if you’re an essential retailer versus a specialty retailer. The enviornment is definitely going to change for malls, but the stories aren’t going to go away, but I just don’t think the importance of Black Friday is going to be there in future holiday seasons. I think people will remember how they shopped this season and they’ll going to look forward to doing it again that way next year.
Tony D’Onofrio:
And I would concur with Ricardo. I think Black Friday has changed and it was changing already anyway. What’s happening is we’re moving earlier and earlier into the holiday season. Prime Day, I think is going to become almost like a permanent kickoff probably going forward. So Black Friday is just another one. The concern that I would have is as a consumer, are we not go shopping for Christmas in July? So we’re going to move it up. All the way up to July. So are we actually going to kill this aspect of Christmas shopping because we were moving earlier and earlier, but Black Friday itself, and even Cyber Monday, there were just opportunities to engage with a retailer.
Tony D’Onofrio:
The concern that I have is that, maybe we’re getting to a point where there is no more holiday season shopping during holidays. And we’ll do the Christmas in July as it’s already advertised on multiple channels.
Julia Raymond Hare:
Both fair statements from you on a Black Friday, Ricardo and Tony. And I’ll move on to something a little bit more cheerful. We talked about Christmas and your last statement there, and stores are getting creative. So luxury department store, Neiman Marcus employed Santa Claus to help out this year. So instead of posing for pictures because of the pandemic and what not.
Julia Raymond Hare:
Santa’s got to deliver Curbside Pickup orders to customers. So he was there at your car. I thought that was pretty cool. The retailer also had virtual gift advisor services where customers can work with an assistant that will call or text you gift ideas for everyone on your shopping list. So that takes out a lot of the hard work and thought, right? So, that sounds like a good thing to me. And it also came with champagne and chocolate chip cookies sent in the mail by Neiman Marcus. That was all part of the service. So interesting work there.
Julia Raymond Hare:
Other retailers put on a series of deals over the holiday weekend, notably we looked at Urban Outfitters. They had a lightning fast flash deal on their e-commerce site. And Ulta had a virtual queue for its digital sales. And we know brands are fighting harder this year for loyalty and attention with a lot of shopping being done online. Tony, what do you think about some of the promotions and did any stand out to you this year?
Tony D’Onofrio:
So to me the surprising thing, especially during the pandemic and really not a lot stood out to me as a major promotion that retailers are driving that I said, wow, that promotion really has the retailer finding that magic formula to increase loyalty. I think the US has a long way to go to actually get promotions nill, to actually create engagement. And as you know Julia I’ve talked about in terms of other parts of the world and how they’ve done this extremely well. And to me, I look to China every year as the gold standard and what they’ve done with the recent shopping holiday that ended in November.
Tony D’Onofrio:
So this year Singles’ Day, or it’s been rebranded Double 11 was an 11 day shopping festival ending November 11. Alibaba had sales of 74 billion-
Julia Raymond Hare:
Unbelievable.
Tony D’Onofrio:
Unbelievable. Is that almost $7 billion a day. It included intentional recruitment of nearly 32000 international brands from 84 countries. They also recruited 2.1 million small businesses, live streaming was very popular. They had 28 live streams that did $15 million or more even Magic Johnson got into the game this week, doing his own live streaming selling one of his products. Cartier had 800,000 people in their life stream, and they even were selling a $28 million necklace if you wanted to buy. And then the surprise was Nike. They sold $15 million in one minute-
Julia Raymond Hare:
Oh my-
Ricardo Belmar:
Wow. That’s impressive.
Tony D’Onofrio:
$15 million at peak. Alibaba was a processing 583,000 orders. And by its conclusion ship 2.232 billion packages. So it was a wild party. It included Kate Perry doing virtual concerts or shopping parties. And they’ve included 800 million people worldwide. So that’s the way to throw a shopping party. We’re near nowhere to be closed and to put it in perspective, that party was 16 times as many sales as Amazon prime day in terms of delivering results.
