FROM THE DESK OF DEBORAH WEINSWIG

Could Retailers Run Short of Inventory this Holiday Season? In normal years, retail stores are bulging with merchandise during the holidays, skillfully ordered and arranged for shoppers to purchase as gifts for friends and family. Stores also acquire and display special holiday merchandise, including “doorbusters” that are designed to get consumers into stores—although these have increasingly migrated online in recent years. Preparation for the 2020 holiday season has been markedly different. In spring, retailers would typically focus on closing out the current collection to bring in the summer collection and placing orders for the holidays. As spring 2020 saw the outbreak of the pandemic, retailers had to make their plans for the holidays while simultaneously handling coronavirus-related store closures. Given the sudden halt to retail sales and little information on prospects for reopening, many retailers placed conservative orders for the holiday season. Whilst uncertainties still remain, there have been several significant developments in the intervening months as stores have largely reopened and US retail sales growth has rebounded—rising 6% year over year in August. At the same time, e-commerce sales skyrocketed by 44.4% in Q2, according to the US Census Bureau. Based on the most recent monthly US retail sales figures, the conservative outlooks during the peak of the pandemic’s disruption could leave retailers short on inventory for the holidays. Although retailers are not required to disclose inventory that is en route to stores and warehouses, we can use available data to piece together the inventory picture. Despite the seasonal disruption, our 2Q20 US Retail Inventory Tracker shows that inventory turns improved year over year (to 1.2 from 1.1 a year ago), due to inventory accumulation from a year ago to offset the expected impact of tariffs and to support expansion plans. In addition, 21 of the 23 retailers we analyzed showed year-over-year declines in inventory values, with two retailers showing increases of just single-digit percentages. Many retailers had already experienced inventory shortages in Q2, such as Walmart and Best Buy, however many retailers offered positive comments on their inventory levels. Macy’s characterized its sales-to-stock parity as good, and Nordstrom commented that it had exited the quarter with clean inventory. There are several new events that could change shoppers’ behavior and pull demand forward into October, leaving last-minute shoppers scrambling to find gifts in December. Firstly, Amazon Prime Day is taking place in October, instead of July, and the company reportedly plans to also launch its Black Friday deals in October. There is also the 10.10 Shopping Festival, taking place on October 9–12, which is supported by more than 40 retail partners and several technology and charity partners. Finally, large retailers such as Target and Walmart have encouraged shoppers to start shopping in October to avoid potential social-distancing issues from crowded stores on peak holiday shopping days. Fortunately, there are many alternative gift sources for consumers if in-store supplies run dry. Consumers can always shop online—and many will, preferring to avoid the potential safety issues related to in-store shopping. In our recent US consumer survey, 56.3% of those surveyed said they were currently avoiding stores and malls. Other non-contact gifting methods include e-gifting and gift cards, the latter of which our new holiday survey confirmed is a highly popular option. There are also opportunities to find pre-owned gifts on Etsy and in consignment stores, and perhaps handmade gifts could even stage a comeback this year. This holiday season is markedly different from that of previous years in many ways, since there are many variables that will determine consumer shopping behavior. With no Covid-19 vaccine available on the immediate horizon, consumers will likely continue to shift shopping online, leaving those electing to visit physical stores to choose from perhaps smaller quantities of merchandise than in prior years. With the holiday shopping season starting in October, we will gain an early read on the holiday season as it progresses.

US RETAIL AND TECH HEADLINES

Macy’s and Klarna Announce Five-Year Partnership (October 6) Company press release

• Macy’s and payment technology firm Klarna have partnered to provide Macy’s customers the option to pay for online purchases in four equal, interest-free instalments at checkout. Macy’s is one of the first firms in the department store sector to offer Klarna’s buy now, pay later feature.
• Macy’s Chief Digital Officer Matt Baer said that the “financial control and convenience” this feature offers will allow Macy’s to “reach wider audiences looking for seamless alternative payment solutions.” Macy’s has also become an investor in Klarna, in addition to integrating Klarna’s payment technology on its website.

