Zara has a secret weapon to fight against fast-fashion Shein

Zara seeks to regain its competitive edge

February 23, 2024

Hello from the editorial team at Retailist! As look towards the weekend, the pace of the e-commerce, retail, and Direct-to-Consumer (DTC) sectors continue to rapidly move. This past week, we've seen a variety of industry updates, emerging trends, and new narratives within the retail industry. Let's delve into the leading stories.

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In the news: Top headlines this week

RFID has been around for decades. Radio-Frequency Identification (RFID) technology, which originated from radar research during World War II, is increasingly being utilized by retailers not just for inventory management but also as a potent tool against theft and shrinkage. By attaching RFID tags to more merchandise, retailers are able to gather extensive data, which is instrumental in enhancing the precision of inventory tracking and in combating retail crime more effectively. [Retail Dive]

Lefties: Zara's secret weapon in fast-fashion fight against Shein. Inditex, the parent company of Zara and the world's largest fast fashion retailer by sales, is leveraging its budget-friendly, Gen Z-targeted brand Lefties to compete with the rising success of Shein, a Chinese-founded online fast fashion retailer. As Shein's growth challenges traditional retailers like Inditex and H&M with its competitive pricing and exclusively online presence, Zara seeks to regain its competitive edge by expanding budget options, despite previously raising prices at its core brand to counter inflation and target more upscale customers. [Reuters]

Toast to cut 550 employees. Toast, a payments company serving the restaurant industry, is laying off 550 employees, about 10% of its workforce, as a move to scale back after a period of rapid growth and expansion proved to be unsustainable. CEO Aman Narang cited over-expansion in some areas as a key reason for the layoffs, emphasizing the decision as difficult but necessary for restructuring the organization to better align with its priorities, despite the company's presence in 106,000 locations and rising revenue. [Payments Dive]

Wingstop says its chicken sandwiches are bringing in a new type of customer: richer, kid-free millennials and Gen Zers. Wingstop has observed that its chicken sandwiches are attracting a new demographic of diners: wealthier, younger millennials and Gen Zers who typically do not have children, differing from its traditional customer base. According to CEO Michael Skipworth, these customers not only visit Wingstop more frequently but also spend more with each order, indicating a significant shift in the chain's appeal and customer dynamics. [Business Insider]

Can Hasbro Recover and Turn Business Around After Eliminating 50% of SKUs? Hasbro's latest financial disclosure revealed disappointing Q4 and full-year 2023 performance, missing analyst expectations with a significant 23.2% drop in year-over-year revenue to $1.29 billion and a sharp decline in non-GAAP profit per share from $1.31 to $0.38. This downturn has led to speculation about the company's future direction, especially in light of Wall Street's forecast of an 11.6% revenue decline over the coming year. Despite these challenges, Hasbro's long-standing reputation for creating iconic toys and entertainment, such as Mr. Potato Head and the Rubik’s Cube, suggests potential paths for strategic innovation and market recovery. [Retail Wire]

Activist Arkhouse launches proxy fight at Macy’s, nominates nine directors. Arkhouse Management has initiated a proxy battle at Macy’s by proposing nine directors to the department store's board, including high-profile individuals like Ric Clark, Mo Meghji, and Isaac Zion. Following Macy's rejection of Arkhouse's $5.8 billion takeover bid in December, citing concerns over the financing, Arkhouse responded by providing additional details about their financial backing, which involves equity partners managing over $75 billion in assets. Arkhouse is pressing Macy’s board for clarity on any further information needed regarding its financing to address any residual doubts, signaling a determined push to reshape the retailer's governance. [CNBC]

Bed Bath & Beyond, Overstock name new CEOs. Bed Bath & Beyond and Overstock have appointed new CEOs as part of a broader executive leadership reshuffle aimed at propelling the companies through significant transformations. Chandra Holt, previously with Conn’s HomePlus, takes the helm at Bed Bath & Beyond, while company veteran Dave Nielsen becomes CEO of Overstock, and Adrianne Lee is promoted to chief financial and administrative officer, with all changes effective immediately. This strategic move, highlighted by executive chairman Marcus Lemonis, is intended to drive shareholder value and support the companies' strategic objectives during a period of major change. [Retail Dive]

