Hello BoF Professionals, your exclusive ‘This Week in Fashion’ briefing is ready, with members-only analysis on the key topic of the week and a digest of the week’s top news.
This week, Sears filed for bankruptcy protection. The company presented a plan to turn its business around, including the closure of 142 unprofitable stores, and will keep operating at least through the Christmas holidays. But its chances of long-term survival are low.
Sears, once the largest retailer in America, has lost money for years and become next to irrelevant for a new generation of consumers who no longer frequent the shopping malls that the chain so often anchored. Meanwhile, Edward Lampert, the hedge fund manager who has run Sears for the last decade, has focused on financial restructuring while failing to develop a successful strategy for actually winning back shoppers.
For much of its 132-year history, the Minneapolis-born Sears was a retail pioneer that harnessed two underlying platform shifts to terrific effect. At the turn of the 20th century, on the back of improved postal delivery to rural areas in the United States, the company built a booming mail-order business. Then, 25 years later, it launched brick-and-mortar locations worth driving to just as rising car ownership made millions of Americans more mobile.
Sears was the “everything store” of its time — selling dresses and children’s toys alongside fishing tackle and tombstones — long before the arrival of Amazon. So how did one of the most innovative and successful retailers in the world fail to maintain its position?
While Sears brilliantly capitalised on retail innovations built on the postal system and the automobile, it failed to adapt as new waves of change rippled across the landscape: big box retail and e-commerce. First, Walmart’s super-centres and supply chain mastery allowed the company to best Sears on product selection and price as America’s middle class began to contract, driving what Deloitte has dubbed a “great retail bifurcation” that favoured premium and low-cost players at the expense of mid-market stalwarts like Sears. Then, Amazon reinvented Sears’ original mail-order business with its own internet-powered “everything store.”
“Sears was essentially the Amazon of its era, but the chain missed several key shifts,” said retail futurist Doug Stephens. “The first was a compression of the middle-class. The second was e-commerce. Given its pioneering approach to catalogue retail, Sears could have and should have owned e-commerce, but it failed to invest sufficiently, leaning instead into its brick-and-mortar formats. Lastly, Sears never bridged the gap to a younger, more urban consumer.”
Often times, tremendous success with a particular approach is precisely what creates the blind spots that prevent companies from seeing and surfing major vectors of social, economic or technological change. “Success is often a company’s worst conspirator, but the format, philosophy and formula that got you here doesn’t guarantee you a ticket to the future,” explained Stephens.
In the 1990s, Walmart, too, fell prey to a similar dynamic, investing in more of its highly successful super-centres at the expense of e-commerce, and the largest retailer in the US now finds itself locked in an existential battle with Amazon and has acquired companies like Jet and Bonobos in a bid to keep up as consumption moves online. And, as unthinkable as it seems, even Amazon, today’s dominant retail disruptor par excellence, may one day become a victim of its own blind spots and the next seismic change to shake up retail.
To some degree, it’s simply the natural lifecycle of companies and Sears was remarkable for riding not just one but two major waves of change. But while death is ultimately inevitable for all companies, how can firms stay alive as long as possible?
“Every business’ objective should be to determine how to put itself out of business before someone else does,” advised Stephens. “It’s also important to recognise that every business is simply a platform for delivering value to consumers. What that value is and how it’s conveyed must remain adaptable to change.”
This is perhaps more true than ever in a digital world where consumers are increasingly fickle and disruption can strike faster than ever. “In the new era of retail, all businesses need to think of themselves as software that can be constantly upgraded, updated and reengineered.”
THE NEWS IN BRIEF
BUSINESS & THE ECONOMY
Burberry debuts monthly product drops. The legacy British brand will be “dropping” new products on the 17th of each month. Dubbed B Series, the monthly releases will “range in scale and availability,” the company said, which started with white sweatshirts and T-shirts with red “TB” logos. The 17th date was not an arbitrary decision: 17 is the lucky number for chief creative officer Riccardo Tisci, a known enthusiast of astrology and new-age spirituality.
Losses mount for Asia’s luxury stocks. Over the past week, Prada lost almost $2 billion in market value, while L’Occitane and Shiseido also tumbled, as consumer sentiment in China continues to decline. Chinese consumers account for over a third of sales in the global luxury sector, the growth of which many speculate will be hindered by rising business costs, employment contraction and the ongoing US-China trade war. Ermenegildo Zegna tightened its budget for China investment next year. But not everyone is worried. Swiss watchmaker Patek Philippe, one of the remaining independently owned brands in the sector, still has strong demand across the world despite the China downturn.
Rent the Runway partners with WeWork. Users of the monthly subscription rental service will soon be able to return worn items in 15 WeWork locations across the US. Previously, customers could only drop off garments in Rent the Runway’s five physical stores or ship the clothes back, causing a delay in receiving new items as part of the company’s “endless wardrobe” concept.
Tod’s denies possible sale. Diego Della Valle, the company’s chairman, denied that his family — which owns just over 60 percent of the Tod’s Group — plans to sell their stake. An Italian newspaper reported earlier that Della Valle began to reorganise family’s holding companies, which could lead that to a future sale of the group.
Walmart expects fastest sales growth in 2019. The world’s largest retailer forecasts same-store sales will grow up to 3 percent next fiscal year, following expected growth of 3 percent this year. Bloomberg data indicates that this would be Walmart’s highest rate of growth since 2008. This momentum is driven by the big box retailer’s online finesse, successfully vying for digital market share against Amazon. Online shoppers spend nearly twice as much as brick-and-mortar consumers.
