IPO

This Picture's Worth a Thousand Treats

Of all the retail companies to IPO this week, my eye went to the one with a furry special guest. And first trading day zoomies.

Under ticker WOOF, Petco shares jumped as much as 72% in their Nasdaq debut. Petco raised $864 million in its IPO, funds that’ll go toward debt repayment and expansion.

Pet adoptions and purchases have soared over the past year, but there’s mastiff competition for retail companions. In an interview yesterday, Petco CEO Ron Coughlin gave Retail Brew a glimpse at the strategies across Petco’s stores—sorry, “pet care centers”—that have investors’ tails wagging.

Experiential upgrades. Across Petco’s 1,470 stores, 100+ have full veterinary hospitals. Results from those centers, paired with upgraded grooming services and premium brands, hint more renovations could come soon. 

• “There’s a 4% lift in center-store sales from the increased traffic and veterinary business” in these locations, Coughlin said.
• “We’re seeing guest satisfaction levels at a 9.3 out of 10 when we bring these in.”

Quality selection. People who call their pets “fur babies” aren’t buying them standard grade kibble. That’s encouraged Petco to double down on exclusive products: Last year, more than half of its product assortment wasn’t available at competitors. 

• Coughlin said selling premium, fresh pet food = doubled visits to stores. 
• I asked if Petco had explored exclusive sales partnerships with new DTC pet care brands. Coughlin’s response: “We are always on the hunt for new brands.”  

Convenience factor. Petco has invested $300+ million in its digital opps, spanning app updates, curbside pickup, and same-day delivery. Across all e-comm, 80% of orders are fulfilled through Petco’s stores.

• Same-day delivery has only been live for five weeks, but Coughlin said 30% of all online orders are fulfilled with this option. 

Chew on this

Pet care was already more reliable than home goods or apparel. But Coughlin believes the pet adoption wave benefiting Petco is far from over. 

“We anticipate the first half of 2021 [will look] similar to 2020, in terms of the dynamics of people being home and adoption levels being high,” Coughlin said. “So what’s unique for us is these pets and homes are like an annuity to our business.”

TRADE

Blanket Ban

After months of mounting restrictions, the US has issued an outright ban on imports containing cotton or tomato products from China’s Xinjiang region, where researchers say at least 1 million members of the Uyghur ethnic minority are in forced labor camps. The ban went into effect January 13. 

Wide ramifications: In 2019, Xinjiang produced 85% of China’s cotton—and the country accounts for ~20% of the world’s supply. Labor rights group Worker Rights Consortium (WRC) estimates US brands drive $20+ billion in annual sales from garments containing Xinjiang-produced cotton. 

• WRC executive director Scott Nova said the ban “will redefine how the apparel industry—from Amazon to Nike to Zara—sources its materials and labor.”

Retailers and trade groups like the American Apparel & Footwear Association have supported the spirit of the ban, but they’ve also cautioned that implementation will be difficult due to low supply chain visibility. Because cotton changes hands so often, the AAFA argues that a global coalition is necessary to prevent Xinjiang cotton from unlawfully infiltrating products. 

Looking ahead...those concerns might not fall on sympathetic ears. With the ban, US officials set stricter expectations for brands to figure out the origins of their products. 

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In addition to protecting your products, Clyde’s platform streamlines the entire claims process for both business and customer, saving everyone time and promoting sanity in just a few clicks. 

From coordinating repairs to providing tracking information on replacement products, Clyde does all the heavy lifting on your behalf—which is great because we’d all rather be spending more time at the koala sanctuary.

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E-COMM

Primark Refuses to Join the Grid

2020 was the worst year on record for UK retail sales. But the ongoing catastrophe could impact some retailers more than others. 

Primark, which still doesn’t have e-commerce operations, said recent lockdowns could wipe $1.4 billion from its revenue this year. More than 75% of its stores are closed due to Covid-19—including its entire UK footprint. 

What year is it again? 2021, and e-commerce has been a life raft for nearly every other business. But as Bloomberg notes, Primark hasn’t logged on for two reasons: 

1. Pricing. Primark’s shirts are affordable even for lemonade stand operators. With those margins, shipping and processing costs would make e-comm ops unthinkable. 
2. Production. The retailer orders heaps of clothing from garment factories in Asia, but those orders are placed months in advance. That keeps prices low, but it’s unfriendly to rapidly shifting online trends.

From Primark’s POV...this stubbornness isn’t a trend. When a new location opened in Paris in August, 1,000 shoppers lined up to enter despite the pandemic. Primark’s planning to open more stores across the US and Europe, regardless of whether lockdowns lift in its home market. 

WHAT ELSE IS BREWING

• Retail sales declined 0.7% in December, per the US Commerce Department.
• Marc Lore, Walmart's head of e-commerce, is leaving the retailer. 
• Trader Joe’s and Instacart will pay employees who get the Covid-19 vaccine. 
• Canada Goose workers said conditions in the brand's Winnipeg factories are unsafe.
• Nike is suing 1,000+ websites and social media profiles for selling counterfeits.
• H&M’s first designer collab of 2021 is here.

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SWAPPING SKUS

There are niche corners of retail I don’t always get to cover: deep sea fishing apparel, tiny home organization, homeschooling supplies. Today surfaced two great articles on an undercovered segment. That segment is ski-tail. 

• Restoration Hardware invested in an Aspen, CO, commercial real estate property. Here’s a look at its plans to build a slopeside shopping compound. (Retail Dive)
• Even Olympians can find fault in the winter outdoor gear on the market. So former US skier Kiley McKinnon turned her frustrations with ski pants and jackets into a new brand, Halfdays. (Fashionista)

FRIEND OR FAUX?

You’ve all seen that Taco Bell video, but how closely have you watched the rest of the drive-thru world? See if you can spot the fake fast food headline below.

1. McDonald’s cancels merch orders for its anticipated J Balvin collab.
2. Sonic is piloting plant-based hot dogs. 
3. Panera’s pandemic workaround? A virtual catering service.
4. Sweetgreen enters the fried chicken wars with a crispy salad.

Keep reading for the answer.

ICYMI

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

• Can Amazon’s Contactless Tech Revitalize Airport Retail?
• Harry’s Wants to Become So Much More than a Shave Brand
• Shipt Is Bullish on Everything Delivery 

FRIEND OR FAUX? ANSWER

2. Nope, plant-based meat alternatives haven’t arrived at Sonic yet.