FROM THE DESK OF DEBORAH WEINSWIG

Was That the Sound of Black Friday Dying?

As a one-day (or even one-week) event, the traditional Black Friday looks to be dead. We publish this note partway through the Thanksgiving-Black Friday weekend and with Cyber Monday still to come. So, the full picture on Black Friday 2020 is not yet clear, but the traditional dates in the retail calendar are less meaningful than ever, with the Covid-19 impact diluting Black Friday to a month-long promotional event this year.

Our final pre-Black Friday survey of US consumers, undertaken on November 24, found that only 19% expected to shop in stores on Black Friday, although a sizable 55% expected to shop online on that day. Even if shoppers return to stores in greater numbers in future years, the direction of travel is away from a one-day, store-focused event to a weeks-long, digital-heavy event.

No Longer the Holiday Bellwether

The continued shift to online is unsurprising, but the multiweek Black Friday promotions that many retailers have been running may dilute the scale of the e-commerce spike this year. We expect that year-over-year growth in Black Friday e-commerce sales will prove more moderate than the estimated 33.5% year-over-year growth in total holiday e-commerce sales, as Black Friday sales get distributed through November. Meanwhile, we expect the change in Black Friday store traffic to underpace the holiday average: We estimate that nonfood Black Friday traffic will have decreased by 50% or more compared to 2019, versus an estimated traffic decline of 30–35% for nonfood retailers across the holiday season in total, as many consumers avoid the traditional crowds and as retailers regulate shopper numbers. (These estimates were made before our channel checks on Black Friday.)

Black Friday has traditionally been used by retailers and retail-watchers to take an “early read” of holiday trading and consumer demand, but these shifts—together with the multiyear migration of sales to e-commerce—mean its status as a bellwether of holiday retail has now passed.

The Decline of Black Friday: Here’s Why It’s Good

Retailers gain from pulling purchases forward and diluting the demand peak. By managing product availability in stores and online, working within shipping capacity and policing in-store crowds, spreading demand over an extended promotional season makes it much easier for retailers to cope. There are also indirect gains: Shoppers crossing through their holiday shopping list early in the season are more likely to keep shopping and thus spend more in total than those who buy at the last minute. Retailers can use direct marketing, loyalty schemes and promotions to keep those early shoppers coming back in November and December.

The Decline of Black Friday: Here’s Why It’s Bad

Clearly, weeks-long discounting during the holiday peak is disadvantageous to retailers: In a perfect retail world, the strength of consumer demand during the final quarter would be sufficient to allow retailers to maintain full-price retailing. However, we live in a world of near-unlimited capacity in retail—indeed, capacity becomes virtually unmeasurable online—and where shoppers can buy from brands, retailers and marketplaces worldwide. Given the extension of Black Friday in previous years and the advent of final-quarter shopping festivals such as Prime Day in October and the 10.10 Shopping Festival in 2020, we think the ship of price integrity has now firmly sailed.

Here’s What Retailers Can Do

Retailers must seek to mitigate margin erosion associated with discounting during the holiday peak, including through factoring that discounting into their buying plans. In 2021, retailers must prepare early for a highly promotional end-of-year peak, building those expectations into their plans for buying, marketing and pricing. Where they are happy to embrace a more promotional final quarter, retailers should look to the festivalization trend—either piggybacking on existing multiretailer festivals such as Singles’ Day or, where they have the scale to do so, launch their own shopping festivals, as Amazon has done with Prime Day.

• Look out for our US Black Friday Insights report in the coming week, plus see our US Holiday Retail 2020 Databank for details of what retailers announced in terms of Black Friday plans.

US RETAIL AND TECH HEADLINES

American Eagle Outfitters Witnesses Strong Sales Improvement in Its Third Quarter

(November 24) Company press release

• Apparel specialty retailer American Eagle Outfitters reported sales growth of 3.0% in its third quarter, ended October 31, 2020, versus a 15.0% decline in its previous quarter. By brand, American Eagle’s sales declined by 11%, while Aerie’s sales increased by 34%. The retailer’s digital sales were up by 29% and accounted for 37% of the company’s total revenues.
• The company reported a net profit of $58.1 million in its third quarter versus a loss of $13.8 million in its second quarter. During its third quarter, the company opened a new store selling its activewear brand “Offline,” increasing the total count for stores dedicated to this brand to four stores. The retailer said that initial responses to the Offline brand have been positive and that the management team sees activewear as a growing category.

