FROM THE DESK OF DEBORAH WEINSWIG

Our Two Biggest Trends for 2021 and Beyond This week, we unveiled our global retail trends for 2021, the latest of our yearly deep dives looking to the year ahead. For 2021, our global analyst team identified 17 trends under five umbrellas: the new consumer; the future of physical retail; the evolution of digital retail; doing good is good business; and discovering new ways of transacting. In this week’s note, we focus on the two biggest multiyear trends impacting almost all of retail: wellness and sustainability. Wellness Concerns Will Be the Number-One Driver of Discretionary Spending Growth Worldwide We see wellness remaining the pre-eminent multiyear trend driving discretionary spending shifts, amplified by the pandemic prompting consumers to be more focused on both their mental and physical wellness. This secular trend will drive the flow of dollars in apparel (to athleisure and other sportswear), beauty (to wellness-themed products), supplements (including CBD), the sleep economy, home fitness and mental wellbeing. In the near term, we will continue to see much wellness spending diverted from services such as spas, gyms and fitness memberships to products for at-home use. We see the growth of wellness spending not only playing out in the more mature retail markets of Europe and North America but also in higher-growth economies such as China and India. In those markets, we have already seen an abundance of evidence that the growing middle classes are willing to spend on wellness-driven categories. With demand fueled by the typically younger populations of many of these countries—in China, millennials and Gen Z are expected to account for 65% of the urban population by 2025. Across economies, we predict that the aspirational and often image-driven nature of the wellness trend will see consumer migration to strong brands—from DTC (direct to consumer) and lifestyle brands in home and fitness to the strongest global brands in beauty and sportswear to brands with authentic credentials in categories such as CBD. Sustainability Will Increasingly Be an Essential Factor for Consumers and Investors We expect sustainability to remain top of mind for multiple stakeholders—consumers, employees, investors, government and NGOs (non-governmental organizations)—in 2021 and subsequent years, driving enhanced business models and new consumer brands and services across a range of sectors and categories. Sustainability suffered a brief dulling of interest as the Covid-19 virus captured mindshare in early 2020, and attention was diverted to health, employment, family safety and finance. However, as 2020 progressed, the effect of Covid-19 appeared to accelerate interest in sustainability as consumers increasingly sought out brands, products, services and retailers with values and purpose beyond mere commerce. We predict that environmental awareness and a push for sustainability will impact a range of sectors and regions in 2021. Most industries have a handful of environmental concerns that are destructive to the ecosystem but also carry with them the potential for reputational risk and financial harm. We believe that this year, corporates will resume and increase their focus on improving sustainability efforts following 2020’s lull. Long-Term Impacts We see a couple of common factors between the wellness and sustainability trends:

• First, both of these major trends look set to be supported by generational shifts. An abundance of evidence suggests that younger consumers tend to be more interested in wellbeing and more concerned with sustainability than their older counterparts. Assuming that this is a cohort effect, rather than simply a correlation with youth, the consumers that are now young will take those concerns with them as their spending power grows with age, expanding the market for wellness and sustainable products and services.
• Second, both trends demand brand integrity. As noted above, we see wellness demand underpinning consumer demand for trusted, premium brands. Meanwhile, integrity in regard to environmental sustainability will increasingly be a market of the strongest brands, with those brands that lead environmental efforts likely to enjoy stronger connections with, and greater loyalty among, consumers.

Read our full report, Retail 2021: Global Trends, here.

US RETAIL AND TECH HEADLINES

Amazon Reports Outstanding Fourth-Quarter Results (February 2) Company press release

• Amazon reported sales growth of 44% in the fourth quarter of fiscal 2020 versus 37% growth in the prior quarter. By segment, North America saw 40% sales growth; International witnessed a 57% sales increase; and Amazon Web Services (AWS) reported sales growth of 28%. For the first quarter of fiscal 2021, Amazon expects net sales to grow by 33–40%, including a favorable impact of around 3% from foreign exchange rates.

