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FROM THE DESK OF DEBORAH WEINSWIG
Retail Spending Remains Healthy Despite Mixed Signals on the “Wealth Effect” Signals are mixed on how the wealth effect—when consumers feel affluent due to the value of their stock portfolios or home equity—gives them confidence to bolster their spending. As we approach the middle of the year, one sign is negative, one is positive and one alternative sign is highly negative. Let’s start with stock portfolios: they’re down so far this year. At the time of this letter’s writing, the broad S&P 500 Index is down more than 20% year to date, putting it officially into “bear market” territory. The decline is even more severe for the technology-heavy Nasdaq index. Unless holders decide to sell, these declines only represent paper losses, and long-term investors can enjoy the average 10% annual return in the stock market over the last decade, according to a calculation from personal finance company NerdWallet.Figure 1. Relative Stock Index Performance, Year to Date [caption id="attachment_149668" align="aligncenter" width="700"]
Source: Yahoo! Finance/Coresight Research[/caption]
Many consumers’ primary means of accumulating wealth is through home ownership, and these data are more positive. Home prices have been on a steady upward march over the last 12 months, up 20.5% year over year, based on the S&P/Case-Shiller index with data available through March 2022.
Figure 2. S&P/Case-Shiller U.S. National Home Price Index, 12 Months to March 2022 [caption id="attachment_149669" align="aligncenter" width="700"]
Source: Fred/S&P Dow Jones Indices LLC[/caption]
Then there are cryptocurrencies. Despite the many understood advantages of Bitcoin and Ethereum and cryptocurrency’s position as a building block of the metaverse, these currencies have declined sharply year to date. Even some cryptocurrencies thought to be “stable” have disintegrated. Whereas many new investors thought crypto could only go up, the currencies are extremely volatile and have moved in tandem with major stock indexes. Our recent Metaverse Latest report discusses volatility in cryptocurrency and NFT (non-fungible token) markets.
Figure 3. Relative Cryptocurrency Performance, Year to Date [caption id="attachment_149670" align="aligncenter" width="700"]
Source: Yahoo! Finance/Coresight Research[/caption]
Thus far, consumers appear sanguine about changes in drivers of the wealth effect. Despite the above changes in asset values, a stubbornly high inflation rate and shocking new highs in gasoline prices, they continue to spend. May retail sales were up 6.5% year over year, we calculated. Interestingly, consumer spending appears to be healthy in affluent segments, as demonstrated by recent reports from Macy’s, Nordstrom and Neiman Marcus that sales and margins were above pre-pandemic levels. Still, affluent consumers do monitor their stock portfolios and home-equity values, and their spending can be pulled in quickly, although they do not yet appear to be spooked by declines in their portfolios and crypto wallets.
US RETAIL AND TECH HEADLINES
Apollo Funds Acquires Supermarket Chain Cardenas Markets (June 13) Company press release- Private equity firm Apollo Funds has agreed to acquire grocery chain Cardenas Markets, which operates 59 stores in California, Nevada and Arizona and specializes in Latin American cuisine.
- The acquisition will be made using investment funds affiliated with global investment firm Kohlberg Kravis Roberts (KKR). The deal follows Apollo Funds’ acquisition of grocer Tony’s Fresh Market in April 2022.
- Home-goods retailer Bed Bath & Beyond has collaborated with Rebuilding Together, a non-profit organization dedicated to ensuring safe and healthy homes and communities, to provide no-cost home repairs and essential household items across the US.
- As a part of the program, Bed Bath & Beyond will support more than 25 no-cost home repairs projects nationwide during 2022. Project volunteers will be local associates from the company’s Bed Bath & Beyond, buybuy Baby, Harmon Face Values and Decorist banners.
- Travel retailer Hudson, owned by Dufry, has rolled out the Amazon One biometric payment service and Just Walk Out frictionless shopping technology at its first Hudson Nonstop Grab and Go store at Nashville International Airport.
- The new store spans just over 1,000 square feet of concession space and is the first Hudson Nonstop store to exclusively offer food and beverage products. To pay, customers can hover their palm over an Amazon One device, which registers their unique palm signature and charges their account accordingly.
- Grocery delivery platform Instacart has announced its collaboration with Pressed, a cold-pressed juice and plant-based snacks maker, to provide e-commerce fulfillment for all US Pressed stores.
- Instacart will deliver Pressed products to consumers within one hour in Southern California, as well as Austin, Texas, Dallas and Houston, with plans to expand the partnership in the coming months.