Dick’s Sporting Goods Posts a Strong Third Quarter; Announces Key Management Changes

(November 24) Company press release

• Dick’s Sporting Goods posted very strong sales growth of 22.9% in its third quarter, ended October 31, 2020, following 20.1% sales growth in its previous quarter. Comparable sales increased by 23.2%, compared to 20.7% comp growth in its second quarter. The company’s digital sales surged by 95% in its third quarter, accounting for 21% of total revenues, versus 13% in the same quarter last year.
• Dick’s Sporting Goods has announced key changes to the company’s management structure to support its future growth and strategic initiatives: Current President Lauren Hobart has been promoted to President and CEO, effective February 1, 2021. Edward Stack, the current Chairman and CEO, will assume the role of Executive Chairman and continue as Chief Merchant from February 1, 2021.

Gap Inc. Sees Strong Sales Improvement in Its Third Quarter; Appoints New Management for Banana Republic 

(November 24) Company press release

• Gap Inc.’s sales were flat year over year in its third quarter, ended October 31, 2020, versus an 18.2% sales decline in its previous quarter. The company’s comparable sales were up by 5%, compared to 13% in its second quarter.
• By brand, Old Navy’s comparable sales were up by 17%, compared to 24% in its previous quarter; Gap’s comparable sales were down by 5% compared to a 12% increase in its previous quarter; Banana Republic’s comparable sales were down by 30%, compared to a 27% decline in its previous quarter; and Athleta’s comparable sales were up by 37%—a 19% increase compared to its previous quarter and the highest quarterly comparable sales increase in the brand’s history.
• Gap Inc. announced the appointment of Asheesh Saksena as Chief Growth Officer from January 2021 and Sandra Stangl as CEO and President of Banana Republic brand from December 2020.

Kroger Expands Its Customer Fulfillment Partnership with Ocado

(November 24) Company press release

• Supermarket retailer Kroger announced that it will expand its existing partnership with UK-based online grocery company Ocado, in order to improve the efficiency and ease of in-store product fulfillment.
• Under the expanded relationship, Kroger will combine its own technology with Ocado’s proprietary automation technology to help its employees assemble customers’ orders from shelves to facilitate the in-store fulfillment of online orders. Kroger’s Chief Technology and Digital Officer Yael Cosset stated, “Kroger aims to build a seamless ecosystem that combines the best of the physical store experience with the digital experience. Ocado’s in-store fulfillment capabilities, leveraging artificial intelligence, will further contribute to continuous improvement of the customer pickup experience.”

Nordstrom Continues To Underperform, with Third-Quarter Sales Down by Double-Digits

(November 25) Company press release

• Department store retailer Nordstrom’s total revenues contracted by 16% in its third quarter, ended October 31, 2020, following a 53% decline in its previous quarter—despite a positive impact of around 10 percentage points linked to the shift of the Nordstrom Anniversary Sale from its second quarter to its third quarter.
• The retailer’s digital sales increased by 37% in its third quarter and accounted for 54% of the total sales. Nordstrom reported a net profit of $53 million in its third quarter, representing a year-over-year decline of 58.0%.

EUROPE RETAIL AND TECH HEADLINES

JD Sports Looks To Acquire Debenhams

(November 25) TheTimes.co.uk

• UK-based sportswear retailer JD Sports is reportedly in talks with Lazard—the advisors to UK department store Debenhams—as well as administrators at FRP Advisory for a complete takeover of Debenhams, according to sources that spoke to The Times. The department store filed for bankruptcy in April 2020 for the second time in the last two years. Debenhams employs approximately 12,000 people and operates 124 stores, as of April 2020.
• British retail group Frasers left the race to acquire the bankrupt retailer earlier this month after failing to match the £300 million ($394 million) price tag demanded by Debenhams’ advisors.

HelloFresh Acquires Ready-To-Eat Meal Producer Factor75

(November 23) Company press release

• Germany-based meal-kit company HelloFresh entered into an agreement to acquire the US-based ready-to-eat meal company Factor75 for up to $277 million in cash, of which $177 million is payable upon completion and the remaining $100 million is structured as a performance-based earn-out. Factor75 expects its sales to reach $100 million in 2020.
• The acquisition strengthens the position of HelloFresh in the US market. The company’s CEO Uwe Voss said, “Direct-to-consumer ready-to-eat meals are a nascent food vertical that we believe has the potential to grow into a multibillion-dollar category over time. With Factor75, HelloFresh, EveryPlate and Green Chef, we have four high-growth food brands in our group, all benefiting from our strong growth engine, technology and supply chain infrastructure.”

