Memo: Cyber Five

More than a quantitative measure of retail health, this year’s span of five days – beginning on Thanksgiving and ending on Cyber Monday – may serve as a judge of the entire economy. If text messages like these are any indication, our economy is coming out of its hole:

Positive news: we absolutely, unequivocally CRUSHED BFCM week.

Black Friday fought the good fight against inflation and cost of living hikes, this year. But there’s more to this weekend’s holiday shopping story than that day. Our Blackest Friday report began with a Jeff Bezos quote: “Don’t buy a fridge, hold on to your money.” So to spend or not to spend? This was the question. The answer was a resounding ‘yes’; consumers spent despite the economic forces at play. First, the top line numbers.

  • According to Adobe, online sales for Black Friday reached a record $9.12 billion, a 2.3% year-over-year increase.
  • Adobe anticipated that weekend online sales on the Saturday and Sunday on Thanksgiving weekend would hit $9 billion on their own, while Cyber Monday sales would hit $11.2-11.7 billion, versus $10.7 billion last year.
  • This year, mobile shopping hit a new record, accounting for 48% of online sales, up from 44% last year. Buy now, pay later schemes also had a big year – a sign of the times.
  • BNPL orders increased 78% during the holiday week (November 19-25) compared to the week prior, while BNPL revenue increased 81% in the same time frame.
  • Exercise equipment, toys, smart home devices, audio equipment, games and gaming devices, Macbooks and Dyson products were all top sellers. Apparel, sporting goods and TVs all saw peak discounts over the weekend.

In all, Adobe data indicates 2022’s “Cyber Five” is on track to generate a total of $34.8 billion in online sales, a 2.8% increase over 2021’s data and a drop off from the projected 7% growth that analysts predicted. A few things are happening at once.

In the past several years, retailers successfully trained customers to shop earlier and earlier: Cyber 5 is more like October through December. This allowed for a steadier stream of high sales volume days – though none are expected to top Cyber Monday. The extension of the sales holiday also places less strain on logistics and supply chain efforts by spreading sales volume over 60-70 days rather than 6-7. As Adobe pointed out, savvy shoppers are waiting until December 1 to buy appliances, for instance, when discounts are expected to peak.

At the same time, inflation is the story of this season. A 2.8% increase is insignificant compared to the 7% projection. The 2.8% increase is less impressive when you consider the higher consumer pricing index (CPI). Discounts for the holiday weekend were also not as extreme, hinting that retailers are waiting to see how much is necessary in terms of markdowns before customers bite. As Axios calls it, it’s a “game of chicken” to see who gives in first: the customers making purchases vs. the retailers setting the prices. Last year, customers were scrambling to buy early to avoid everything selling out as supply chain backups gripped the season. USA Today reported on this year’s consumers bargain hunting before a different backdrop:

Due to elevated prices for food, rent, gasoline and other essentials, many people were being more selective, reluctant to spend unless there was a big sale. Some were dipping more into savings, turning to “buy now, pay later” services that allow payment in installments, or running up their credit cards at a time when the Federal Reserve is hiking rates to cool the U.S. economy.

The Two Winners: BNPL and Physical Stores

One industry segment that is benefitting from the current economic shortfall are the “buy now, pay later” family of companies. These platforms removed one more barrier out of the way of cash-sensitive consumers, allowing them to pay for products over the course of four or more payments – minimizing up front costs. Holiday seasons are often mortgaged during times of economic distress.

In a US survey, 60% of people were found to be more likely to use BNPL because of inflation, and 53% were using BNPL out of necessity. Forty-five percent said they were were most likely to use BNPL when their finances are tight. That means that Klarna’s 2022 troubles aren’t to be blamed on a decline in interest on BNPL. But rather, a more tenuous financial outlook makes people more reliant on services like BNPL. For many, it’s a way to make purchases now without taking on credit card debt. It’s a dangerously unregulated substitute for traditional debt. CNBC recently explained how Klarna’s rebound may be tied to increase usage:

The Stockholm-based startup saw 85% erased from its market value in a so-called “down round” earlier this year, taking the company’s valuation down from $46 billion to $6.7 billion, as investor sentiment surrounding tech shifted over fears of a higher interest rate environment.

