FROM THE DESK OF DEBORAH WEINSWIG

Amid Surging Online Grocery Demand, Asset-Heavy Models Confront the Challenge of Fixed Capacity While the coronavirus outbreak has hit most retail hard, it has prompted a surge in demand for online grocery services. Coresight Research recently completed its annual online grocery consumer survey and found that for the first time, more than half of US respondents had bought groceries online in the past 12 months—up considerably from around 37% of respondents last year. In addition, among US online grocery shoppers, over one-third said they are buying more groceries online because of the coronavirus outbreak. A further sizeable share started buying groceries online because of the pandemic. We expect a very strong uplift in US online grocery sales, with capacity rather than demand proving to be the constraint. We believe online grocery sales will approximately double during the crisis period—although the elasticity of capacity in the online grocery market is not readily quantifiable, especially given that it is rapidly expanding. What We’ve Seen in the UK The UK is a more mature online grocery market, and Coresight Research’s analysts in that market have seen retailers report exceptionally strong demand—and in some cases, they are struggling badly with that demand. The pattern we have seen in the UK is that mixed-mode, multichannel models and asset-light models have been able to flex much more smoothly to the surge in online grocery. Ocado is one retailer with no such flexibility: Its UK online grocery operation is highly automated with centralized fulfillment centers, and the company has struggled badly amid increased demand. All UK grocery retailers have seen delivery slots snapped up rapidly, but Ocado has seen particular difficulties coping with demand: Access to its website has often been blocked except for those who already have a delivery slot booked, or website visitors have been subject to long virtual queues; the retailer has not accepted new customers since mid-March; and service standards have been eroded—notably being able to edit an order, which has rendered some customers’ booked delivery slots virtually redundant. Online review sites have been flooded with negative reviews, and TrustPilot data cited by the broker Jefferies shows Ocado’s average customer rating slumping from a market-leading lifetime average of 3.2 out of five prior to the crisis to just 1.7 in March. Multichannel retailers’ operations have proved much more resilient. UK market-leader Tesco fulfills grocery orders from its physical stores, as well as a limited number of “dark stores” for online orders only. This model provides the company with some scope to flex capacity, and the crisis prompted it to add 145,000 delivery slots to take its total weekly delivery slots to 805,000. Unlike Ocado, while those slots have continued to be booked up quickly, Tesco has not restricted access to its website or removed functionality. Similarly, second-place Sainsbury’s grew its number of delivery slots from 370,000 to 600,000. In addition, it ramped up capacity at its nascent rapid-delivery service ChopChop, where typically smaller orders are fulfilled by third-party riders biking deliveries from nearby stores. To offer rapid deliveries, Marks & Spencer has partnered with UberEATS and Morrisons with Deliveroo. Those collaborations reflect the advantages that labor-heavy, asset-light services have enjoyed during this crisis. Rapid-delivery services that typically rely on a courier on a bike and are often outsourced to third-party firms have proved to be the most flexible in expanding capacity. In the US, Instacart rapidly sought to expand as demand surged. On March 23, the company reported a 150% uplift in online grocery order volume and a 15% increase in average order size over the prior weeks. As a result, Instacart said it was seeking to double its grocery-shopping staff by hiring 300,000 more shoppers. In grocery at least, the coronavirus crisis has exposed meaningful challenges for the highly automated fulfillment model. Multichannel retailers with hybrid online/offline operations have proved much more flexible, and this is likely to bolster shopper loyalty and repeat custom, thus resulting in market-share gains in the online channel. We will explore the US online grocery market in our annual survey report, publishing next week.  

US RETAIL AND TECH HEADLINES

The RealReal Estimates a 15% Rise in First-Quarter GMV, Announces Job Cuts and Furloughs

(April 14) Company press release

• Online luxury consignment marketplace The RealReal has estimated its gross merchandise volume (GMV) to be approximately $258 million in its first quarter, ended March 31, 2020—representing 15% year-over-year growth. The platform expects its first-quarter net loss to be in the range of $38.9–$39.9 million, compared to the loss of $23.2 million reported last year.
• The RealReal has cut its overall headcount by about 10% and lowered payroll expenses by approximately 15% in order to preserve its liquidity amidst the coronavirus crisis. The company has also furloughed nearly 15% of its staff across e-commerce centers, retail stores, luxury consignment offices, sales organization and headquarters.

