Over 45k retail stores may close

The report highlights the most affected

Hello Retailist family! 🌟 As we approach the weekend, the excitement in e-commerce, retail, and Direct-to-Consumer (DTC) sectors is undeniable. This past week was filled with news, emerging trends, and innovations in our beloved industry. With so much information at our fingertips, are you ready to dive into the most engaging stories that have surfaced? Let’s dive into these intriguing developments and discover their implications for us!

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In the news: Top headlines this week

Over 45K retail stores may close in next 5 years: UBS. UBS predicts that over 45,000 retail stores may shut down within the next five years as e-commerce continues to expand, supported by companies like Temu and Shein. This trend is evidenced by significant store closures and bankruptcies among established retailers such as Foot Locker, Sally Beauty, and Bed Bath & Beyond, which has transitioned to an online-only model. The report highlights that the most affected sectors are clothing, consumer electronics, and home furnishings, and suggests that an economic downturn could increase the pace of these closures.[Retail Dive]

Peloton's CEO steps down as the company cuts 15% of staff. Peloton announced that CEO Barry McCarthy is stepping down and the company is laying off 400 employees, representing 15% of its workforce. These changes are part of a broader restructuring plan aimed at cutting over $200 million in annual expenses by the end of fiscal 2025. Measures include reducing the number of retail showrooms and reevaluating its international strategy. [Business Insider]

Johnson & Johnson Announces Plan To Resolve All Current and Future Ovarian Cancer Talc Claims. Johnson & Johnson has proposed a $6.48 billion plan to settle all existing and future ovarian cancer claims related to its talc products over the next 25 years. This announcement follows numerous lawsuits alleging that the company's baby powder contains asbestos and causes ovarian cancer. The settlement strategy involves a third bankruptcy filing by its subsidiary, LLT Management LLC, specifically established to handle these talc liabilities. However, this approach has faced challenges, as previous attempts to use the subsidiary's bankruptcy for settlement purposes have been rejected by courts. [Retail Wire]

Long-predicted consumer pullback finally hits restaurants like Starbucks, KFC and McDonald’s. The anticipated consumer pullback has impacted major restaurant chains, with Starbucks experiencing an unexpected decline in same-store sales, which led to a significant 17% drop in its stock price. Similarly, Pizza Hut and KFC also reported reductions in their same-store sales. McDonald’s has responded to the tightening market by adopting a more aggressive "street-fighting mentality" to attract cost-conscious customers. This shift comes after months of warnings from economists about reduced consumer spending due to higher prices and interest rates, affecting even the most robust fast-food players as they adjust to a changing economic landscape. [CNBC]

Amazon services outpace retail growth in Q1. Amazon's first quarter showed that its services division, including third-party services, advertising, subscriptions, and its cloud unit AWS, is outperforming its retail sector, generating $82.1 billion in net sales compared to $59.9 billion from its physical and online stores. Non-retail operations excluding AWS still nearly matched retail revenue with $57.1 billion. Third-party sellers now account for 61% of all goods sold on Amazon's platform, which also benefits from diverse sources like healthcare, video content distribution, and financial services. [Retail Dive]

The fishy death of Red Lobster. Red Lobster is facing potential bankruptcy due to escalating labor costs and high leases, not merely its unlimited shrimp offer, which although increased customer traffic, led to significant financial losses. Bloomberg reported that the seafood chain might file for Chapter 11, as its popular "Endless Shrimp" promotion turned from an occasional event to a permanent, yet unprofitable fixture, contributing to operating losses of $11 million and $12.5 million in consecutive quarters of 2023. [Business Insider]

Etsy misses first-quarter sales, profit estimates on lower discretionary demand. Etsy reported lower than expected sales and profit for the first quarter, as demand for its unique handcrafted goods and personalized gifts declined. The company has increased its spending on promotions and advertising but still faces challenges in competing with larger retailers and attracting cost-conscious consumers. Additionally, Etsy is contending with competition from budget-friendly e-commerce platforms like Temu and persistent inflationary pressures, which deter customers from purchasing discretionary items like jewelry and home decor. Despite its growth since the pandemic, Etsy is struggling to expand beyond its niche market, as larger e-commerce players like Amazon and Walmart capture more of the market. [Reuters]

Sam’s Club Innovates Customer Experience With AI Exit Tech. Sam’s Club has implemented AI-powered exit technology at more than 120 of its locations to enhance the customer experience by addressing the common issue of long wait times for receipt verification. This technology, introduced at CES in January, has been rapidly deployed across 20% of Sam’s Club stores within just four months, setting a new standard for the use of member-facing AI applications in the retail sector and outpacing similar initiatives by other retailers. [Retail Wire] 

Hyatt, Peloton team up to offer bikes at 800 hotels. Hyatt and Peloton have announced a partnership to provide Peloton exercise equipment and classes at over 800 Hyatt hotels globally. This collaboration, revealed on Wednesday, aims to enhance the travel experience by allowing Hyatt guests and Peloton members to maintain their fitness routines while on the road. The initiative reflects Hyatt's commitment to guest wellness and marks a significant expansion of Peloton's presence in the hospitality industry. [Fox Business]

Walmart Unveils New Premium Brand Bettergoods To Broaden Appeal. Walmart has launched Bettergoods, a new premium brand aimed at broadening its consumer appeal and enhancing access to quality food. This brand, unveiled on April 30, represents Walmart’s most significant private-label initiative in two decades and is the fastest-developed private food brand in the company's history. Set to feature over 300 items by Fall 2024, with prices ranging from $2 to $15 and many products under $5, Bettergoods is part of Walmart’s strategy to capitalize on the growing trend towards private brands, which made up 26% of the food and beverage market in 2023. This move is also a response to consumer demand for more affordable options amidst rising inflation. [Retail Wire]

Starbucks says it's launching boba-inspired drinks this summer. Starbucks is introducing boba-inspired drinks as part of its summer menu, starting the week of May 6. Announced by CEO Laxman Narasimhan during the company's earnings call, this launch marks Starbucks' first venture into "texture innovation" with plans for more such innovations in the future. The company has been testing drinks with pearls for over two years. [Business Insider]

Walmart removes self-checkout from select stores. Walmart is revising its self-checkout strategy and removing these systems from select stores, joining other major retailers like Target and Dollar General in reassessing their reliance on self-service options. Target recently limited self-checkout to transactions of 10 items or less and has provided store managers with greater flexibility in determining the mix of self-checkout and traditional cashier-operated lanes. Similarly, Dollar General is reducing the number of self-checkout systems, completely eliminating them from 300 stores most affected by shoplifting, while also increasing staff at checkout areas to enhance customer service. Dollar General's CEO Todd Vasos emphasized that despite the convenience of self-checkout, the presence of helpful and friendly staff remains crucial. [Payments Dive]

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