Express Responds to NYSE’s Non-Compliance Notice (October 5) Company press release

• The New York Stock Exchange (NYSE) had issued a notice to fashion retailer Express that it was no longer complying with the stock exhange rules on maintaining an average closing share price of $1 over a consecutive 30-day trading period.
• Express announced that it intends to “formally notify the NYSE of its intent to cure the deficiency, including for example through a reverse stock split,” and that the NYSE notification does not affect the company’s business. CEO Tim Baxter added that the company’s strategy and cost-saving actions will “put (the company) back on The EXPRESSway Forward.”

Instagram To Add Shopping Function to Reels (October 5) CNBC.com

• Instagram is looking to test a shopping function on its short-form video feature Reels, in order to monetize the feature in a manner akin to TikTok—an app used by content creators and influencers that was recently banned in India and the US.
• Instagram will also add shopping to its IGTV feature to allows users to upload and view longer videos, starting October 12. Content creators and brands can add shopping tags to their content that users can tap to shop through the Instagram app or be redirected to the brand’s shopping site.

Walmart Partners with Drone Operators To Test Deliveries Across Categories (October 5) CNBC.com

• Walmart has announced three deals with drone operators to test drone deliveries of various products as it catches up with Amazon. Rival retailer Amazon recently received the Federal Aviation Administration’s approval to operate its own fleet.
• Walmart’s deal with Flytrex will see the retailer test deliveries of groceries and household essentials. Its project with Zipline will test on-demand deliveries of health and wellness products, and its deal with Quest Diagnostics and DroneUp will test deliveries of at-home Covid-19 test kits.

Dollar Tree To Hire 25,000 Staff (October 5) Company press release

• Dollar Tree has announced plans to hire over 25,000 seasonal workers at its Dollar Tree and Family Dollar stores as well as its US distribution centers, during a national hiring event that takes place October 19–23.
• The store-based roles include full-time and part-time store managers, assistant store managers, cashiers and stocking associates, as well as seasonal holiday workers. The open roles at its distribution centers include management as well as full-time and part-time order fillers, equipment operators and warehouse associates.

EUROPE RETAIL AND TECH HEADLINES

Tesco Reports 6.6% Group Sales Growth, 69% Online Sales Surge in First Half (October 7) Company press release

• Tesco reported that it grew group sales (excluding VAT and fuel) by 6.6% to £26.7 billion ($34.5 billion) in its first fiscal half, ended August 29, 2020. Total UK sales were up 7.7% and UK comparable sales were up 7.6%. UK online sales surged 69%. Profit before tax came in at £551 million ($709 million), up 28.7%.
• The retailer noted shifts in customer buying habits in the UK, with food sales up 9.2%, clothing sales down 17.2% and general merchandise sales down 0.3%. Tesco doubled its online UK delivery capacity to 1.5 million slots per week and opened its first urban fulfillment center during the period. Tesco expects retail profits in the second half to be broadly in line with the first half retail profit.

IKEA Retail Sales Shrink 4% In Year Ended August 2020 (October 6) Reuters.com

• IKEA has reported a 4% decline in retail sales to €39.6 billion ($46.7 billion) in the year ended August 31, 2020. E-commerce revenues surged 45% to account for 15% of total retail sales. The retailer said that online sales remained high even after stores reopened following temporary closures during the early weeks of the pandemic.
• After adjusting for temporary closures, comparable sales remained flat as the pandemic lifted consumer interest in homes, according to chief executive Jon Abrahamsson Ring. He added that he expects the retailer to return to growth this year.

