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May 2024 | Newsletter No. 11 | #retailrundown
Baker Retail Rundown
by Leo Contreras & Sophie Shao
Stay in the know with monthly retail challenges and our rundown of top retail industry news, curated by our talented team of Penn student analysts.
Nordstrom is launching a new digital marketplace to enhance its online product range by providing a broader selection of products, brands, and sizes. This initiative will include more size-inclusive options and target younger customers with new and relevant brands. The marketplace operates on an unowned inventory model, allowing Nordstrom to expand its offerings without holding all items in stock. Miguel Almeida, president of digital and customer experience at Nordstrom, emphasized that the platform aims to offer a curated selection from coveted brands rather than becoming an "everything store." Improvements to the online shopping experience, such as enhanced search features and personalized recommendations, are part of the rollout. The marketplace will also maintain standard Nordstrom services like loyalty benefits and customer care. Brands featured include AdoreMe, Alala, and others.
Kering shares have lost 15% since its warning, with LVMH down 7%. Hermes, seen as less vulnerable than rivals thanks to its wealthier client base, is down 2%. Annual growth for global sales of luxury goods will slow to mid single percentage digits from nearly 9% last year and double digit growth in the previous two years, according to analysts at Barclays. Faced with rising cost of living, shoppers have become more selective about high end merchandise, widening the gap between stronger performers, including top labels such as Louis Vuitton, Chanel and Hermes, and brands like Burberry, which is undergoing an overhaul.
The Federal Trade Commission (FTC) is suing to block Tapestry, Inc.'s proposed $8.5 billion acquisition of Capri Holdings Limited, asserting that the merger would significantly reduce competition in the "accessible luxury" handbag market. The deal involves merging three closely competitive brands: Tapestry's Coach and Kate Spade, and Capri's Michael Kors. The FTC argues that this acquisition would eliminate direct competition between these brands, potentially leading to higher prices and less innovation, and would adversely affect employee wages and benefits due to reduced competition for labor. Tapestry's ongoing strategy involves serial acquisitions aimed at cementing its position in the fashion industry, and the FTC fears that this acquisition would only strengthen Tapestry's market dominance, making it difficult for new entrants to compete effectively. The Commission has unanimously authorized a lawsuit and is seeking a temporary restraining order and preliminary injunction to prevent the merger.
Rent the Runway has seen a surge in its stock value following news of its expected achievement of free cash flow breakeven by the year's end, though shares have since settled. The company continues to face challenges, particularly in a post-pandemic market where hybrid work and casual dressing have impacted demand for its products. Rent the Runway has increased its inventory and revamped its marketing strategy to attract and retain customers, including a new CMO and plans for ad campaigns and in-person events. Despite its struggles, CEO Jenn Hyman is optimistic about growth, aiming to transform Rent the Runway into a multibillion-dollar company.
TikTok Shop has launched a new category for luxury resale items, allowing users to buy pre-owned designer handbags, such as Louis Vuitton and Bottega Veneta, directly from the platform. This new vertical features five UK-based luxury resale companies, including Luxe Collective and Sellier Knightsbridge, which offer a variety of designer items at different price points. The initiative targets Gen Z consumers, allowing them to browse and purchase luxury goods in a more affordable and accessible way. The move is part of TikTok Shop's broader strategy to expand its offerings beyond low-cost goods, aiming to establish itself as a prominent shopping platform.