- Grocery retailer SpartanNash has acquired Shop-N-Save Food Centers, a three-store supermarket chain in Michigan. The Shop-N-Save stores in Benzonia, Fremont and Ludington have been converted to the Family Fare banner, part of the SpartanNash retail grocery business.
- The new Family Fare locations will also house pharmacies and offer SpartanNash’s Our Family brand products and Yes Rewards loyalty program, through which members get access to digital coupons, featured clubs and other perks to save on groceries and household products.
EUROPE RETAIL AND TECH HEADLINES
Abercrombie & Fitch Extends Same-Day Delivery Service (June 14) RetailGazette.co.uk- US fashion retailer Abercrombie & Fitch has collaborated with UK courier service provider Gophr and software service provider Delivery Solutions to improve its fulfillment capabilities for over 30 Abercrombie & Fitch, Abercrombie Kids and Hollister locations.
- UK shoppers can shop the full range of clothing available in their local stores for same-day delivery.
- French hypermarket chain Carrefour has announced its partnership with Swiss coffee brand Nescafé Dolce Gusto to make it easier to recycle used coffee capsules in select stores.
- The collaboration aims to prevent coffee capsules from ending up in landfills. The project is being tested in Carrefour’s hypermarket in Galeria Mokotów, as well as two city supermarkets.
- German supermarket chain Edeka has partnered with Naturland, a German international association for organic farming, in order to expand its organic products range.
- Edeka will add 40 new regional and international Naturland-certified products to its Naturkind and Bio segments. Edeka stated that the products that are certified by Naturland meet high ecological and social standards, which exceed the requirements set by the European Union.
- UK fast-fashion retailer Missguided announced that its former CEO and Founder Nitin Passi has been reappointed as a CEO after stepping down from the role following the acquisition of Missguided by British sports-goods retailer Frasers Group in April 2022.
- In April 2022, Missguided appointed administrators from US management consulting company Teneo to explore strategic options after struggling with supply chain costs, general cost inflation, a weakened consumer market and increased competition. However, Teneo’s efforts were not successful and Missguided fell into administration in May 2022, before being acquired by Frasers Group for £20 million ($24 million).
- German online fashion retailer Zalando has acquired a majority stake in Highsnobiety, a sneaker blog-turned-luxury fashion and lifestyle publisher. Highsnobiety will serve as a strategic and creative consultant to Zalando, boosting the retailer’s inspirational storytelling and assortment curation capabilities, according to the company.
- Highsnobiety CEO and Founder David Fischer will retain a minority stake in the company and continue to run the business as a separate entity with Co-Managing Director Jürgen Hopfgartner.
ASIA RETAIL AND TECH HEADLINES
Foxtale Raises $4 Million (June 14) MoneyControl.com- Indian direct-to-consumer (DTC) skincare brand Foxtale has raised $4 million in a pre-Series A funding round led by Matrix Partners India. The round also included existing investor Kae Capital.
- The company plans to use funds to scale its business, hire senior staff and expand its product lines. Foxtale launched in December 2021 after raising $730,200 in August 2021, aiming to bring innovative ideas to the skincare industry and produce goods that cater to customer demand.
- Swedish furniture giant IKEA is set to close its store in Shanghai's Yangpu district next month, marking the company's second store closure in China within two months.
- In April 2022, the company closed its store in Guizhou province, marking the retailer's first mainland China store closure since its entry in 1998. The retailer has 37 locations around the country and plans to open five new locations in Shanghai this year.
- Apparel and footwear brand owner NIKE has opened a concept shop in Hong Kong, built by Dubai-based retailing and distribution company GMG, in an effort to expand its presence in Asia. The new NIKE store offers men's and women's sportswear in a variety of categories, including running, basketball and fitness training.
- NIKE recently purchased NIKE retail outlets from SUTL Corporation in April 2022, allowing it to grow its footprint in Singapore and Malaysia.
- Indian Logistics aggregator Shiprocket has acquired an 80% stake in rival Pickrr, an e-commerce software-as-a-service (SaaS) platform, for $200 million, triggering a significant consolidation in the industry.
- Avendus Capital acted as the exclusive financial advisor to Shiprocket on this transaction. Shiprocket and Pickrr cater to India’s burgeoning DTC sector.
- Shopee, the e-commerce arm of Southeast Asian Sea Group, is set to lay off employees in its Shopee Food and Shopee Pay teams in Indonesia, Thailand and Vietnam. In March 2022, the company shut down its e-commerce business in India.
- The company stated that its plan is aimed at “rationalizing its e-commerce business,” as rising inflation and high-interest rates have hit the global startup ecosystem.