Sosandar’s Revenues Up 52% in Half Year to September 30 (October 7) Company press release

• Online women’s fashion brand Sosandar has reported 52% growth in revenues in the first half ended September 30, 2020. The company said that the momentum it observed in the first quarter and July continued into August and September.
• The company said that new customers increased 26% and repeat orders surged 88% despite a 49% decrease in marketing spend. Sosandar launched on the John Lewis and Next websites in August; the company stated that initial trading was “pleasing” and that it has expanded the ranges on both sites.

Next Opens First Beauty Hall Concepts (October 5) RetailGazette.co.uk

• Fashion retailer Next has opened its first beauty hall concept stores in the UK at the Intu shopping centers in Watford and Milton Keynes. The new concept stores are part of Next’s Beauty & Home banner and are housed in former Debenhams sites.
• In May, The retailer first announced extending its online beauty offer to physical stores. The newly opened stores include a beauty hall, departments for homewares and furnishings, women’s accessories, nightwear and lingerie, and a cafe.

H&M To Collaborate with the Vampire’s Wife on New Collection (October 5) Company press release

• H&M has announced a collaboration with British fashion brand The Vampire’s Wife to a launch a new collection made from sustainably sourced materials. Statement pieces include a lace mini dress and a silvery lace cape, all made from recycled nylon and recycled polyester.
• The collection includes accessories such as gloves, detachable collars and jewelry. It will be available online and in stores from October 22, 2020.

ASIA RETAIL AND TECH HEADLINES

Amazon India To Launch Great Indian Festival Sale on October 17 (October 6) Company press release

• Amazon will launch its annual Great Indian Festival sale on October 17, with Prime members getting access to sale deals 24 hours earlier on October 16, coinciding with Flipkart’s annual flagship Big Billion Days sale.
• This year, the focus of the Great Indian Festival will be on small and medium businesses (SMBs) who will be featured through Amazon’s various programs for SMB sellers, such as Amazon Launchpad, Local Shops, Amazon Saheli (for female sellers) and Amazon Karigar (for artisans and craftspeople).

Alibaba Group Forms Joint Venture with Dufry in China (October 5) Company press release

• Alibaba Group and Swiss-based travel retailer Dufry have formed a joint venture (JV) “to jointly explore and invest in opportunities in China to develop the travel retail business and to enhance Dufry’s digital transformation.” Alibaba will hold a 51% stake in the JV while Dufry will hold the remainder.
• Alibaba will also buy a 9.99% equity stake in Dufry for CHF 250 million ($273 million), subject to shareholders approval.

ADIA To Invest $750 Million for 1.2% Stake in Reliance Retail (October 6) Reuters.com

• The Abu Dhabi Investment Authority’s subsidiary ADIA will invest ₹55 billion ($750 million) for a 1.2% stake in the Reliance Industries retail arm, Reliance Retail Ventures Limited (RRVL). This is the seventh stake sale in less than a month, raising the total investments to ₹377 billion ($5 billion).
• KKR, Silver Lake Partners, General Atlantic, Mubadala, GIC and TPG are the other investors in RRVL, which operates around 12,000 stores and is looking to grow market share through its e-commerce businesses.

E-Commerce Firm Bukalapak Forays into Fintech (October 7) RetailNews.Asia

• Indonesian B2B e-commerce firm Bukalapak has forayed into fintech with the launch of a mutual funds business called Buka Investasi Bersama—making it the first marketplace platform in Indonesia to obtain a mutual fund sales license.
• CEO Rachmat Kaimuddin said that the mom-and-pop stores on Bukalapak’s platform will act as banking agents to sell the mutual funds, through a partnership with one of the largest lenders in Indonesia.

Mr DIY Seeks To Raise $360.6 Million through IPO (October 6) InsideRetail.Asia

• Malaysian retailer Mr DIY is looking to raise $360.6 million through an initial public offering (IPO). The company will use about $75 million to repay debts and plans to expand its existing network of 678 stores by around 300 stores over the next two years.
• CEO Adrian Ong stated that the retailer holds a 29% share of the Malaysian home improvement retail market and that the company is “adding stores at a very fast pace.”