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Weinswig’s Weekly

Weinswig’s Weekly — September 27, 2019

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Coresight Research

Key Points

September 27, 2019

  • This week’s note “From the Desk of Deborah Weinswig” looks at the rise of buy online, return in store (BORIS), and the headaches and opportunities it presents for retailers.

In the news this week:

  • Walgreens is testing drones for rapidly delivery of food and beverages, over-the-counter medications and other items.
  • Primark announced it may begin sourcing from Guatemala, Costa Rica and Mexico. Currently, Primark US sources from Asia and Turkey.
  • Alibaba’s Tmall has partnered with Japanese textile manufacturer Mitsubishi Chemical to launch a thin, heat-generating fabric called Celwarm.
FROM THE DESK OF DEBORAH WEINSWIG

BOPIS, Meet BORIS

A key part of a retailer’s service offering consists of returns. This is especially the case for online: Nearly 30% of all items ordered online are returned, compared to only 9% of items purchased in physical stores, according to brand consulting firm Invesp. These high return rates for online sales and the reverse logistics required to process them present multiple challenges for retailers – and cost retailer money. The NRF estimates product returns accounted for about $369 billion in lost sales for US retailers in 2018.

Still, there is a silver lining in returns for retailers in that they offer a largely untapped opportunity to increase loyalty.

Buy online, return in store (BORIS) is gaining traction across the globe. Across all retail categories, 42.1% of US retailers offer BORIS versus the international average of 46.7%, according to a 2018 OrderDynamics survey of retailers in seven countries. The adoption rate is particularly high for omnichannel vendors: The same study also found 70.5% of US omnichannel retailers offer BORIS, compared to the international average of 72.6%. Department stores are the sector most likely to offer BORIS in the US, with an adoption rate of 65.9%, followed by fashion retailers at 52.3% and footwear merchants 52.0%.

Consumers mainly use BORIS to avoid paying for shipping and to save time, according to a 2017 UPS survey. In the survey, 58% of consumers said they do not want to pay to return an item bought online and prefer to return items to stores. Of those surveyed, 53% of buyers choose BORIS because it is faster, while 41% say store returns are more convenient, while 38% said they return online orders in store to get an immediate refund. Finally, 34% said they would use BORIS so they can exchange the returned item for another product.

The 34% who said they prefer to return in store to exchange for another represent the real opportunity for retailers to engage the consumer and potentially drive additional sales once the customer is in the store.

The BORIS model requires a reverse-logistics pipeline, and retailers have to account for what happens to online purchases returned in-store. Retailers can add returned online purchases to store inventory, ship them to another store or return them to a distribution center.

One challenge is that stores often end up holding inventory of goods that are most often returned, rather than what consumers buy. Retailers may have to mark down products or incur shipping costs to send them to another store or distribution center. And while store associates are busy putting returned items back on the shelf, they have less time to interact with customers.

By shipping the returned items to another store or distribution center, retailers can reduce markdowns and manage inventory more efficiently, freeing up store associates to engage with customers. Still, this approach is not as cost-effective as incorporating returned items to in-store assortments due to shipping expense, having the goods unavailable for sale while in transit, and the risk of the items being lost or damaged.

That said, for all the benefits BORIS offers for customers and retailers, many retailers are working hard to drive down online return rates by ensuring online product listings are detailed and accurate, product imagery and video are comprehensive and customer reviews are abundant. New technology such as apps that help online shoppers get the right fit also help.

See our report Solving Retail’s Most Expensive Problems with AI to learn more about what companies are doing to drive down return rates, and learn more about BORIS from our report Buy Online, Return In Store: Assessing Strategies and Drivers of Adoption.

 

US RETAIL & TECH HEADLINES

Pinterest’s New Shop the Look Collections Lets Brands Promote Several Items in One Mobile Ad

 (September 23) Marketing Land

  • Pinterest announced it would soon be releasing Shop the Look ads in a new collections format for mobile. The ads will roll out in the US over the coming months. The company is also redesigning the layout and expanding into more countries.
  • The soon-to-be-released Shop the Look mobile collections ads for mobile will allow brands to showcase up to four products. The company said the ad format was inspired by its organic Shop the Look pins businesses can tag up to 25 items in a single image.

Western Union Enables Real-Time Account-To-Account Cross-Border Payments for Banks, Digital Wallets

(September 23) PYMNTS    

  • Western Union announced it has expanded its real-time global payments capabilities to include real-time account-to-account transfers to an account or a mobile wallet for select banks or digital wallet providers in 17 countries.
  • Recipients will receive funds within minutes. The service will enable cross-border, cross-currency payment capabilities for C2C, B2C and B2B.

Macy’s to Make Same-Day Delivery Free in 30 Markets, for a Limited Time

(September 19) Retail Dive

  • Macy’s announced that starting October 1, same-day delivery will be available in 30 markets nationwide on orders of $75 or more, without the company’s usual $8 fee. The department store said the pilot will last only a limited time, yet to be determined.
  • Same-day delivery of online orders at Macy’s and Bloomingdale’s was first launched in 2014. Customers who choose same-day delivery on qualifying orders placed by noon local time Monday through Saturday or 10 a.m. local time on Sunday will receive items the same day.

