February Three

This midweek Fix goes deeper on everything retail - DTC / DNVB/ O2O/ Omnichannel  etc and we aim to give everyone involved in this vibrant new economy insight and tips that help make your business more efficient. Tell me how we can make this better  - hit reply.

Iconic Merchants - People still love shopping — in Shops.

High Street Blues
 
The High Street is being reshaped and everyone is blaming the relentless rise of DTC. But people still like going shopping — see Regent Street when we came out of lockdown — and the problems with Arcadia and Debenhams seem to have more to do with financial engineering than customer preferences.
 
Now there are two big questions. Are the brands worth what it costs to buy their digital presence? And is there any role for their flagships stores?
 
It looks like financial engineering comes into effect here too.
 
TopShop is a strong brand and ASOS shipped a lot of their product - and this deal turns TopShop into own label, avoiding the wholesale mark up. In a good Business of Fashion piece, the ASOS CEO said;
 
“This is our consumer and we can overlay some of what we do best [and] drop the brand straight onto our platform and our model,” “This operation will come at [a] very low incremental cost to us.”
 
He also hints there may be a role for their flagship Oxford Street store - although he has no intention of buying the building. So an opportunity for the landlord to work with ASOS to reinvent how retail works at this iconic location? TopShop on the ground floor and an ASOS curated House of DTC Brands on the second? Someone call Appear Here.
 
The other deal sees BooHoo buy Debenhams and whilst the transactions look similar, there are significant differences.
 
ASOS and Arcadia are essentially more of the same — fast fashion, bought by the young. Which also describes the BooHoo business — but Debenhams has a much wider range of merchandise and a broader customer base. The Debenhams online presence is stronger than TopShop - a top 10 online retailer in terms of traffic. The FT think BooHoo have a bargain and say
 
Running a marketplace will drain management attention but offers the promise of creating a UK version of Zalando, its higher valued German peer.
 
I can see why no one wants the ‘messy stuff’ of the stores and the staff, but as we see Merchants around the world recognise the benefits of an omnichannel approach, I think we will see fresh thinking around physical stores. All those people on Regent Street saw a store visit as worthwhile and there are equivalent destination streets across the UK.
 
Some merchants are going to do well servicing these people.
 
One of the benefits of a store is reducing the cost of returns —  this piece on US returns highlights how expensive returns are for Merchants.
 
And talking with a number of people in the Fashion business, the realities of Brexit may make UK customers more of a priority as European exports falter.
 
High Fashion
 
Farfetch has also prospered through Covid — their market cap is up by almost 500% — and the partnership with Richemont and Alibaba injected another $1billion to fuel their Bid to Dominate Luxury E-Commerce.
 
One area of investment is marketing and this good analysis of their plans reminds of the overlap between DTC and Adtech - and in particular here, newTV. The article describes how they targeted their customers across a range of newTV partners as well as other digital and traditional marketing. And they recognise the value of stores as Brand Cathedrals;
 
Elsewhere, the company is set to open a new flagship store on London's Brook Street, showcasing technology such as a "magic mirror" that displays fashion show runway walks and styling tips for the garments customers are trying on in the changing rooms.

Action? Is your marketing as modern as your business model? Are you getting to just the right people?

Credit
 
Often the single most effective thing a Merchant can do is reduce basket abandonment. One tactic is simplifying the payment method — adding Apple or Google Pay or Paypal always helps. And recently we have seen great success with offering Buy Now Pay Later. Firms like Klarna and Affirm have grown quickly with their products really effective at improving conversions, Klarna is one of Europe's most valuable startups and has inspired a bunch of imitators.
 
But the gaps in regulation that let many fintech businesses thrive are closing. The UK Financial Conduct Authority is now to regulate this sector and bring them into line with other firms offering loans and credit.

Action? What could you test this week to try and improve your checkout experience?

Last Mile Logistics
 
One of the more noticeable effects of lockdown is seeing the streets clogged with delivery vans and bikes. Part of that is WFH so you see it more, but it’s also true Last Mile delivery has increased substantially. The logistics behind this are fascinating - railway arches are now Dark Kitchens or local storage - working on the Pareto principle.
 
Ocado have a quick service called Zoom, working out of a warehouse in Acton and are moving to electric vehicles and pedal powered ones. Customers can choose from 10000 items - compared to 58k for the full Ocado service. This number of SKUs dictates a lot - for the full 58k items Ocado has huge robot driven warehouses - but many new players are offering a really fast local service - albeit from a smaller range.
 
Just this week we have seen news of investment in Turkish start-up Getir to launch a grocery delivery service in London. They do 5m orders a month in Turkey and in London they will cover all of Zone1 and most of Zone 2, with their own drivers working from a number of their own distribution centres.
 
I was given a leaflet for ASAP in Broadway Market and saw Instagram ads for WeBother and Weezy. And spurred by a Benedict Evans Tweet asking How many people are using Deliveroo to sell booze, snacks and cookies out of a lock-out garage? I find there are 38 firms offering me grocery delivery on Deliveroo.
 
VC Michael Moritz led the Getir investment and said;
 
“I’m sure eventually it will consolidate,” “But that’s part of the fun of the chase.”
 
Everyone thinking about this space looks at Instacart and Doordash for inspiration. The Instacart founder sums up the prize in a good Forbes piece on his business;
 
“Grocery is the largest retail category in the world, and yet it’s still not digitized. We’re excited by what the future looks like.”
 
In the same piece a Brand exec highlights the problem they face;
 
“They have let the fox into the henhouse,” says Joel Warady, a former Mondelez brand executive. “The more [grocers] partner with Instacart, the more vulnerable they might become. If I was a retailer, this would really scare me.” 
 
The big winner in Convenience Store delivery in the US has been Doordash