Tony D’Onofrio:
So we have a lot of work to do in the West to actually throw a two shopping promotion that will get me interested in terms of doing more shopping, other than the flash deals or the fast deal. But those are not sustainable. In my point of view.
Julia Raymond Hare:
Those numbers are shocking. They really are. I didn’t realize how high they were. And then you mentioned all of the things that they were offering from superstars to really expensive products being shown. I like how you said, that’s the way to throw a shopping party because that’s how it should be. Right. It should be more of that exciting feeling and not so much a transactional which I think we have a long way to go like you said, Ricardo.
Ricardo Belmar:
Yeah. I have to agree with that. What was in many ways missing, maybe with the exception of what you described at Neiman Marcus did is where was the fun in these Black Friday, Cyber Monday activities? So once you take out what I would consider that the not fun parts, i.e removing the door busters from Black Friday that just cause people to stamp into the store. What fun things do you replace it with? And I think the one thing that I pick up on that I am surprised I did not see any examples there. I think Tony would agree is why we didn’t see any attempts at some live streaming over this holiday weekend by retailers.
Ricardo Belmar:
The flash sales, I agree those are good. I view those, for example, I know Best Buy did some as well. When you try to sell some products that often are not discounted or rarely discounted, like say Apple products at Best Buy, then sure the flash sale is I think can make a difference but I agree with Tony, they’re not long-term sustainable. But other than the Neiman Marcus example, the only other one that stood out to me, AllbIrds, for example, I saw they actually raised prices by a dollar because that dollar was going to fight climate change and support the environment.
Ricardo Belmar:
So by adding a cause to it, they not only drove or motivated, let’s say people to shop with them but they made it more worthwhile. So you were accomplishing something useful and for the world by shopping with them. So I consider that creative. But I have to agree overall that apart from clever discounts, I’ll categorize it that way, not a lot of creativity in what was going on. And I think there’s a huge opportunity being missed right now in terms of video selling and in live streaming. In fact, I see more examples of small retailers, maybe some independent retailers realizing that, that’s an opportunity they can use to distinguish themselves from these really large, big box brands.
Ricardo Belmar:
I’ve seen examples of independent retailers where they just use live streaming on YouTube or on Facebook of just themselves walking around their stores, showing off products and leveraging things like Facebook marketplace to sell them. And I think that’s creative. I still continue to be surprised that we don’t see the larger brands adopting some of these techniques.
Tony D’Onofrio:
And Ricardo just to support what you said on live streaming. I totally agree with you. The number one category in China for live streaming is Apparel. Apparel desperately needs the ability to sell differently and more. It’s amazing to me that, that hasn’t been adopted more again on this side of the pond.
Ricardo Belmar:
Yeah, I totally agree. I honestly would expect, for example, areas where they really need the help from that opportunity, like department stores to really jump on that and take advantage of something like that, especially considering that for a department store that has access to more brands, they can really show off on a video.
Tony D’Onofrio:
Yes.
Julia Raymond Hare:
And I like your point about Allbirds not point, but I like your example of Allbirds taking things more creatively in their approach this year, because I think that speaks to the strength of their brand and what they stand for. And they also have a quality product. So they’re allowed to do something different like that, where they’re actually raising the price. Good points on live streaming. I will say, I’d like to see someone that’s not in Amazon do it. Right. I want to stop talking so much about Amazon. I want to see the other retailers win a little bit.
Ricardo Belmar:
Yeah. It’s definitely a missed opportunity, I think right now.
Julia Raymond Hare:
So our last segment of the day, this is a huge announcement hot on the heels of Target’s recent partnership with Ulta comes another interesting pairing. Sephora announced it will be making its way inside hundreds of Kohl’s stores in the coming year. And this new partnership will include at least 850 locations of Kohl’s stores that have mini Sephora stores within them by 2023. And the shops will be roughly 2,500 square feet. So pretty significant. And Kohl’s employees will be trained by Sephora.