Stage Stores Seeks Vendor Concessions To Prevent Bankruptcy

(April 14) Reuters.com

• Department-store chain Stage Stores is reportedly requesting vendor partners for additional time to pay bills and relief on terms amidst the coronavirus crisis to avoid a bankruptcy filing. The retailer is also lowering costs, exploring potential gains from government stimulus programs and asking landlords to reduce rents.
• Stage Stores was instructed to shutter all of its 738 stores and three distribution centers in late March to curtail the spread of the pandemic. The company has also furloughed nearly all of its store, field support, and distribution center staff, along with 87% of its Houston support-center employees.

True Religion Apparel Files for Chapter 11 Bankruptcy Protection

(April 13) WSJ.com

• Denim retailer True Religion Apparel filed for Chapter 11 bankruptcy protection on April 13, 2020, for the second time in less than three years. CFO Richard Lynch stated that True Religion has indefinitely shut 87 retail stores and its wholesale business as a result of the coronavirus outbreak.
• The retailer plans to initiate either a sale or a reorganization and expects to decide among the two approaches in mid-May, according to court documents. The company said it “would have preferred to wait out the current instabilities of the financial markets and retail industry generally,” but could not afford to do so.

Amazon To Stop Accepting New Grocery Delivery Customers due to Rising Demand

(April 13) Reuters.com

• Due to a rise in demand during the coronavirus outbreak, Amazon will relegate all new online grocery customers in the US to a waiting list, to enable it to prioritize orders from existing customers.
• The company will also cut shopping hours at some Whole Foods stores, so that employees can fulfill online grocery orders more quickly. The company plans to increase its capacity in the coming weeks to satisfy the growing demand for online groceries.

eBay Appoints Jamie Iannone as CEO

(April 13) Company press release

• eBay has appointed Jamie Iannone as CEO and elected him to the company’s board, effective April 27, 2020. Iannone previously served as the COO of Walmart E-Commerce.
• Iannone will succeed Devin Wenig, who stepped down from his role as President and CEO at the company in September 2019. Iannone served as VP and in other leadership roles at eBay from 2001 to 2009.

 

EUROPE RETAIL AND TECH HEADLINES

Adidas Receives €3 Billion Emergency Loan, Stops Dividend Payments

(April 14) Reuters.com

• Adidas has received approval from the German government for a syndicated €3 billion ($3.3 billion) emergency loan to help the company get through the losses incurred due to the coronavirus crisis. The company stated that one of the conditions of the loan was to suspend dividends for the year.
• Adidas also stopped share buybacks and 2020 executive bonuses to bridge this unprecedented situation. The company stated that it is unable to provide an outlook for the full-year 2020 and that first-quarter results would be delayed to April 27, 2020.

Morrisons Launches Telesales Service

(April 14) Company press release

• UK supermarket chain Morrisons has initiated a dedicated telesales shopping service that offers next-day delivery of essential items for vulnerable and older shoppers. Customers can now order over the phone from a list of 47 essential items and pay for goods upon delivery on their doorstep via a mobile chip-and-pin device.
• Last week, Morrisons announced a partnership with delivery service Deliveroo, which will offer on-demand delivery in less than 30 minutes to families struggling to secure delivery slots. The service will be available to customers within 2.5 miles from selected Morrisons stores across the UK.

John Lewis Unveils Virtual Styling Service

(April 14) Company press release

• Department-store chain John Lewis has introduced a number of new virtual services that enable customers to interact with experts for consultations via social networking app Instagram. The initial launch will include interactive nursery, home design and personal fashion tips with additional services, motivational talks and learning sessions scheduled to begin in late April.
• Users will be able to request one-to-one video appointments with John Lewis Style Studios personal stylists who will help them find outfits and streamline their wardrobes. John Lewis encourages consumers to contact their favorite stylist with an instant message on Instagram to schedule a video call.

