DTC

CVS Practices Shelf-Awareness

CVS is best known for filling prescriptions and refilling my hand sanitizer stash. But a recent spate of brand deals signal a new identity for the pharmacy chain: a physical destination for direct to consumer (DTC) brands. 

The details: This month, CVS introduced CVS Launch, a program for emerging DTC brands to enter its brick-and-mortar locations. 15 brands spanning 2,000+ stores are part of the first batch, including Public Goods and Stryx, which are expanding after successful pilots.

• Participating brands will be displayed in end caps and pop-up displays in stores.
• They’ll also be available for same-day delivery with Instacart and DoorDash.

Why are DTC brands going the pharmacy route? “The choice of distribution partner is mostly about which retailer would be the best fit with the brand and offer the most complementary distribution,” Steve Dennis, president of SageBerry Consulting and author of Remarkable Retail, told Retail Brew.

A health and wellness focus is the common denominator among CVS’s new brands. 

• Devir Kahan, CEO at men’s cosmetics brand Stryx, told Retail Brew that partnering with a mass market drugstore chain would help normalize its product category.
• Arianne Perry, COO at cleaning brand cleancult, said a shared health emphasis made starting with CVS “paramount to our brand strategy” prior to upcoming partnerships with other retailers.  

Cart competition

From the retail perspective, recruiting online brands for stores is often a prestige play—but CVS is somewhat late to DTC courtship. Since 2017, Target has “aggressively” pursued exclusive deals with online-first brands, including Casper, Harry’s, and Flamingo. Walmart has signed partners ranging from SmileDirectClub to Lola. 

A shared advantage: With the exception of beds in a box, all three retailers are stocking DTC brands with products that necessitate repeat purchases and which fall into essential categories. 

Looking ahead...“I do think this trend will accelerate, perhaps with more acquisitions,” Dennis said. No matter which logo is on the receipt, retailers are a capital-efficient distribution channel for digitally native brands, and DTCs help differentiate stores for customers.  

My takeaway: As a pharmacy chain, CVS is a fitting home for wellness-oriented DTC brands. But it’s too early to call CVS—or any retailer—the winner of the clicks-to-bricks movement.

PAYMENTS

PayPal Splits the Bill

Another payments provider is letting shoppers go Dutch with their future selves. PayPal today shared that it’s launching Pay in 4, a buy now, pay later (BNPL) service, in early Q4.

• The product’s exactly what it sounds like: four interest-free payments on a single purchase at participating merchants.
• Merchants that already use PayPal’s services won’t be charged additional fees to enable Pay in 4. 

Some context: BNPL services are generally a loyalty magnet for retailers—and cart sizes increase at stores where they’re offered. Layaway 2.0’s popularity has only grown during the pandemic and resulting recession. 

• Klarna added one million new U.S. users in three months. 
• Afterpay more than tripled its U.S. users over the past year.

PayPal’s entry to the BNPL category is nearly identical to Afterpay, Klarna, and Sezzle from an installments standpoint—but it could threaten competitors’ business. More than 80% of leading U.S. retailers use PayPal’s checkout services...so they may drop a fintech firm to unify their systems. 

My takeaway: The question now isn’t whether retailers should offer BNPL, but which firm should enable BNPL for them. 

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EARNINGS

Turn a Trend Into a Lifestyle

So many retailers reported Q2 earnings last week, you may have missed the overarching trends through the individual receipts. Here are two common threads to watch:

1. Clicks on clicks. Whether retailers specialize in sports ball (Dick’s Sporting Goods) or odorous cologne (Abercrombie & Fitch), their online sales exploded. At least six companies reported triple-digit gains, by CNBC’s count. 

• “Keep your distance” is still the golden rule, driving traffic online while stores are closed or operating with reduced capacity.
• To make online purchases profitable, some retailers are reducing discounts, cutting jobs, and closing stores.

2. Stretch > style. Overall apparel sales declined 34% from March to July, per NPD Group estimates, but shoppers are still filling their drawers with comfortable clothes for WFH. Tapestry reported that PJs are selling like Pelotons; Gap beat expectations with surges in low-cost leggings and casual wear at Athleta and Old Navy. 

• Gap, Nordstrom, and Stuart Weitzman are expanding their comfy cozy offerings moving forward, the WSJ reports.

Bottom line: The pandemic turned casual clothing and digital checkouts from growing trends to retail essentials.

WHAT ELSE IS BREWING

• Adidas Global Creative Director Paul Gaudio left the brand after 20+ years. His departure came shortly after he called accused Wisconsin protest shooter Kyle Rittenhouse a “victim” on Instagram.
• Tommy Hilfiger unveiled plans to become a “circular” business by 2030.
• Boohoo halted relationships with several suppliers following reports that factory workers were paid less than minimum wage.
• Glossier secured a trademark for its pink bubble wrap packaging.

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PERSONAL SHOPPER

Handpicked guides, professional development tools, and more to boost your brand.

Online stores: It was time to graduate from a generic template yesterday. Browse Yotpo’s top ten storefronts for design and UX inspiration. 

Digital scale: In “Helping Nate Grow,” a weekly audio series, experienced brand operators will share their cart-tested growth strategies with an emerging e-comm founder—in real time. The first episode airs on Thursday.

Omnichannel strength: 2020 is firing curveballs at retailers small and large, but there’s still time to future-proof your brand. Register for Shopify’s Resilient Retail series to learn how.

SWAPPING SKUS

: Beauty brands say they champion inclusivity, but their products and store policies often don’t match their branding. Here’s the proof, in infographic form. (WWD)

: It took a global pandemic and a resulting HGTV boom for Wayfair to finally turn a profit. How can the online furniture giant keep the momentum going when extended quarantine ends? (Marker)

ICYMI

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

• Why Coty Is Shutting Down or Selling Its Factories
• Online Shopping Hasn’t Captured That In-Store Feeling Yet
• A New Home for Excess Inventory: Gen Z Resale Apps