FROM THE DESK OF DEBORAH WEINSWIG

Going to Best Buy To Purchase Your Fourth-of-July Grill  We have often discussed the theme of retail as a platform—where retailers leverage their stores to offer additional services such as beauty salons, optical and health clinics, and financial services. This aims to drive traffic and enhance the total value to consumers, with several retailers recently announcing that they are expanding into new, nontraditional product categories. Notably, Best Buy has announced that it is expanding its product lineup beyond consumer electronics and home appliances into products for summer activities and travel—catering to the post-pandemic reopening across the US. The company is expanding its “outdoor living” collection on its website to include grills and outdoor ovens, offering free delivery and grill assembly, paralleling the installation services it already offers for consumer electronics. To encourage its customers to trade up, Best Buy will also remove and responsibly dispose of existing grills for a small fee. For consumers getting back on the road, the retailer is adding other non-electronics products to its website, including accessories, bags and luggage from high-end brand TUMI. Moreover, Best Buy has been expanding its service offerings for several years, and its New Blue service portfolio comprises repair services, tech support, concierge services (including connected health and personal emergency services for seniors) and software subscriptions. The company recently announced a subscription service package at $200 per year that offers free shipping, unlimited tech support and membership pricing—echoing programs such as Amazon Prime and Walmart+. Best Buy is not alone in newly offering nontraditional merchandise on its website. Retailer Express is offering products from other brands on its website, and J.Crew is offering goods that are sold and shipped by other companies. Home-improvement retailer Lowe’s has recently added exercise equipment, outdoor leisure equipment and small appliances to its product lineup. These moves echo Amazon’s well-established Marketplace model, with retail giants Target and Walmart also operating online marketplaces. Marketplaces have grown to become an essential growth driver for Amazon—its third-party seller service revenues grew 60% year over year in its first quarter of fiscal 2021, faster than the 44% growth rate of Amazon’s online stores and with third-party seller units accounting for 55% of worldwide unit sales in the quarter. Macy’s is also expanding beyond traditional department store product categories. The company stated on its most recent earnings call that it is responding to consumer demand in categories including food and wine, health and fitness, products and toys. The company intends to broaden its offering through both vendor-direct shipping and owned inventory. Over the past year, Macy’s has added hundreds of new brands and categories in apparel, home and beauty in an effort to capture healthy consumer spending. These efforts by retailers to expand beyond their principal categories seem to defy traditional business logic of “sticking to the knitting,” or, in other words, staying true to one’s core business. Yet with continuing rapid changes in consumer preferences, there is a method to the apparent madness. Consumers’ rapid gravitation toward e-commerce and ever-diminishing loyalty to a single product or brand motivates retailers to expand their online product offerings broadly. A broader offering gives shoppers more reason to dwell on a retailer’s website, and offering third-party drop-shipped products carries no inventory risk if the new product lines are not successful. Branching out into other product categories underscores the concept of retail as a platform or as a service, with physical and online stores serving as the foundation for offering additional goods and services. In addition, with shopping shifting online, many physical stores will be best utilized as showrooms rather than places to house inventory, freeing up space to demonstrate new products. As Best Buy has already benefited greatly from the shift in consumer demand to products for entertainment, exercising and working at home, it makes sense for the retailer to seek to capture incremental demand—why not offer a grill to add to the webcam or gaming console already in the consumer’s shopping cart and keep them from jumping to another retailer’s website?

• For proprietary insights into what categories US consumers are spending on, read Coresight Research’s weekly Consumer Tracker reports.

US RETAIL AND TECH HEADLINES 

Amazon Introduces “Just Walk Out” Technology in New Fresh Store in Washington (June 15) Company press release

• Amazon has announced that its “Just Walk Out” autonomous checkout technology will be available in its new Amazon Fresh store in Bellevue, Washington. The 25,000-square-foot store opened on June 17 and features traditional checkouts alongside the new technology.
• Previously, in the US, Just Walk Out technology was only available in the company’s smaller Amazon Go convenience stores. The technology uses a combination of overhead cameras, weight sensors and deep learning technology to enable shoppers to select products and skip the checkout. When exiting the store, the items are automatically charged to the customers’ payment cards via the Amazon app.