Julia Raymond Hare:
The storefronts will be positioned near the front of the Kohl store and at some locations might even be assessable by a separate entrance. According to Kohls CEO, Michelle Gus, the Sephora logo will also be placed on the outside of the building. And Sephora announced it will launch Kohl’s website next year. So Ricardo, I’ll pass this to you. What are your thoughts on the partnership between Kohl’s and Sephora? I know you predicted this one, so it’s a pretty big one.
Ricardo Belmar:
Yeah. I really love this partnership. Now because the least of which is because I got that prediction right and I don’t often get to say that, but I will say it this time. To me in some ways this was an obvious pairing. So once Target and Ulta announced I really felt that the obvious next move was for Kohl’s to do the same thing with Sephora. So one almost every shopper panel that I’ve seen over the last few years when their panel shoppers are asked name your two favorite brands, you almost always get the same answer. And Sephora is always one of the two listed. So there’s a huge amount of brand affinity and loyalty with Sephora. And what is Kohl’s probably number one problem today is in getting people to the store to buy.
Ricardo Belmar:
So bringing Sephora in, I think for Kohl’s would be much more successful or at least has the potential to be much more successful than it was for JC Penney. And Sephora is obviously has been looking to get out of the JC Penney’s their agreements coming to an end. They don’t for, I think obvious reasons want to stay in JC Penney and Sephora wants to get out of the mall. So Kohl’s has a great advantage for them there and that they’re off mall. I’ve seen people arguing, why Kohl’s, why wouldn’t Sephora do this with another department store brand.
Ricardo Belmar:
In my conclusion there, every other department store Sephora could have gone to they’re all based in the mall. So it doesn’t really get them the advantage. Sephora wants to reach more customers. They want to reach their existing customers closer to where they are. So Kohl’s is I think gives them a good opportunity for that. And for Kohl’s I think the advantage is they need a game changer, right? They need something to really generate more interest in getting people to the store. They’ve started doing some interesting things.
Ricardo Belmar:
We know Kohl’s CEO loves to tell us that the Amazon returns that they’ve set up at the store is a great foot traffic driver. I still think it remains to be seen what positive impact that has on their sales figures, but putting that aside, I think you’ll have a better chance of when they bring Sephora customers in. And in fact, one thing I noted in the announcement that I don’t believe we heard in the Target Ulta’s announcement that Kohl’s mentioned is Kohl’s is going to hold the Sephora inventory for these sales. So that to me gives them a little, maybe a little bit of an advantage here in terms of the impact it’s going to have on their bottom line, in terms of in-store sales.
Ricardo Belmar:
And then in both cases, For Target plus Ulta and with Kohl’s plus Sephora both are going to be implementing this on their e-commerce sites. So I think that’s probably even an even bigger opportunity for them. Kohl’s, I think is a longterm decision here. That to me, they’re starting to look more and more like Target. I’ve been somewhat vocal in saying that Target really has become the modern department store where Macy’s used to love calling themselves America’s department store. I really think Target has taken over that moniker if you will, because the people just love to shop there. And they really do…
Ricardo Belmar:
We have departments where I think most department stores no longer have departments. They’re just apparel stores. Kohl’s still has an opportunity there. I think people forget that you’re not too long ago they announced a partnership with Aldi now to bring grocery into Kohl’s. I think that’s important for them, especially now that we’ve learned through the pandemic, that being an essential retailer really has an impact and really drives consumers to shop with you. I think Kohl’s if they find the right formula to leverage all these plus Amazon returns plus now Sephora and they get their product assortment, right.
Ricardo Belmar:
We’ve seen them talk about how they’re going to shift their Apparel a bit to be more athleisure or athletic and comfort wear focused if they can pull off that strategy. And in combination to do something unique, maybe with Amazon beyond the returns, they have a good chance since they’re not attached to enclose malls to really be almost like the next target. I think they have that opportunity if they can get this right.