Walgreens to Test Drone Delivery Service with Alphabet’s Wing

(September 19) CNBC

  • Walgreens is testing a new, on-demand delivery service with Alphabet’s drone delivery service Wing, beginning next month, the companies announced. The pilot program will deliver food and beverage, over-the-counter medications and other items within minutes, Walgreens said. Prescription deliveries will not be available.
  • Amazon said in June its new delivery drone should be ready “within months” to deliver packages to customers.

Amazon Expands Cash Payment Services Across the US

(September 19) Retail Dive

  • Amazon said that for the first time, US customers can pay for online purchases in cash at over 15,000 Western Union locations nationwide. Dubbed Amazon PayCode, the service is already available in 19 other countries, according to a company press release.
  • The no-fee transaction allows a customer to choose “Amazon PayCode” at checkout and bring payment to a participating Western Union location within 24 hours. A QR code and number provided at checkout tracks the purchase for payment and returns.
EUROPE RETAIL AND TECH HEADLINES

Sports Direct to Close Five More Jack Wills Stores

(September 24) RetailGazette.co.uk

  • On Tuesday, Sports Direct announced plans to shut another five Jack Wills stores, following the closure of eight stores last month. The stores earmarked for closure are located in Bluewater, Oxford, Newcastle, Winchester and London Gatwick airport.
  • Last month, Sports Direct acquired Jack Wills for £12.75 million ($15.8 million) in a pre-pack administration deal. As part of the deal, all UK and Ireland Jack Wills stores, including the distribution center and 1,700 employees, were transferred to Sports Direct.

Another Senior Management Departure at Marks & Spencer

(September 23) DrapersOnline.com

  • Drapers reported that Gordon Mowat has stepped down from his role as Director of Supply Chain and Logistics for Clothing and Home at Marks & Spencer (M&S). Stephen Fitzgerald, Clothing and Home Trading and Transformation Director, will take over the role in the interim.
  • Over the weekend, M&S revealed that Humphrey Singer has stepped down from his role as CFO. Singer joined M&S in July 2018.

Pinterest Introduces Shopping Ads in Germany

(September 23) FashionNetwork.com 

  • Social media platform Pinterest has expanded Pinterest shopping ads to Germany. Pinterest will now allow German firms to present products for sale on the platform through paid pins.
  • In addition to the shopping ads, companies can offer their entire product catalog in a business profile, in which several articles can be linked in a single pin. Users can be redirected to the company’s website through the pin to purchase and can also save the pin for later viewing.

Studio Launches Mobile Shopping App

(September 23) TheRetailBulletin.com

  • Findel-owned home shopping retailer Studio has launched its first mobile shopping app, Studio WOW, in partnership with software-as-a-service (SaaS) app platform Poq. Studio currently has two million customers.
  • Shoppers can gain access to a large number of products, covering a range of categories including homeware, clothing, gifts and electric products via the new app. Studio WOW also includes a credit feature to allow customers to opt for flexible payment options 

Gerry Weber Signs UK and Ireland Franchise Contract with Jonzara

(September 23) FashionNetwork.com

  • German fashion retailer Gerry Weber has signed a UK and Ireland franchise contract with Irish retailer Jonzara. Gerry Weber plans to shut all its UK stores by October, as part of an extensive restructuring announced in July. However, it will continue operating in the UK and Ireland in partnership with Jonzara.
  • Jonzara has taken over the Gerry Weber store in Newtownards, Northern Ireland, and will continue to offer the Gerry Weber merchandise to customers across the UK and Ireland via its e-commerce site.

John Lewis Partnership Faces Potential Restructuring

(September 22) TheTimes.co.uk

  • The John Lewis Partnership board is reportedly considering plans to streamline business operations. Currently, the retailers have separate HR, finance, marketing and procurement departments, and separate operating boards across three different head offices.
  • Chairman Sir Charlie Mayfield plans to reduce duplication across John Lewis & Waitrose to reduce costs, which could lead to layoffs.
ASIA RETAIL AND TECH HEADLINES

Topsports International Launches Hong Kong Initial Public Offering

(September 24) DealStreetAsia.com

  • Chinese sportswear retailer Topsports International, owned by Chinese footwear retailer Belle International, has launched a Hong Kong public offering hoping to raise about $1.2 billion.
  • The company will offer 930 million shares priced between HK$8.30 and HK$10.10 ($1.06 to $1.29) per share.

Tmall to Launch Heat Generating Fabric Celwarm

(September 23) Alizila.com

  • Alibaba’s Tmall has partnered with Japanese textile manufacturer Mitsubishi Chemical to launch a thin, heat-generating fabric called Celwarm. Tmall will launch a series of campaigns in the run up to November’s 11.11 shopping festival to market the new fabric.
  • Fashion brands that sell on Tmall, including Vero Moda, Only, Selected, Jack & Jones, Bananain, Miiow and Maniform, are already selling some products on the platform.