This Cyber Five’s winner? The physical store. This year: Walmart, Target and Kohl’s all overtook Amazon in terms of online Black Friday discount searches according to data from Captify. Walmart searches surged 386%, followed by Target, then Kohl’s, then Amazon. That’s telling for a few reasons. People seem to associate Amazon with the best deals less than they used to. And more people are likely to search for deals across stores and online, knowing they can strike both at any of the big-box retailers before Amazon. According to MasterCard SpendingPulse data, in store sales increased 12% year over year. RetailNext, tracking foot traffic to stores, found that traffic rose 7% this year on Black Friday compared to 2021. Here was the takeaway from Placer.ai:

Shopping malls saw far and above average visits. Indoor malls saw visits up 261% compared to the daily average for Q1-Q3 2022, outlet malls saw visits up almost 366%, and open-air lifestyle centers saw visits up around 151%. Compared to the first three weeks of November 2022, visits were up about 277% (indoor), 395% (outlet), and almost 160% (open-air lifestyle centers), respectively, at those mall types.

Going into Black Friday, we forecasted some of these key elements, to include muted growth and the return to physical stores:

​​(1) The recessionary effects are likely to cause muted growth in eCommerce performance in a YoY basis. Searching for bargains, more customers will be pursuing in-store purchases where deals may be greater. (2) Try to conserve your money this season to prepare for any additional market downturns. It’s likely that large purchases may be fewer and farther between in 2022 YoY basis. (3) eCommerce marketplaces will do better than traditional DTC brands’ online stores because utility purchases are likely to rise vs. luxury and other purchases that signal high-discretionary income.

But about that traditional DTC brand thought, it wasn’t altogether accurate. Shopify noted: “More than 52 million consumers globally purchased from brands powered by Shopify this year, an 18% increase from 2021.” Shopify reported promising Black Friday sales figures for its merchants; Shopify merchants brought in $1.52 million a minute on Thanksgiving and $3.5 million per minute at its Black Friday peak, setting a record with $3.36 billion and $7.5 billion between Friday and Monday. This was a 19% increase in sales and a 21% increase on a constant currency basis. But this is more a reflection of how Shopify has grown as an enterprise retail provider than as a snapshot of the greater whole.

Cyber Monday Data (via Adobe)

According to Adobe’s data, consumers rang in $11.3 billion on Cyber Monday, seeing the industry to a 5.8% YoY improvement and a whopping $12.8 million earned per minute. Vivek Pandya, lead analyst, Adobe Digital Insights:

With oversupply and a softening consumer spending environment, retailers made the right call this season to drive demand through heavy discounting. It spurred online spending to levels that were higher than expected, and reinforced e-commerce as a major channel to drive volume and capture consumer interest.

In all, the Cyber Five earned $35.27 billion, a 4% increase over 2021’s eCommerce-driven holiday season. This number is even bigger when you consider the entirety of the shopping season: November 1 – November 28 rang in $107.7 billion with $210 billion expected through December 31. How did this happen? Adobe Analytics noted that discounting hit records highs in 2022 to offset the rising costs of living. And BNPL services like Affirm saw volume rise 85% vs. the prior week, increasing revenue 88% over that time period. One surprising line from the analytics data provided by Adobe:

Strong consumer spending across Cyber Week was driven by net-new demand, and not just higher prices.

Consumers came out for the week and chose the glee over doom, there will be study after study written about this holiday season. It wasn’t all black and white. With the holiday shopping season at its peak, the statistics have been unpredictable at best but not altogether surprising. Retail is irrational and retailers are hoping that it stays that way over the closing four weeks of the holiday shopping season. Jeff Bezos went unheard, consumers chose the 30% off refrigerator over holding on to their money. Let’s just hope that the good news extends and the economy continues its slow recovery.