Ricardo Belmar:
So I’m pretty positive about this one. I haven’t seen people ask the question, well, why didn’t Walmart do this? Why wouldn’t Sephora, for example, go to Walmart if Ulta’s is going to Target. And I personally think that there’s a little bit of a customer mismatch there. I don’t think if you’re a Sephora, you don’t expect your customers to already be shopping at Walmart. And it’s not that I believe they’re sitting there saying, our shoppers also shop at Kohl’s it’s that they’re trying to find something that is close enough, that it’s not as much of a stretch to get their customers to shop at these off mall locations and to get closer to them.
Ricardo Belmar:
And frankly, I suspect if you’re a Sephora customer would rather walk into a really crowded busy Walmart and have to check out with your purchases, would you rather walk into a more easygoing Kohl’s to get your support purchases and I suspect the answer is you’d rather walk into that Kohl’s and it may even be more convenient in that sentence. So I think it’s a fit that does work for them. But it does leave the question. I know Julia, you’ve asked this elsewhere as well, what’s Walmart’s response going to be if they’re getting left out of this beauty party?
Julia Raymond Hare:
Great analysis, Ricardo. Wow. I did forget about the Aldi announcement with Kohl’s. So your forward-looking view of Kohl’s becoming more like Target is I think spot on. That’s a really good piece of thought leadership there. Tony, what do you think?
Tony D’Onofrio:
So first I want to congratulate my friend Ricardo for predicting this a few weeks ago so that it was going to happen. So congratulations to Ricardo. I think it’s a good idea. I think both of them, the Sephora Kohl’s partnership and the Target Ulta, I think for a bunch of different reasons, one reason is what I said earlier. The importance of strip malls as destination shopping, and that’s going to become even more important in the next 12 months as a substantial number of folks as I said earlier, are staying away for more from the malls.
Tony D’Onofrio:
I think it helps Sephora as a place, a destination shop outside the malls. Second, and most important, is where I put beauty versus things like Apparel that also sold by these locations. And we talked about already in terms of the struggles that Apparel has and how important it would be to someone like a Kohl, multiple forecasts have Apparel now recovering to 2019 levels until 2023 and beyond.
Tony D’Onofrio:
So they got to find other ways to entice consumers. And then to me, Apparel when you consider for example, all of our Sundays Zoom calls and what we’re not buying clothes, but we are buying those beauty products but just we want to look good on these Zoom calls. So I think it’s a perfect fit from that perspective. I also agree that it does increase traffic just like the Amazon play in terms of, and they’re also planning to do online. So would increase traffic there. It will be interesting to watch for me as well.
Tony D’Onofrio:
This is a new trend for department stores exactly to what Ricardo says in how the department stores are evolving and disconnecting from the mall itself and becoming a destination shopping. Can you put the right set of products together to create that, that type of a destination that consumers want. Alternative partners are important, but they do not take away from the fact that the retailer of brand needs to stand for something other than a collection of all other brands, because that’s really what led the department stores to ultimately fail.
Tony D’Onofrio:
So the even faster-growing 10 that I see already from the bigger brands if they’re all going direct to consumer. So do you get tired of doing the brands of the house of brands and go end up in a strategy where these brands just suggest a temporary step. So, a good idea. But what is important to me is Kohl’s thinking about me as Kohl’s the brand, what entices me to actually come to your store and make you the destination versus a partner brand.
Julia Raymond Hare:
Excellent point about why department stores failed and hinting at, they need to make sure they’re not going down that same path where everything becomes a bit boring and beige, and it’s like Target Superstore, Walmart Superstore, Kohl Superstore. And those are the behemoths outside of Amazon. I think you’re right D to C, is a really important part of the conversation. Well, Ricardo, Tony, it was great as always to have you both on the show, super appreciate all of your insights and everything you shared today.
Tony D’Onofrio:
Thank you very much. Pleasure to be with you.
