2PM - No. 851: A Leading Indicator

Memo / Excerpt: While many seem to be counting eCommerce out, retailers and manufacturers are preparing for a future of increased direct-to-consumer volume and the logistics systems that support it.

Over the past two years, we have witnessed disruption after disruption. A shipping canal blocked, union employees standing down en masse, the U.S. postal service slowing to a halt, an international bridge protested by truckers, and a container ship on fire with 4,000 vehicles. Over this time period, freight forwarding has increased 500% in costs, retailers have begun to acquire trucking and container resources. Shopify has invested and divested in warehouse management, and Amazon has become the number one buyer of commercial real estate. Technology and retail brands must be more than that to survive the turbulent change that defines this era of retail. (Read More)

American Eagle's hottest business isn't jeans — it's logistics

Source / Business of Fashion: American Eagle acquired Quiet Logistics and Airterra last year in a bid to build a supply chain “open marketplace,” in which retailers would share warehouse space, delivery trucks and more. The retailer believes this segment could one day become more lucrative than its apparel business.

Airbus forecasts 50% rise in freighter fleet

Source / FlightGlobal: The airframer expects deliveries of 2,440 freighters over the two-decade period while the retention of some 630 current aircraft, including those delivered over the course of the pandemic, will lift the overall world freighter population by some 50%, to around 3,070.

Unnammed customer signs up for seven A350 freighters

Source / Air Cargo News: Aviation title FlightGlobal speculates the extra seven aircraft could be accounted for by Etihad Airways, which in February signed a letter of intent (LOI) for seven of the model. The publication suggests that the carrier could now have firmed up the LOI.

Klarna’s valuation slashed by $39 billion amid fintech rout

Fintech / Bloomberg: This was published just 2.5 weeks ago, "Venture-backed consumer technologies thrived throughout the decade-plus long bull market. Profitability was secondary to growth. Market capture was the key performance indicator. The buy now, pay later (BNPL) industry is one of those industries facing the strongest headwinds. More here: The buy-now-pay-later giant said it raised $800 million from new and existing investors, according to a statement Monday. Its new valuation [$6.7 billion] is down from the $45.6 billion it achieved in June 2021, with Klarna reducing its ambitions several times during the latest talks with investors.

What can America learn from Hong Kong's malls?

Retail Real Estate / South China Morning Post: The original mall concept that bears his name is a perversion of what he’d really intended. What got in the way? American sociology. [Victor] Gruen has reentered the American conscious after decades of being forgotten by everyone outside of architectural pockets. This 2019 essay explained how our own cultural woes contributed to the over-retail of American and the zombie-fication of retail. More Here: ‘Zombie malls’ signal the demise of an American cultural icon, and while hailed by some, architecture critic Alexandra Lange laments the loss of social spaces. Hong Kong malls thrive because, in contrast to their American, ‘anti-transit’ counterparts, they are well integrated with local transport and communities.

Updated for July 8: the next update goes live for Executive Members for the upcoming Wednesday letter. Here's this week's top 15:

eCommerce hasn't killed physical retail

A. Physical Retail / Fast Company: The true value of the retail environment today is no longer solely tied to direct financial profit, which is increasingly the domain of eCommerce. It’s in the less tangible, yet critical, value of emotional and experiential engagement that only physical retail can offer. These softer elements are fundamental to establishing long-term consumer loyalty, brand reputation, differentiation, and, ultimately, sales.

Transforming emotion into experience

B. Physical Retail / UXUS:The pandemic has accelerated this conversation exponentially. Following the global closure of stores, online shopping rose from 14.1% of retail sales in 2019 to 17% in 2020, with many brands permanently shutting their physical retail spaces. The focus has shifted towards consumer engagement in the digital realm, a trend that is here to stay as eCommerce is predicted to soar to 25% of sales by 2024. The 'death' of brick-and-mortar has never been a hotter topic of conversation.

Editor's Note: this is an excellent white paper. 

Amazon Prime growth stalls in US after price increase

eCommerce / Bloomberg: Amazon in February raised the price of Prime membership to $139 from $119 for those paying yearly and to $14.99 from $12.99 for a monthly subscription. The higher prices combined with inflation and the resumption of pre-pandemic shopping habits by consumers to cool demand for the service, known mostly for quick delivery of online orders.

Demi Moore turns designer for DTC swim brand Andie

DTC Brands / AdWeek: Copelman cited Moore’s existing interest in the styles and fit of swimwear and vintage fashion dating back to her teen years, coupled with her established experience and relationships in the fashion industry, among the many reasons she was a dream collaborator. (Moore has previously modeled in campaigns for Versace and Donna Karan with then-husband Bruce Willis, and most recently walked the runway for Rihanna’s Savage X Fenty line.) 

How Ye changed everything

Culture / Complex: With the trademarking of YZYSPLY stores and the on-going theme of omnichannel efficiency throughout this edition, this deep dive into West's retail and cultural contributions felt timely. More Here: Kanye is an artist: a multi-faceted prism refracting the world’s light. As ridiculous as it might sound, I wanted an iconoclast, but he was more interested in being an icon. Coming from the keep-it-real puritism of the Fat Beats scene, and knowing only his work and pedigree, I expected Batman. But, instead, Kanye was Dr. Manhattan. The thermodynamic miracle. The catalyst for everything was here, even if I didn’t get it yet.

Excerpt: The next months of retail holidays will determine eCommerce’s resilience against rising recessionary pressures. So far, it doesn’t look great for short-term eCommerce growth. Amazon is focusing on its strengths while reducing costs associated with those efforts. Walmart’s actions are emblematic of the direction the digitally-secondary retailers will steer in the coming months.

Prime Day is coming up and its number one competitor won’t be doing anything special for it this year. It is indicative of a key shift in philosophy facing many companies in retail today. Walmart’s decision to avoid competing on Prime Day is notable and I believe that logistics cost and personnel concerns are at the center of the decision. Walmart is letting Amazon have its day. (Read More)