Автор Веб Смит | Под редакцией Хилари Милнс с иллюстрациями Алекса Реми и Кристины Уильямс

Памятка: Преимущество электронной коммерции меняется

Заголовок статьи гласит: "Почему разрушители электронной коммерции торгуют как динозавры кирпичной и минометной торговли". Мы считаем, что для многих представителей старой гвардии розничной торговли жизнь находит выход.

Сравнение с динозаврами появилось благодаря новому отчету The Information, который отслеживал цены на акции Farfetch, 1stDibs, The RealReal, Stitch Fix, Rent the Runway и ThredUp и нарисовал картину лопнувшего пузыря, заявив, что "электронная коммерция на распродаже". Все компании, о которых упоминает The Information, являются цифровыми аборигенами, дебютировавшими на рынке в последние два года, и с тех пор их оценка упала, а цены на акции снизились. После пандемического бума у некоторых из них рост замедлился. Теперь некоторые из них ищут выход, подыскивая партнеров для поглощения. Для других консолидация уже началась. Южнокорейская компания Naver приобрела Poshmark, которая только что стала публичной в 2021 году. Вот краткая информация от The Information:

Несколько членов этой группы, включая ThredUp, Poshmark, Wish и Rent the Runway, вышли на биржу в прошлом году, когда общая рыночная оценка достигла пика. В основе их публичного дебюта лежала уверенность инвесторов в том, что пандемия вызвала необратимый сдвиг в поведении покупателей в сторону увеличения количества покупок через Интернет. Но время было выбрано неудачно. По мере ослабления блокировок рост онлайн-покупок резко замедлился - всего до 6,8 % в годовом исчислении за первые два квартала этого года, а со второго квартала 2020 года, по данным Бюро переписи населения США, темпы роста составят более 30 %. Даже в 2019 году, до Covid-19, темпы роста колебались между 12 и 18 %.

Преимущество, которое когда-то сохраняло новое поколение онлайн-площадок для розничной торговли, по крайней мере временно, сошло на нет. За последние два года многие из этих розничных компаний провели громкие IPO (или вторичные раунды на частном рынке). Теперь они изо всех сил пытаются удержаться на плаву в условиях, когда экономика стала отдавать предпочтение кирпично-минометным магазинам, таким как Target и Walmart. В некотором смысле динозавры опережают новаторов - они разрушают разрушителей.

Это не только Target и Walmart. Ритейлеры эпохи универмагов, которые когда-то славились посещаемостью и недвижимостью в торговых центрах, вкладывают значительные средства в электронную коммерцию. К ним относятся Macy's, Saks и Kohl's. Но даже при улучшении омниканальных операций традиционных ритейлеров, основанных на моде, избыток товарных запасов повлиял на глубину скидок и частоту ценовых акций, наблюдаемых во многих из этих магазинов. Однако переизбыток товарных запасов не повсеместен: у ритейлеров, которые также продают бытовую технику и товары повседневного спроса, товарные запасы более стабильны, чем в фэшн-ритейле. Именно полный рынок находится в лучшем положении, чтобы пережить предстоящий подъем. В статье "Изменения товарных запасов" я объяснил:

Чтобы выбраться из-под избыточных запасов, пострадавшим ритейлерам, вероятно, придется проводить рекламные акции и долгосрочное хранение избыточных запасов. Это тяжелая пилюля для крупных компаний. Target и Walmart могут компенсировать менее востребованные товары за счет стабильно высоких показателей в таких категориях, как бакалея и товары первой необходимости.

Появившиеся онлайн-площадки должны были навсегда изменить способ совершения покупок. Я считаю, что они научили потребителей взаимодействовать с ритейлерами в Интернете, так же как динозавры сами стали успешными онлайн-ритейлерами. В каком-то смысле новое поколение находится в невыгодном положении. Одноканальная розничная торговля для многих близка к исчезновению.