Target shoppers say the store's dupes of luxury perfumes smell better than the real things.  In 2024, Target has become a popular destination for fragrance enthusiasts seeking affordable alternatives to luxury perfumes. TikTok users are especially vocal about Target's Fine'ry perfume line, noting that these scents rival those of high-end brands for a fraction of the cost, with prices ranging from $13 to $30. Notably, the scent "Not Another Cherry" from this line has been highlighted for its striking resemblance to Tom Ford's "Lost Cherry," offering a blend of wild cherry, almond amaretto, and Turkish rose, all while being vegan and free from parabens and phthalates. [Business Insider]

What’s the Recipe for Total Wine’s Success? Total Wine & More has overtaken Costco to become the largest alcohol retailer in the U.S., a feat attributed to its vast selection and expansive store layouts. Each store boasts an impressive array of more than 8,000 wines, over 2,500 beers, and upwards of 3,000 spirits, housed within spaces that range from 25,000 to 50,000 square feet, designed with bright displays and organized aisles for easy navigation. Additionally, Total Wine ensures competitive pricing through meticulous market analysis, promising customers the lowest prices by leveraging its significant buying power and relationships within the industry. [Retail Wire]

Companies — profitable or not — make 2024 the year of cost cuts. In 2024, a wide array of companies, regardless of their profitability, have committed to reducing expenses, signaling a clear intention to Wall Street about their cost-cutting measures. High-profile companies such as Mattel, PayPal, Cisco, Nike, Estée Lauder, and Levi Strauss have recently announced job cuts. Additionally, Macy’s plans to close five stores and eliminate over 2,300 positions, while airlines like JetBlue and Spirit offer staff buyouts, and United Airlines reduces in-flight services to cut costs. This trend reflects a response to consumer spending caution and investor demands for financial prudence amid returning or declining consumer demand and rising operational costs. [CNBC]

Why social commerce is transforming online retail. Social commerce, the fusion of social media and e-commerce, is revolutionizing online retail by leveraging platforms like TikTok and Instagram where consumers increasingly browse and shop. This trend underscores the importance for brands to engage with consumers directly on these platforms to tap into new customer bases. Moreover, the 2023 Online Consumer Behavior Global Report reveals that the vast majority of consumers, 82%, visit multiple websites to compare before making a purchase, highlighting the demand for convenience and variety in online shopping. [Retail Dive]

Rise of fast-fashion Shein, Temu roils global air cargo industry. The swift expansion of fast-fashion e-commerce giants such as Shein and Temu is significantly disrupting the global air cargo industry. Their competitive strategy of securing limited air-cargo space to offer quick delivery times is leading to increased air-freight costs from Asian hubs and causing capacity shortages. With Shein and Temu shipping almost 600,000 packages daily to the U.S., traditional off-peak seasons are vanishing, according to industry insiders and a June 2023 U.S. Congress report. [Reuters]

It looks like high-income shoppers are becoming increasingly loyal to Walmart. Walmart is witnessing a surge in loyalty from affluent consumers, with a growing number of high-income shoppers not only visiting the retailer for affordable groceries but also for a wider range of goods, including clothing, electronics, and home items. During the Q4 fiscal 2024 earnings call, CFO John David Rainey highlighted that the retailer has seen an increase in market share across nearly all categories, particularly noting significant growth from households earning over $100,000 annually. [Business Insider]

How Will the Starbucks Inclusive Spaces Framework Change Retail? Starbucks is pioneering the Inclusive Spaces Framework to increase accessibility in its U.S. stores, responding to the needs of the one in six adults living with a disability. This initiative, developed in collaboration with a diverse group of stakeholders, will be applied to all new and remodeled company-operated stores, aiming to improve the experience for partners, customers, and communities alike. The first store to implement this framework opened in Washington, D.C., at Union Market, setting a new standard for future Starbucks locations with its innovative accessibility features. [Retail Wire]

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