Alibaba Partners with AR Beauty Company Perfect Corp

(September 23) CosmeticsBusiness.com

  • Alibaba has partnered with US augmented reality (AR) beauty company Perfect Corp to offer virtual makeup try-on services. The service will be available to Tmall and Taobao customers using Perfect Corp’s AI-powered YouCam Makeup app.
  • Tmall’s General Manager Mike Tu said innovative technology would be the key in driving sales over the next three years, especially in beauty.

JD.com Launches a New E-Commerce Platform, Jingxi

(September 21) KrAsia.com

  • JD.com has launched a group-buying service through its new social e-commerce app Jingxi. The group-buying service will also be available to customers through a mini app featured on WeChat from October.
  • JD.com plans to target Chinese female customers and expand to lower-tier cities through the new app. Customers can enjoy bargains through flash sales, discounts through group-buying or by sharing a purchase with another user.

Amazon India Opens Its Largest Fulfillment Center in West Bengal

(September 20) IndiaRetailing.com

  • Amazon India has opened its fifth fulfillment center in Ranihati, West Bengal, to meet growing demand in the surrounding area. The center is now the largest fulfillment center in the state.
  • The new center will double the storage capacity in West Bengal and also create jobs. Currently, Amazon has 50 such fulfillment centers across India.
LATIN AMERICA RETAIL AND TECH HEADLINES

Yann Le Bourdon to Become L’Oréal Chile’s New General Manager

(September 23) Modaes.com

  • Yann Le Bourdon, currently President of L’Oréal Korea, will replace Enrique Teixido as new General Manager of L’Oréal Chile.
  • Bourdon has worked for L’Oréal since 1990 in various locations including France, Germany, Korea, Spain and Latin America.

Vivara Plans to Raise $396 Million

(September 23) FashionNetwork.com

  • On September 20, Brazilian jewelry retailer Vivara announced plans to raise R$1.65 billion ($396 million) through an initial public offering.
  • The company plans to offer its shares priced between R$21.17 ($5.09) and R$25.40 ($6.10) on October 8. Both Virvara and its controlling shareholders will sell shares and the funds will finance opening new stores, expanding production and launching new brands.

Prüne Opens a Flagship Store in Uruguay

(September 23) FashionNetwork.com

  • Argentinian footwear and accessories brand Prüne has opened a flagship store on Alfredo Arocena Avenue in Carrasco, Uruguay. The new 1,076-square-foot store offers a range of footwear, accessories and Prüne’s first ready-to-wear clothing line.
  • On September 19, the store organized an event to present its first clothing collection, which of which was launched on the brand’s e-commerce site and in stores across Argentina last month.

Primark to Tap Central American Suppliers

(September 22) Reuters.com

  • Primark announced plans to consider sourcing from suppliers from countries such as Guatemala, Costa Rica and Mexico.
  • Presently, the US division of Primark sources all its merchandise from China, India, Bangladesh, Cambodia, Vietnam and Turkey. Sourcing closer to the market could help cut transport costs.

Panerai Opens Its First Store in Mexico

(September 22) FashionNetwork.com

  • Italian luxury watch brand Panerai has opened its first store in Mexico through its local partner Berger Joyeros, located in El Palacio de Hierro Polanco, an upscale department store in Mexico City.
  • Panerai watches were previously available in Mexico only through the company’s e-commerce site and authorized dealers.
MACRO UPDATE

Key points from global macro indicators released September 18–24, 2019:

1)  US: The IHS Markit Manufacturing Purchasing Managers Index (PMI) increased to 51.0 in September from 50.3 in August, above the consensus estimate of 50.3. Continuing jobless claims in the US decreased to 1.661 million in the week ended September 7 from 1.674 million in the previous week.

2)  Europe: In the eurozone, consumer confidence fell 6.5 points in September versus the 7.1-point decrease in August. In the UK, total retail sales increased 2.8% year over year in August, versus a 3.8% increase in July.

3)  Asia Pacific: Japan’s consumer price index (CPI) came in at 0.3% year over year in August, slightly lower than the 0.5% increase in July and below the consensus estimate of 0.6%. In Korea, industrial production fell 0.6% year over year in August, versus a 0.3% decrease in July.

4)  Latin America: Brazil’s central bank Copom lowered the prime rate to 5.5% in September, from 6%. In Colombia, the trade deficit was $1.08 billion in July, widening further from June’s $760.9 million deficit.

*Coresight Research’s evaluation of the actual figure’s impact on the economy relative to historical benchmarks and the current macroeconomic environment: + indicates a positive signal for the country’s economy, – indicates a negative signal and = indicates a negligible or mixed impact.
Source: Markit Economics/US Department of Labor/European Commission/Destatis/Statistics Bureau of Japan/Bank of Korea/Banco Central Do Brasil/DANE/Coresight Research

 

EARNINGS CALENDAR
Sales and EPS data is for the full fiscal year
Source: Bloomberg

 

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