Современные ритейлеры, которые надеялись, что, действуя иначе, чем их предшественники из универмагов, они напишут новые правила розничной торговли и одновременно воспользуются вновь обретенной покупательской энергией, стали хуже. Но технологии стоят дорого, особенно если учесть более высокие, чем в среднем, затраты на привлечение клиентов, недостатки логистики, тонкую маржу на товар. Этим компаниям было трудно поддерживать рентабельность. Теперь они оказываются в положении, которое может показаться динозаврам, которых они пытались уничтожить.

В преддверии нестабильного сезона праздничных покупок "динозавры" имеют больше шансов занять большую долю рынка, чем цифровые аборигены. У покупателей на первом плане инфляция и бюджетные ограничения. Традиционные ритейлеры имеют дело с избытком товарных запасов, что приведет к глубоким скидкам и частым акциям. Это магнит для покупателей, которые в трудные времена предпочитают выгодные предложения, а не простоту покупки. Это знак времени для розничной торговли, которая возвращается к основам: наличию, акциям и доступности.

Но когда проблема избытка запасов будет решена, ритейлеры, которые вложили наибольшие средства в развитие своей электронной коммерции, смогут добиться успеха, поскольку доступность всех каналов обеспечивает наилучший покупательский опыт. Кроме того, эти ритейлеры привлекают бренды с цифровыми технологиями, которым необходимо получить оптовый доход. Вдобавок к этому добавьте промо-акции. В отчете, опубликованном в начале октября, мы рассказали о том, как Walmart готовит свои запасы к предстоящему праздничному сезону, в том числе за счет жестких мер в отношении брендов, которые не могут выполнить требования по выполнению заказов:

Бренды стали более заменимыми, а ритейлеры - более избирательными. Walmart с его обширной сетью магазинов и возможностями цепочки поставок может стать доминирующим рынком в этом праздничном сезоне и в последующие. Бренды осознают, что для выживания им нужен массовый ритейлер.

Этот год укрепил позиции Target, Walmart и Amazon в качестве лидеров отрасли, что уже доказали радушные объятия DTC-брендов. Теперь современные ритейлеры оказываются на задворках индустрии, которую они собирались разрушить. Эти ритейлеры, работающие на рынке электронной коммерции, восстановятся и/или будут жить дальше в той или иной форме, особенно по мере того, как экономика будет восстанавливаться и у потребителей будет меньше стимулов покупать товары в магазинах с избытком запасов. Но Target и Walmart стали столь же важны для двигателя онлайн-ритейла, как и Amazon. Мало кто предсказывал, что в 2009 году, когда началась эра "DTC", нынешнее время может показаться ледниковым периодом тем, кто рассчитывал на более простые времена и более зеленые пастбища.

Автор Веб Смит | Под редакцией Хилари Милнс с иллюстрациями Алекса Реми и Кристины Уильямс

Memo: Walmart-Friendly Inventory

As retailers face down a holiday season that will be impacted by a looming recession in the United States and ongoing global supply chain challenges, they’re doing everything that they can in order to get in front of potential inventory issues.

A lot rides on the holiday shopping season for retailers to meet their annual forecasts. And since the start of the pandemic, the holidays have become increasingly challenging to navigate. Big-box retailers like Target and Walmart are putting new measures in place in order to make sure they have what they need in stock from brand partners, and that their supply chains don’t break down when orders increase.