Boxed Set To Go Public via $900 Million SPAC Merger   (June 14) Company press release

• Grocery e-commerce retailer Boxed has announced that it will go public through a merger with Seven Oaks Acquisition Corp., a special purpose acquisition company (SPAC). The valuation of the combined entity is nearly $900 million. The deal will provide Boxed with around $334 million in cash, including a $120 million investment from firms Avanda Investment Management, Onex Credit and Brigade Capital Management.
• The new company will be led by current Boxed CEO Chieh Huang. Seven Oaks Chairman and CEO Gary Matthews will serve as Chairman of the Board. Boxed expects the transaction to close in the fourth quarter of 2021.

Instacart Launches $1 Million Advertising Initiative To Support Black-Owned Brands (June 14) Forbes.com

• Instacart has announced a $1 million advertising initiative to support Black-owned brands selling consumer packaged goods (CPG) brands on its marketplace. The company has partnered with brands including A Dozen Cousins, Capital City Partake and Uncle Nearest.
• Instacart is offering eligible brands prominent advertising locations and Ads credits for its featured product offerings, enabling higher visibility in product placements. The company will also offer monthly training opportunities to help brands maximize the impact of their advertising campaigns.

Washington Prime Group Files for Chapter 11 Bankruptcy Protection (June 13) Company press release

• Mall owner Washington Prime Group has filed for Chapter 11 bankruptcy protection, citing losses incurred from pandemic-related store closures and rent relaxations for some of its tenants. It plans to implement a comprehensive financial restructuring of its $950 million debt, allowing the company to substantially deleverage its balance sheet and strengthen its businesses going forward.
• Washington Prime Group stated that it has secured $100 million in financing from its creditors to support daily operations during the Chapter 11 process and has ensured that all business operations will continue as usual throughout the proceedings.

EUROPE RETAIL AND TECH HEADLINES

Boohoo Group Reports First-Quarter Fiscal 2022 Results and Reiterates Its Fiscal 2022 Guidance (June 15) Company press release

• Boohoo Group reported sales growth of 32% year over year or 91% on a two-year basis (compared to pre-pandemic values) in its first quarter of fiscal 2022, ended May 31, 2021. The company’s gross margin stood at 55%, in line with the comparable period two years ago.
• During the quarter, Boohoo launched a new Debenhams digital department store and integrated its recently acquired Burton, Dorothy Perkins and Wallis brands onto its multi-brand platform. The company also reiterated its fiscal 2022 guidance and continues to expect sales growth of about 25% year over year and an adjusted EBITDA margin of 9.5–10.0%.

H&M Group Reports Trading Update for Second Quarter and Early June 2021 (June 15) Company press release

• H&M Group reported a sales increase of 62% year over year in its second quarter of fiscal 2021, ended May 31, 2021. However, sales were down 19% compared to its second quarter of fiscal 2019. H&M noted that sales were impacted by store closures in its largest markets, including France and Germany, where pandemic-related restrictions were extended.
• For the period June 1–13, H&M reported sales growth of 35% year over year, with 2% growth on a two-year basis. The company noted that it is witnessing a strong recovery as more people are getting vaccinated in many of its markets.

Lindex Adopts Circular Approach and Launches Secondhand Clothing Scheme (June 15) Company press release

• Sweden-based apparel retailer Lindex has launched a secondhand clothing scheme as part of its circular transformation and sustainability initiatives. The company aims to reduce its carbon dioxide emissions by 50% across its entire value chain by 2030.
• As part of the scheme’s pilot, the retailer introduced a take-back program for its outerwear ranges for babies and kids, whereby consumers send in old items and receive a reward. The secondhand items will then be resold in selected Lindex stores in Sweden. The retailer is also exploring a new circular approach for its existing in-store womenswear collection, reselling returned items at its new store in Oslo, Norway.

