E-COMM

The Other Side of the Surge

E-commerce sales have tossed retailers a pixelated life raft during the pandemic: Adobe Analytics projects 2020’s online retail sales will surpass 2019’s total by October. But the surprise surge also unleashed a tsunami of operational challenges. 

In the warehouses: “The pandemic basically landed an unexpected holiday season smack in the middle of what is normally low tide for e-commerce,” Andrew Lipsman, principal analyst at eMarketer, told Retail Brew. That led to product and staffing shortages across retail, and especially at so-called essential brands. 

Then there’s the square footage itself. E-commerce operations require 3x the space of store operations.

• As a result, e-comm leasing activity jumped to 50% at JLL during the pandemic. 
• The firm now anticipates $1 billion of new warehouse construction by 2025. 

On the delivery route: Cardboard box forts across the country played down disruptions to the shipping process.

• The two largest private shipping firms, UPS and FedEx, have combated the delivery deluge by hiking up prices or limiting shipments for retailers. 
• Then there’s the USPS of it all: Deliveries processed through the Postal Service have slowed after USPS funding was cut earlier this summer. While larger retailers can afford to increase their spend on private services, small businesses depend on the USPS’s lower rates. 

 A self-fulfillment prophecy

E-comm’s ascent isn’t the strawberry dress surge: It’s a trend that’ll last. So retailers should consider adapting for the long haul with...

More dark stores: “The U.S. already had the most overbuilt real estate footprint of any country,” Lipsman told Retail Brew. “The more that commerce moves in the direction of Amazon, and e-commerce more broadly, the less need for shelf space.”

• Plus, converting stores close to population centers into full-time fulfillment hubs will cut down delivery times.

New shipping methods: Reliance on third-party shipping partners could become retail history. “Long term, you'd expect to see other large retailers vertically integrate into fulfillment and last-mile to better control their own destinies,” Lipsman said.

Key words: large retailers. The extreme costs and complexity of developing in-house fulfillment networks—like, say, Fulfillment by Amazon—will box out small and medium sized businesses. But that creates more opportunities for alternative fulfillment players, like ShipBob and Red Stag.

RENTAL

Sharing Zoom Top Recs > Sharing Zoom Tops

A nationwide rain check on formal events has been a miracle for overbooked bridesmaids and a detriment to rental services: Rent the Runway is closing its five U.S. stores, CNBC reports.

Small footprint, big deal. Opening rental stores was supposed to introduce RTR to new members. But more than 90% of RTR store visitors stopped by only to pick up or return rentals they’d ordered online, the WSJ reports. So moving forward, RTR will...

• Convert its former NYC flagship into a drop-off center.
• Add more return drop-off boxes with retail partners like Nordstrom.

Revenue at RTR evaporated at the beginning of the pandemic, forcing the company to lay off its entire retail staff and cut costs by 51%. But some business has returned since lockdowns lifted in June, RTR President Anushka Salinas said. 

Other rental businesses are a similarly mixed dressing bag: not because renters developed late-onset sharing allergies, but because there are fewer occasions requiring formalwear. 

• Le Tote’s bankruptcy filing noted that subscriptions declined during the pandemic.
• Urban Outfitters has “aggressively reduced investments” in its rental platform Nuuly, despite its early success. 

My takeaway: If rental survives, it’ll come from adopting quarantine-friendly or underserved categories. RTR recently moved into activewear rentals; Eloquii, a plus-size brand, introduced a rental program last week.

SPONSORED BY LISTRAK

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With email and SMS behavioral-based triggers, cross-channel orchestration, predictive analytics, customer insights, and identity resolution, Listrak is providing retailers the support they need to sustain and boost business.

Which will all be critical for the upcoming holiday season—one which will surely be unlike any other. That’s why Listrak has created their Holiday Prep Marketing Guide, filled with strategies and tactics straight from their Client Services team.

It’s another way that retailers gain more than just a tech platform with Listrak; they gain a long-term, strategic partnership with retail marketing experts. 

Be ready for the holidays. Get Listrak’s guide here.

BIZ LAW

Retail Trade Groups to Amazon:

More than a dozen retail trade groups joined forces on Friday to launch the Buy Safe America Coalition. Their goal: Force third-party marketplaces to introduce tougher anti-counterfeit measures.

• First up? Backing the INFORM Consumers Act, bipartisan legislation requiring third-party marketplaces to collect, verify, and share more seller information. 

When I say third-party marketplace...you definitely think of Amazon. And Amazon’s the presumed target, since claims that shady Amazon sellers ripped off honest shoppers have risen alongside e-commerce this year. 

In Amazon’s defense, it has kicked up anti-counterfeit measures—some that overlap with the INFORM Consumers Act’s propositions. 

• Amazon is a co-plaintiff with Valentino and KF Beauty in two counterfeit lawsuits. 
• This summer, Amazon launched two internal initiatives to clean up its listings: Project Zero, an authentication program, and the Counterfeit Crime Unit, an investigative arm.   

My two cents: Coalition or no coalition, counterfeits will exist so long as there are best-selling products to rip off. Improving the elimination process will require more cooperation between retail behemoths and outside enforcement.

WHAT ELSE IS BREWING

• Diageo acquired Aviation Gin for $610 million.
• Independent consignment stores are fighting for survival. 
• Walmart rolled back pandemic limits on store operating hours.
• Copenhagen Fashion Week lost earned media value without influencers this year, Vogue Business reports.

SPONSORED BY QUANTUM METRIC

Don’t let your e-commerce brand get stuck in holiday traffic. Quantum Metric is the continuous product design platform helping brands prep for the holiday surge and avoid the headaches. And as an early gift, Brew readers can unwrap a 12-day access pass to the platform and a free copy of their “Holiday Readiness” report. Get the insights you need to optimize your digital products and prepare for a 2020 holiday season unlike any other.

NOW TRENDING

Up top, I told you about the logistical constraints and considerations facing retailers as online shopping grows. Turns out, the e-comm boom is also revising how retail leaders express themselves. 

CB Insights tracked mentions of “e-commerce” and “acceleration” on earnings calls over the past five years in its latest report. Guess which direction they went?

CBInsights "State of Retail Tech H1'20 Report"

My question: What are some other phrases that CEOs can’t stop dropping during the pandemic? Let me know so I can ban them from this newsletter.

SWAPPING SKUS

Three reads at the corner of consumer trends and internet culture—exactly what 2020 ordered. 

• Allbirds and streetwear brands: Are these collabs a step too far? (Input)
• As prices rise on the resale platform Depop, some power users wonder if the once-accessible marketplace is changing for the worse. (Dazed)
• If you follow an influencer, you’ve likely seen a swipe up for Nordstrom’s annual summer anniversary sale. Here’s how Nordstrom and affiliate marketing platform rewardStyle coordinated this year’s anniversary sale #ad flood. (BuzzFeed News)

ICYMI

Catch up on the top Retail Brew stories from the past week. 

• DTC Brands Are Revising Product Design Processes for WFH
• Retailers Are Offloading Unsold Inventory on Donation Orgs
• Partner With a Department Store? No Thanks, Say DTC Brands