2PM - No. 390: Enter MrBeast

America's malls spiraling toward sweeping reset

A. Retail Real Estate / WWD: It's coming — an unprecedented reduction of shopping center square footage. Industry pundits and prognosticators expect about 25 percent of America's shopping centers to vanish in the next four to five years, driving developers and landlords to repurpose outmoded formats and square footage left vacant by bankrupt and downsizing retailers.

Editor's Note: If you've been reading for a while, you know this but the details are sobering and worth the lead. America is over-retailed. Today, this problem is exacerbated by pandemic's impact on retail, the proliferation of eCommerce, a struggling middle-class, and the cracking of debt-ridden department stores. In what I consider one my favorite essays of the archives: The Ballad of Victor Gruen explained the history of how we got here. And what the solution seems to be. 

The death of the department store and the American middle class

B. Retail / Recode: “Sears was built for [the] middle-class mall goer,” Web Smith, the founder of the commerce and media newsletter 2PM, wrote in the wake of Sears’s 2018 bankruptcy. “It’s been the thesis of 2PM, Inc. that retailers who’ve built their businesses for this American demo will continue to struggle until the American middle class rebounds.”

It's not all a matter of socio-economics, however. Just look at the first vs. second week of the beginning of COVID shutdowns. Malls have not returned to this level of foot traffic and likely won't for some time. 

Nike shares rip toward record high, as investors see digital bets paying off

eCommerce / CNBC: The retailer’s big bets on its digital business are clearly paying off, with online sales of its namesake brand soaring more than 80% during the latest period. It makes Nike especially well-positioned this holiday season, as a record number of consumers are buying gifts on the web. Nike has also trimmed its inventories, making it less reliant on discounting. Management expects eCommerce will represent about half of Nike’s sales in the near future.

Short analysis: Nike embraced DTC. For the second quarter, revenue increased 9% to $11.4 billion, beating analyst expectations. Online sales were up 84% as more customers shopped via Nike.com, offsetting losses at wholesale and Nike brick-and-mortar stores. Singles Day in China and Black Friday in the US were big shopping events, and tighter inventory management helped reduce overall promotions heading into the holiday season.

Nike’s performance in the pandemic has validated its Consumer Direct Offense strategy, which has had the brand prioritizing its own channels and a few select retail partners over the past several years. It pulled its inventory off of Amazon (at least from the brand directly; third-party sellers still exist) and enacted a wholesale tiering strategy that puts products in different retailers based on the customer that Nike is targeting, and reserves certain products for direct stores only. Nike’s success during the pandemic will make this a strategy to emulate for other brands that have traditionally relied on wholesale partners. The bottom line: invest in digital sales on mobile and web, invest in better store experiences and keep outside partners to a select few. This will be the DTC formula coming out of the pandemic.

2020's been a breakout year for the creator economy

The Passion Economy / Axios: Substack has more than 250,000 paid subscribers and its top 10 publishers collectively earn more than $10 million a year. Patreon is now valued at $1.2 billion, after raising $90 million in September. More than 6 million people pay creators through its service globally. OnlyFans will earn $300 million in profit this year, per The Information. The subscription service lets creators monetize exclusive videos, sometimes racy ones. Twitch has doubled the number of streamers on its platform during the pandemic.

Walmart and Amazon launch return options as some predict holiday onslaught

eCommerce / Retail Dive: Walmart has partnered with FedEx to allow online shoppers to return items from their homes, according to a company post Monday. The new free service, Carrier Pickup by FedEx, lets customers set up an appointment online for a FedEx associate to pick up packages from their doorsteps. Walmart also added features to its app to make in-store returns faster.

For the retail industry, 2020 was a wild ride

Trends / Wall Street Journal: The roller coaster is a real one in retail. In 2020, changes in the way we are engaging, selling and retailing have accelerated. But our love of shopping is alive, and retail isn’t dead. This is a moment in which, like a season’s end, we begin to clear out the brush to allow new branches to grow and bloom. What replaces the relics of the past will be clearer, cleaner, more vibrant and even more affordable. Retailers will create communities around their brands that become points of gathering.

The 15 fastest-growing DTC brands of 2020

DTC Brands / Retail Brew: Expected a list of toilet paper and frozen pizza brands. But “the range of categories across the top 15 DTC brands shows us that not every winner in 2020 was directly related to the pandemic-driven trends,” Jamie Drayton, lead eCommerce consultant at SimilarWeb, told Retail Brew. Apparel and fashion companies occupied one-third of the list: “impressive, given market realities,” Drayton said. Special shoutout to Rowing Blazers, which created a viral marketing moment with an assist from the people’s princess.

Psychoanalysis shapes consumer culture

Deep Generalism / American Psychological Association: Intrigued by Freud's notion that irrational forces drive human behavior, Bernays sought to harness those forces to sell products for his clients. In his 1928 book, "Propaganda," Bernays hypothesized that by understanding the group mind, it would be possible to manipulate people's behavior without their even realizing it. To test this hypothesis, Bernays launched one of his most famous public relations campaigns: convincing women to smoke.

Running brand On fixes the 'broken experience' of shoe shopping

Physical Retail / Wallpaper: The Lafayette Street store, first On store anywhere, showcases the collection but in a suitably clean-lined, purposeful and tech-driven way. And matches just the right amount of retail theatre with friction-free functionality. The centre piece of the new store, designed in collaboration with architect Andreas Bozarth Fornell, is a 62 ft long magic wall which aims to make finding the right pair of shoes fast and fun. One side of the wall is loaded with a video screen backed with all kinds of smart sensors and gait-analysis technology.

Why Dave Chappelle doesn't want you to stream Chappelle's Show

Streaming Economy / Vox: HBO is the second network after Netflix to pull Chappelle’s Show from streaming as a favor to Chappelle, who claims that due to signing an unfair contract when the show first aired, he now receives no royalties from streams of it. (Those go to the rights holder, Viacom, which owns Comedy Central.) The subject seems to have been on Chappelle’s mind frequently as of late; he first brought it up during his post-election hosting gig on Saturday Night Live, when he noted “I didn’t get paid for any of it.”

What Poshmark's IPO filing tells us about social commerce

Linear Commerce / Vogue Business: Poshmark’s success hinges on its positioning as a social platform; sellers gain followers, and shoppers can like, comment and bid on items for sale. Personalised home feeds make recommendations, similar to Instagram. The average seller has 359 followers, and the most-followed seller had more than 2.7 million.

Every industry is overdue for a digital-first reset. Even casual restaurants are beginning to adjust to a brave new world, accelerated like many other categories by the pandemic.

By and large, foot traffic slowed at shopping malls. Retailers and department stores earned the majority of the media’s attention, but in the process, tens of millions of square feet in commercial kitchens and dining rooms were going to waste. The wage workers who ran them suffered from job losses. Restaurants were sinking into bankruptcy by the dozen. Over the last year, new concepts began to take shape based on proven experiments. To better understand those experiments, I spoke with one of the foremost experts.