Rotaro Opens Its First Rental Pop-Up Store (June 14) RetailTimes.co.uk

• UK-based online apparel rental platform Rotaro has opened its debut pop-up store in London, which will be open for two months from June 14. The store enables customers to take away items to rent on the day or try on items to reserve for rental at a future date. Rentals vary from £14–£70 ($19–$99) for four days.
• Rotaro describes the new pop-up store as a zero-waste “store of the future” and has committed to several sustainability initiatives, including recycling packaging and replanting flower installations.

WIT Fitness Signs a Multi-Year Global E-Commerce and Retail Partnership with CrossFit  (June 14) Company press release

• UK-based sportswear retailer WIT Fitness has partnered with US-based fitness consultancy service and gym owner CrossFit. WIT will operate an official online CrossFit store and sell CrossFit-branded attire at its flagship London store—with potential for extension to further physical stores worldwide. WIT will also support CrossFit with future in-house products and introduce a retail presence at CrossFit events.
• WIT’s founder Dan Williams stated, “The partnership with CrossFit now allows us to access a new, significant and engaged international pool of consumers. The partnership will also accelerate WIT’s move into expanding our brick-and-mortar presence both in the US and in the EU, with an investment round pending in 2022 to fund this.”

ASIA RETAIL AND TECH HEADLINES 

Abu Dhabi Development Holding Company (ADQ) To Invest $500 million in Flipkart (June 14) Bloomberg.com

• Abu Dhabi’s state investment company, ADQ, is reportedly in talks about a potential investment of $500 million in Flipkart.
• Flipkart is set to focus on raising $3 billion in funds ahead of its potential initial public offering in 2022. With the funding, Flipkart’s expected valuation will be $35–40 billion prior to its IPO.

Pace Enterprise Raises Debt Financing and Announces Partnership with Valiram (June 16) BusinessTimes.com.sg

• Singapore-based fintech startup Pace Enterprise has raised an undisclosed sum in its latest debt financing round, led by venture debt firm Genesis Alternative Ventures. Pace Enterprise offers buy now, pay later solutions.
• The company has also announced an exclusive regional partnership with Valiram, a Malaysia-based luxury goods and retail house. Under the partnership, Valiram will extend its offering to brands including Victoria’s Secret and Michael Kors.

eBay Inc. Plans To Sell South Korean Unit for $3.6 Billion (June 16) Reuters.com 

• eBay is reportedly planning to sell its South Korea business to Shinsegae Group’s E-Mart Inc., and Naver Corporation, a South Korea-based web portal operator.
• The deal is set for $3.6 billion but is yet to be finalized. eBay Korea is the third-largest e-commerce firm operating in South Korea and accounted for 12.8% of e-commerce’s total market share in 2020.

India’s Retail Sales Decline by 79.0% in May (June 15) ETRetail.com 

• Based on data from the Retailers Association of India (RAI), India’s retail sales fell by 79.0% in May 2021 compared to pre-pandemic levels in May 2019.
• Sales of food and grocery slumped by 34.0% as compared to the same period in 2019. However, beauty, footwear, personal care and wellness reported steeper declines of more than 85.0% each.

UAE-Based Toy Retailer Tablez Set To Rebrand Its Toy Stores in India (June 15) InsideRetail.asia

• Abu Dhabi-based retail department Tablez, which is owned by Lulu Group’s, has announced plans to transform its existing Indian Toys“R”Us stores into a new retail format for babies and children. The company currently operates 15 stores across Bengaluru, Chennai, Delhi, Ghaziabad, Mumbai and Pune and plans to open six rebranded stores by the end of its first quarter of 2022.
• The rebranded retail outlets will sell various international toy brands and offer multiple products, including apparel, baby essentials and stationery.