ASOS annual profit up 28 percent. The online fast-fashion retailer beat analyst forecasts this week, reporting a profit of $134.4 million between 2017 and 2018, a 28 percent increase since last year. Retail sales totalled $3.1 billion, while its active customer base grew by 19 percent. Asos predicts sales growth of 20 to 25 percent in the next year. Its latest campaigns include a bid for the gender-neutral market, introducing a line of products that aren’t categorised by gender.
Nine West files amended bankruptcy plan. After filing for bankruptcy protection in April, the holding company for the famous mall shoe brand filed a Chapter 11 plan that will cut its pre-bankruptcy by more than $1 billion. Under the amended plan, shareholders can see up to $105 million in cash recovery for their claims. Nine West Holdings Inc. sold its namesake brand along with Bandolino footwear and handbag business to Authentic Brands Group for $340 million in June. In its Wednesday filing, the company said it has inked a three-year purchase commitment from Belk, a department store chain, for a selection of products across its remaining portfolio brands, including Anne Klein and Gloria Vanderbilt.
Maison Kitsuné targets $100 million in sales. With 16 stores across the world and more than 400 stockists, the Paris-based label aims to generate €100 million in annual revenue within the next five years. Founded by Daft Punk manager Gildas Loaëc and architect Masaya Kuroki, Kitsuné originated as a music label with a small fashion business in 2002. But it found immense success in its ready-to-wear line, which now drives 90 percent of revenue.
Superdry tumbles. The UK apparel retailer said unseasonably hot weather will shave £10 million ($13 million) off its 2019 profit. Shares fell as much as 22 percent in London, touching the lowest level since 2015. Superdry joins a growing list of European retailers, including Moss Bros Group and Zalando, that have said they suffered because of the heat this year. The retailer expects a further hit of about £8 million because a currency hedging strategy did not provide the expected protection.
Vans boosts VF Corp. The apparel maker posted better-than-expected quarterly results and raised its full-year profit forecast thanks to thriving demand for Vans shoes and North Face apparel. Net revenue rose 15 percent to $3.91 billion. Vans has been keeping its inventory channels clean and selling products at full price, while also refreshing styles to make its brands more popular among millennials and compete with Nike.
Charlotte Tilbury sponsors VS Fashion Show. The makeup artist’s beauty brand, which is celebrating its five-year anniversary, is the exclusive makeup partner for the Victoria’s Secret’s annual extravaganza this year, which will be held in New York. The fashion show has traditionally served a powerful marketing tool for the brand. But the lingerie maker is struggling to drive sales, as its sexy image is thought to be increasingly out of sync with consumers in the world’s largest markets.
Deciem founder removed from CEO role. An Ontario Superior Court judge removed Brandon Truaxe from the helm of the skin care company he founded five years ago. The Estée Lauder Companies, which owns 28 percent of Deciem, applied for an injunction to relieve Truaxe after he ordered the company to shut down in an Instagram post. Co-chief executive Nicola Kilner will serve as interim CEO.
Alexander Wang CEO exits. Lisa Gersh, a former Martha Stewart and Goop executive, is exiting the New York-based label after just one year in the position. Wang will assume Gersh’s duties while the company begins its search for a new CEO.
Smythson names CEO. Xavier Rougeaux, who previously served as Smythson’s COO, rejoins the leather-goods and stationery company from LVMH-owned Loro Piana. He will work closely with creative director Luc Goidadin, who joined the business in February. Rougeaux’s appointment is the latest move by Nicole Bahbout, daughter of Smythson owner Jacques Bahbout, who took over as head of brand in March 2017 and plans to ramp up Smythson’s international profile and elevate its product offering.
MEDIA & TECHNOLOGY
Amazon Fashion to open London pop-up. The 3,000 square foot space, located on Baker Street, will open on October 23 for seven days, stocking a curated mix of men’s and women’s brands, including Calvin Klein, Tommy Hilfiger, as well as Amazon private label lines: Find., Truth & Fable and Meraki. The pop-up marks the e-commerce giant’s European debut in the brick-and-mortar retail space.
H&M backs AI-powered Thread. The corporate venture arm of the fast fashion behemoth, dubbed CO:LAB, funnelled $13 million into London-based menswear e-tailer Thread as part of a $22 million Series B investment round. Thread uses artificial intelligence to power online personal styling service selling premium-priced men’s fashion. This marks CO:LAB’s 12th investment since it was founded in 2014 and second-biggest after fintech firm Klarna, in which it invested $20 million.
Hermès launches China e-commerce. The French luxury label opened its online shop in China on Wednesday, taking a cue from its competitors such as Louis Vuitton. In a September interview, Hermès’ CEO said he had also considered a partnership with JD.com, the second biggest e-commerce platform in China. An assortment of ready-to-wear items, accessories and fragrances will be available on the new website.
JD.com launches parcel delivery. The Chinese e-commerce platform has unveiled a new service allowing people and businesses in Beijing, Shanghai and Guangzhou to send packages across China, with plans to expand the vertical to anywhere in the country. The firm will use an existing network of drivers and warehouses that it uses for deliveries from its own platform. JD.com reported a net loss of $334.4 million in its second quarter, in part due to declining sales and an uptick in investment costs.
Vestiaire Collective rebrands. The luxury resale site will adopt a new visual identity, website and logo as the company faces growing competition in the $6 billion high-end consignment market. Rebranding efforts will also include updated packaging and a campaign that promotes resale as a modern alternative for the luxury and sustainability-conscious consumer. Vestiare Collective raised $62 million in a funding round last year, using the capital for international expansion.
BoF Professional is your competitive advantage in a fast-changing fashion industry. Missed some BoF Professional exclusive features? Click here to browse the archive.