Co-op Italia Introduces New Measures To Limit the Number of Shoppers in Stores

(April 14) ChargedRetail.co.uk

• Supermarket chain Co-op has introduced new digital measures to limit the number of customers in its Italian stores at any given time, in keeping with social distancing requirements.
• The chain now requires customers to book an available time slot online or via phone, and they must provide proof of booking to enter stores. The system is currently in place in hypermarkets in Genoa, Milan and Savona and is expected to be implemented in more locations depending on feedback.

The Oasis and Warehouse Group To Enter Administration

(April 14) News.Sky.com

• Women’s fashion retailers Oasis and Warehouse plan to file for administration, putting 2,300 jobs at risk, after being forced to indefinitely close stores due to the coronavirus crisis. The news comes three weeks after the group began exploring a sale of the business.
• The group has over 90 standalone stores and additional 437 concessions in department stores. It intends to appoint Deloitte as administrators to manage the insolvency process as it seeks to find a buyer for the business.

ASIA RETAIL AND TECH HEADLINES

RedMart Partners with ComfortDelGro To Deliver Groceries in Singapore

(April 14) KR-Asia.com

• Online grocery retailer RedMart has partnered with transport company ComfortDelGro to utilize the transport company’s taxi drivers to fulfill the high demand in online grocery orders in Singapore due to the coronavirus outbreak.
• The partnership comes after the Land Transport Authority of Singapore had eased regulations to allow point-to-point transport drivers to service delivery jobs until the end of June. ComfortDelGro’s fleet of 10,000 taxi drivers will be trained by RedMart and will undertake delivery jobs by the end of April.

LimeRoad Launches Intiative To Help Its Sellers in India

(April 14) FashionNetwork.com

• Indian online fashion marketplace LimeRoad has launched its “Financial Clinic,” a new initiative to help its sellers through the economic impact of the coronavirus outbreak.
• The service will focus on small and medium-sized sellers that have been hit the hardest due to the ban on sales of non-essential goods in India. LimeRoad will provide guidance on short-term credit, inventory and working capital management, among other financial issues that its sellers are facing.

Takashimaya Partner with SBI Securities To Offer Financial Services in Japan

(April 14) InsideRetail.asia

• Japanese department-store chain Takashimaya has partnered with online financial-services company SBI Securities to offer its customers SBI Securities’ wide range of financial services, which include investment trusts, foreign stocks, futures and options trading, foreign exchange, and domestic and foreign bonds.
• Takashimaya will also offer its customers in-store consultations to help them decide on their investments. It will act as an intermediary services provider, while customer accounts will be managed by SBI.

FamilyMart Launches New Concept Store in Thailand

(April 14) InsideRetail.asia

• Japanese convenience-store chain FamilyMart has launched a new concept store format, “FamilyMart Corner,” in Thailand. The new store features vending machines that will sell beverages, snacks and convenience foods, increasing convenience for customers on the go.
• Two stores in the new format were opened on April 10 in the Robinson Lifestyle Srisaman and Saraburi department stores, and another is scheduled to open on April 22 in Bangrak. The stores will be open from 7:00 a.m. to 9:00 p.m. and will allow only five customers inside at any one time, in order to meet social-distancing requirements.

Indian Government To Set Up 2 Million Retail Shops To Provide Essentials

(April 13) FashionNetwork.com

• The Indian government plans to set up a network of 2 million retail stores across the country under the banner “Suraksha Stores” to provide essential goods during the nationwide coronavirus lockdown. The government will transform existing local convenience stores into outlets that follow strict health and safety procedures. 
• The stores will retail groceries and personal care items as well as clothing, and customers will be required to maintain a distance of 1.5 meters while shopping. The government has reached out to over 50 fast-moving consumer goods companies to supply goods, and it plans to integrate the supply chains of these companies to maintain proper hygiene.