BEAUTY

Contour Those Assets

Skipping the mascara has consequences small and large: My mom doesn’t recognize me on FaceTime and Coty is unable to support its existing supply chain. 

After posting a 56% quarterly sales decline and $778 million net loss, the FT reports that Coty is planning to sell or shutter most of its owned factories. 

• Nearly 80% of Coty’s beauty products are produced in factories spanning China, the U.S., and Brazil.
• Interim Coty CEO Peter Harf said switching to an outsourced model will make the company more “light and nimble.”

Retailers have largely relied on store closures and staff layoffs or furloughs to make up for pandemic losses; they’ve also tried canceling orders from third-party vendors. But we haven’t seen many try to recover by selling off their supply chains.

• One exception: Brooks Brothers, which is planning to close its remaining U.S. factories during bankruptcy proceedings. 

Potential downside: Coty could face pushback if workers at closing or resold factories lose their jobs. 

Makeover montage 

The pandemic paused a slow-motion turnaround for Coty and shattered its eyeshadow palettes with it.

Salon and department store closures dissolved demand for Coty’s professional-grade beauty and fragrance products. And even though cosmetics are also stocked at pharmacies and grocers, quarantining shoppers haven’t considered them essential. So Coty’s core product demand has declined along with cosmetics sales overall. 

So outsourcing is one part of a larger plan to correct the conglomerate’s shaky application hand. Coty’s also relying on...

• E-comm investments. Despite the sales downturn, Coty execs noted that online sales did what they do best—increase—when stores closed. So Coty’s planning on enhancing its digital channels...just like every other brand.
• Big personalities. Coty didn’t bring two-fifths of the Kardashian-Jenner empire under its umbrella just for a cameo on E!. Sources told WWD the company’s planning custom product expansions for the Kylie and Kim fanbases.

Bottom line: Coty’s hopes of becoming profitable in Q3 hinge on contouring its assets to the extreme.

TECH

Walmart Pursues an E-Comm Renegade

In the time it took Kombucha Girl to reach 50 million phones, retail pros learned that Walmart is partnering with Microsoft to acquire TikTok’s U.S. operations. 

• Microsoft and Walmart are among the frontrunners for a takeover, but it’s a competitive race.
• Walmart told CNBC the acquisition could help expand its advertising capabilities while growing its third-party marketplace.  

Why it matters: TikTok started expanding shoppable ads before it became a U.S. regulatory target. And few had heard of the strawberry dress until it appeared on TikTok: The app is the birthplace of most runaway consumer trends in 2020. So if Walmart took partial control, it’d have first dibs on 1) new advertising revenue and 2) covetable shopper insights.

My question: Did all the other retailers waste their marketing budgets on TikTok choreographers this fall? Not quite. Microsoft’s co-ownership would likely keep Walmart’s control over the app’s e-comm abilities in check. But there could be thorny discussions about how and when competitors can use the app’s shoppable features.  

Zoom out: If there were ever a year for a retailer to buy an app, it’s 2020. U.S. social commerce purchases are expected to nearly double to $38.2 million by 2022, per eMarketer.

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RESALE

Meet Gen Z Where They Live

At 25, I’m as confused by Gen Z as by the theory of general relativity. But I’ve read enough to know retailers’ prized demographic is budget conscious and extremely online.  

So has Studs. The DTC jewelry brand-meets-piercing studio took a strategic step to court younger customers this week: opening a storefront on the peer-to-peer resale site Depop.

• Studs is selling deadstock earring inventory at a discount on the site. 
• Users who visit Studs’s Depop store can access a coupon for its primary online store.

Studs CMO Lisa Bubbers told Retail Brew that many of its target customers are Gen Zers—so choosing Depop was a no-brainer. 90+% of Depop’s 21 million global users belong to Gen Z, per Glossy. 

It’s more than a generational play. Studs is also rebranding the process of offloading excess inventory. Most retailers take their deadstock to off-price vendors—and lose control of how it’s presented along the way. With a storefront on a resale app, Studs can reassert control. 

Looking ahead...the one-two punch of Gen Z exposure and inventory reduction could sway more brands to join Depop. Already, Anna Sui and Rodarte are also selling on the platform.

WHAT ELSE IS BREWING

• Gap generated $130 million in sales from face masks in Q2. 
• Warby Parker is valued at $3 billion after a $245 million fundraise. 
• Lord & Taylor is liquidating all of its stores.
• Amazon is opening its first Fresh grocery store in California.
• Starbucks is making accommodations for employees to take time off on Election Day.
• Uniqlo will release a second collaboration with Jil Sander this fall.

SWAPPING SKUS

Weekend-length updates on threads we’ve followed throughout the summer: 

Social commerce. 47% of U.S. shoppers miss the “general experience” of shopping in stores, according to the Harris Poll results I shared on Wednesday. Group buying apps, like China’s Pinduoduo, may be the closest online retail gets to mimicking the IRL experience. (Jing Daily)

Shelf inclusivity. Since Brother Vellies designer Aurora James launched the 15 Percent Pledge in May, retailers from Sephora to West Elm have promised to carry more Black-owned brands. Her fashion revolution is just beginning. (Vogue)

FRIEND OR FAUX?

Brands trudged forward with some unexpected launches this week. Your challenge: Pick out the fake product from the three that will actually hit shelves.

1. Champion designed a sweatshirt with an extra-large hood for gamers’ headphones.
2. Burberry released face masks in its house print for roughly $118 each.
3. General Mills will sell bags of Lucky Charms marshmallows, minus the cereal.
4. Yankee Candle created new candles inspired by canceled summer travel destinations.

Keep scrolling for the answer.

ICYMI

Catch up on the Retail Brew stories you may have missed this week. 

• What U.S. Adults Miss Most About Shopping IRL
• Ten Winners From the Sweatpants Economy
• Why Nike’s Cutting Ties With Nine Retail Partners

FRIEND OR FAUX? ANSWER

4. Yankee Candle hasn’t released a canceled travel collection, to my knowledge.