Gap Inc. Joins the 15 Percent Pledge; Commits To Increase Its Pipeline Programs by 15% (February 1) Company press release

• Gap Inc. has joined the 15 Percent Pledge, a nonprofit organization that urges major retailers to commit 15% of their shelf-space to Black-owned businesses, as an advocacy partner. The retailer has donated $200,000 to support the 15 Percent Pledge’s mission.
• Gap plans to increase its pipeline programs by 15% to drive opportunity and access for the Black community within the retailer’s family of brands, beginning with early empowerment programs, such as apprenticeships, externships, internships and training.

Home Depot Expands Distribution Network with the Opening of Huge Texas Fulfillment Center (February 2) Chainstoreage.com

• Home Depot has opened a distribution center spanning 1.5 million square feet in Dallas, Texas to fulfill online orders and facilitate in-store order pickups. The distribution center has over six miles of mechanized lines and features automation technologies to boost product flow. It also has a zero-emission hydrogen fuel cell charging station, supporting sustainability.
• The new facility is part of the company’s previously announced $1.2 billion investment plan to expand its delivery network and national distribution, eventually doubling Home Depot’s supply chain footprint in the Dallas area, from 2.1 million square feet to 4.5 million square feet by the end of 2021.

Uber Technologies To Acquire Alcohol Delivery Platform Drizly for $1.1 billion (February 2) Company press release

• Uber Technologies has entered into an agreement to acquire Drizly, an online platform that facilitates the delivery of alcohol in more than 1,400 cities across the US, for around $1.1 billion in stocks and cash.
• After completing the acquisition, Uber plans to integrate Drizly’s marketplace with the Uber Eats app, along with a standalone Drizly app. Uber CEO Dara Khosrowshahi said, “By bringing Drizly into the Uber family, we can accelerate that trajectory by exposing Drizly to the Uber audience and expanding its geographic presence into our global footprint in the years ahead.”

Ulta Beauty Unveils a $25 Million Diversity and Inclusion Initiative; Plans To Double Black-Owned Brands (February 2) Company press release

• Ulta Beauty has unveiled a plan to invest over $25 million in 2021 to promote diversity in its product range and stores. As part of the initiative, the retailer will allocate $20 million to media platforms targeting Black, Latino and other minority communities, which is more than double its annual average multicultural advertising spend over the last three years.
• Ulta Beauty aims to double the number of Black-owned brands it carries by the end of 2021, backed by an additional $4 million marketing campaign promoting Black-owned brands.

EUROPE RETAIL AND TECH HEADLINES

Aldi Announces Job Opportunities for Arcadia Group and Debenhams Employees (February 1) Company press release

• Aldi has announced plans to create 4,000 new job opportunities across the UK in 2021. The company has urged employees of Arcadia Group and Debenhams who lost their jobs to apply for these opportunities. Around 25,000 jobs are likely to be impacted due to the shutdown of retail empires Arcadia Group and Debenhams.
• Aldi plans to invest £1.3 billion ($1.8 billion) in establishing new stores and distribution centers over the next two years, creating new job opportunities.

ASOS Agrees To Buy Arcadia Group’s Popular Brands (February 1) Company press release

• ASOS has agreed to purchase various Arcadia Group brands, including HIIT, Miss Selfridge, Topman and Topshop for £265 million ($361.8 million). The company paid an additional £30 million ($41.0 million) to acquire shares of Arcadia Group. The acquisition is in line with the company’s strategy to become a one-stop shopping destination for Gen Z consumers.

EG Group Agrees To Acquire Asda’s Gas Forecourt Business for £750 million (February 3) Retail-Week.com

• EG Group has secured an agreement to buy Asda’s gas forecourt business for £750 million (around $1 billion). EG Group is owned by the Issa brothers, who have agreed to acquire a majority stake in Asda along with TDR Capital.
• EG Group operates more than 6,000 forecourts globally. The company aims to complete the takeover by the second quarter of 2021.
• The acquisition will be finalized following regulatory approval by the Competition and Markets Authority and it will include Asda’s ancillary land, car washes and gas stations. Asda’s new owners also plan to sell some of the retailer’s distribution assets to institutional real estate investors.