Last week, Walmart laid out its plans in a corporate communications blog post for navigating around supply chain problems this season, framed as an update for customers about how the retailer intended to fulfill demand with its “stable and strong” supply chain. That a company is sending out supply chain-centered messaging to customers is in itself a sign of the times – previously, people could just assume all was working as it should behind the scenes. That’s not the case anymore. Walmart listed all of the steps it’s taken to ensure its supply chain is ready for the holidays. These include:

  • Closely working with carriers and optimizing the supply chain for in-stock items.
  • Store fulfillment from Walmart’s 4,700 locations, which it notes are located within 10 miles of 90% of the population. It also promotes its express delivery, next-day and two-day shipping and store pickup options.
  • Delivery through its Spark Driver platform, a local delivery service that can reach 84% of households.
  • An extended return policy including curbside returns.
  • In-home Delivery and return pick-up from home for Walmart+ members.
  • Expanded DroneUp delivery network, which delivers packages via zone, currently available in 34 locations, plus its autonomous and electric vehicles.
  • Four new fulfillment centers that will be build over the next three years. These next-gen centers put automation at the forefront. Automated technology will also be rolling out across distribution centers.
  • And finally, hiring an additional 40,000 seasonal employees including supply chain associates and an additional 1,500 drivers.

These are the measures being taken to get in front of supply chain issues. Walmart’s investment in employees, technology, delivery and pickup options and more are this season’s customer sell: buy with us, and you won’t have to worry about out of stock notifications or delayed orders. That’s an advantage that only a few retailers have – in addition to Walmart, Target and Amazon are competing by throwing resources behind the looming supply chain problem and recession. Customers are more likely to buy with competitively priced companies. The pressure is on.

The pressure is also on brands who sell in these stores to not miss their own delivery windows. As 2PM has written about before, Walmart and Amazon are now attractive retail partners for all the reasons listed above in Walmart’s pre-holiday measures. They have the deep pockets to brace for impact.

Brands that are unable to meet their delivery windows will be hit with fines from retailers like Walmart and Target as they do whatever they can to keep products in stock. It’s an end to the leniency normalized earlier in the pandemic; now, if brands can’t make their orders, the retailers are hitting back. It marks a power dynamic shift. For years, brands have foregone retailers, and have become more selective about where they choose to sell, and have looked for more amenable terms in their contracts with retailers. Now, retailers have the upper hand again as external forces like inflation, the recession and supply chain tangles have made brands once again reliant on stores for max volume.

As Bloomberg reported today, Walmart and Target are cracking down on brands:

Walmart is telling suppliers that their shelf space will be reviewed more frequently than in the past, a person familiar said, and that vendors with persistent out of stocks could see their products quickly replaced. The retailer also is looking to capitalize on trends, including those sparked by social media, by quickly swapping items in and out.

Anything less than exact compliance can result in penalties from fines to losing shelf space when contract negotiations come up – a particular challenge for small brands that often have limited resources to scrutinize shipments.

The brands have become more replaceable while the retailers have become more selective. Walmart, with its vast store network and supply chain capabilities, could become the dominant marketplace this holiday season and beyond. Brands are recognizing that they need the mass retailer to survive. In a September report, we wrote:

Utility, not trendy exclusivity, has helped Walmart become a magnet for direct-to-consumer brands that previously resisted its gravitational pull. It seems that the company needn’t imitate Amazon or Target at all to get to this point. There are a few reasons: Walmart is recession-proof and it drives profitable sales (at volume) to the most important consumer audience – the American middle-class. It has the size and reach, even if it doesn’t quite have the sexiness of other retailers. With brands focused more on the bottom line, Walmart is an attractive partner to turn on the proverbial sales spigot to gain new customers.

As we head into the end of the year, the power shift will continue. It’s no longer up to the brands to decide Walmart is now worthy of their presence – they will have to prove their worth to Walmart as well. It has the control of its supply chain to tightly manage everything that’s coming in and being sold off of its shelves. This holiday season could set a new standard for the retailer-brand relationship, one that tips the scales back to mass retail’s favor. And Walmart is positioned to win over the rest.

Автор Веб Смит | Под редакцией Хилари Милнс с иллюстрациями Алекса Реми и Кристины Уильямс