Luxury Bed Maker Duxiana Partners with Furniture Retailer West Elm

(November 23) Furnituretoday.com

• Sweden-based luxury bed maker Duxiana collaborated with the US-based furniture retailer West Elm to offer a new DUX mattress, with prices in the range of $1,895 to $2,995.
• Duxiana CEO Henrik Ljung said, “The new mattress is built to stand the test of time and foster the health of its owner.” He added that the company’s OEKO-TEX certification guarantees that the bed is “completely free from any harmful chemicals or toxins.

Next Partners with Morrisons To Trial Click & Collect Delivery and Return Pods

(November 24) Retailtechinnovationhub.com

• UK apparel and footwear retailer Next has launched a new collection and returns service trial with UK-based supermarket chain Morrisons, installing Next-branded pods in the supermarket’s parking areas to improve customer convenience.
• Next has opened pilot locations at Morrisons’ car parks in Essex, Herefordshire and Leominster. The service provides consumers with contactless collections and returns for online purchases from the fashion retailer.

The Original Factory Shop Launches E-Commerce Website

(November 23) Retailgazette.co.uk

• UK discount retailer The Original Factory Shop has launched a transactional website that allows shoppers to buy over 350 products from its beauty range.
• The new website also has a Reserve & Collect service, designed to complement services in its 166 stores across the UK. The retailer plans to launch further categories on its website in the coming weeks.

ASIA RETAIL AND TECH HEADLINES

Disney Forays into Indian E-Commerce Market with Launch of shopDisney

(November 24) ETRetail.com

• Disney India has announced the launch of its online marketplace “shopDisney,” which will feature authorized licensed merchandise from Disney, Marvel, Pixar and Star Wars brands.
• The company said that over 3,000 items across various categories, including apparel, back-to-school merchandise, gifts, toys and other accessories, will be available on the website with delivery to more than 500 cities in India.

Dairy Startup Country Delight Raises $25 Million To Expand Its Offerings 

(November 23) Inc42.com

• Indian direct-to-home dairy startup Country Delight has raised $25 million in a Series C funding round, led by Elevation Capital and existing investors Matrix Partners India and Orios Venture Partners. The company will use the funding to expand its essential food offerings in the Indian market, including fruits and vegetables, oils, pulses and spices.
• Country Delight offers products in the affordable-premium category as daily subscriptions and delivers them through its proprietary distribution network. The company sources its produce directly from farms within a radius of 90 to 125 miles (around 145 to 200 kilometers).

Pinduoduo Partners with Sany To Sell Tow Trucks

(November 23) kr-asia.com

• To expand its offerings beyond consumer products, social e-commerce platform Pindudoduo has partnered with Chinese heavy equipment manufacturer Sany. Pinduoduo will sell Sany’s tow trucks on its platform, which are designed for cargo transportation.
• The e-commerce website will feature six truck models, priced around ¥300,000 ($45,610) and will include accessories such as leather covers for steering wheels.

Happay Raises $10 Million To Ramp Up Presence in China’s Tier 1 Cities

(November 25) Company press release

• Shanghai-based BNPL (buy now, pay later) company Happay has secured $10 million from Australian venture capital firm AP Ventures. With this fund injection, the investment firm will acquire a 20% stake in Happay, increasing its valuation to $50 million.
• Happay will use the capital to rapidly expand its reach across China’s Tier 1 cities, including launching partnerships with key shopping centers such as Lanzhou Center, MixC One in Xiaoshan, Shenzhen Coastal City, Shenzhen KingGlory Plaza and Shenzhen MixC World.

JD Logistics Reportedly Planning Stock Market Launch for 2021 

(November 25) Pandaily.com

• JD Logistics, the courier arm of JD.com, is reportedly planning for an initial public offering (IPO) in 2021, with an estimated valuation of $40 billion. This would be the third subsidiary that JD.com is preparing to trade in the public market this year: Its online healthcare platform JD Health and its investment and finance platform JD Digits are both in the process of filing for a Hong Kong and Shanghai IPO, respectively.
• For its third quarter of fiscal 2020, ended September 30, 2020, JD Logistics operated around 800 stores and generated $1.5 billion in revenue, contributing 5.8% to JD.com’s overall income.