JD Sports Enters Into an Agreement To Acquire DTLR Villa LLC (February 1) Company press release

• JD Sports entered into a conditional agreement to acquire 100% of DTLR Villa LLC, a US-based lifestyle retailer, for a total cash consideration of $495 million. The acquisition is expected to complete during the first quarter of 2021.
• The acquisition of DTLR Villa LLC will help JD Sports to enhance its presence in the north and east of the US. Previously, JD Sports acquired California-based Shoe Palace in December 2020.

The Hut Group Acquires Dermstore From Target for £251 Million (February 2) Company press release

• British e-commerce firm The Hut Group (THG) has completed its acquisition of the US online skincare and beauty retailer, Dermstore.com for a total of £251 million ($342.6 million) from US supermarket giant Target.
• The acquisition is a part of the company’s strategy to expand its beauty box business. According THG Founder Matthew Moulding, “We are delighted to welcome the Dermstore.com team to THG and accelerate our ambition to be the global digital partner of choice across the beauty industry.”

ASIA RETAIL AND TECH HEADLINES

Alibaba Posts Solid Third-Quarter Results, Beats Consensus Estimates (February 2) Company press release

• Alibaba Group posted revenues of ¥221.1 billion ($33.9 billion) in its third quarter ended December 31, 2020, up 37% year over year and ahead of the consensus estimate of ¥214.4 billion ($32.4 billion), according to Institutional Brokers Estimate System data from Refinitiv.
• For the quarter, Alibaba’s Cloud Computing business grew 50% year over year to ¥16.1 billion ($2.5 billion), driven by strong growth in revenue in the retail industry and the public sector. Alibaba Cloud achieved positive EBITA for the first time, which the company attributed to economies of scale.

Amazon Signs MoU with Government of Karnataka (January 28) Company press release

• Amazon has signed a memorandum of understanding (MoU) with the Government of Karnataka to boost e-commerce exports from the Indian state. Through this partnership, Amazon will onboard sellers from the state on its “Amazon Global Selling” program and help them to sell their products across international markets.
• Amazon India’s Director of Global Trade Abhijit Kamra said, “This partnership with the Government of Karnataka is a step towards elevating [hundreds of thousands] of SMEs from across the state to a global level. The Amazon Global Selling program has enabled more than 70,000 Indian exporters to cross $2 billion in cumulative exports, which showcases [millions] of Made in India products.”

Fabindia and Hidesign Come Together To Launch a Joint Store in Chennai (February 2) Fashionnetwork.com

• Indian fashion brand Fabindia and leather products manufacturer Hidesign have come together to open their first-ever joint store in Chennai’s Pondy Bazaar.
• The store will house Fabindia’s apparel and selected home and lifestyle products as well as showcase Hidesign’s premium leather bags and accessories. In addition, the store will also have a customization center to offer a more personalized experience to shoppers.

Reliance’s Deal with Future Group Halted, Interim Respite for Amazon (February 2) NDTV.com

• The Delhi High Court has temporarily halted Indian conglomerate Future Group from selling its retail assets to Reliance Industries in a deal that is valued at $3.4 billion. Amazon previously filed a petition against the deal citing that the deal violates its own contract with the Future Group.
• The Delhi High Court said that it was of the prima facie view that the Singapore tribunal order, which asked Future Retail to not sell its stake, is also valid and enforceable in India.

Vietnam Posts Lowest Rise in Retail Sales Since October (February 3) Retailnews.asia

• Vietnam’s retail sales, including services, increased by 6.4% year over year to reach ₫479.9 trillion ($20.8 billion) in January 2021, according to the General Statistics Office (GSO). This is the weakest rise in retail sales since October 2020 after a resurgence in local coronavirus infections.
• Goods retail sales amounted to ₫378.9 trillion ($16.4 billion), up 8.7% year over year and accounted for 79% of total retail sales during January 2021. The GSO noted that most enterprises, shopping centers and supermarkets have readied an abundant supply of goods to stimulate consumption ahead of the Lunar New Year later in the month.