E-COMM

Nordstrom's Latest Investment Is an 11/10

11 Honoré, a two-year-old luxury e-tailer for extended sizes, said it had completed a $10 million funding round from investors including Nordstrom this week. Its name is French for “this is more useful than another candle brand.” 

First, a digital tour

11 Honoré exclusively sells luxury fashion in extended sizes (12–24), a range infrequently carried by the Balenciagas and Pradas of the world.

• 11 Honoré featured around a dozen brands at launch. Today, it has 70+ including Diane von Furstenberg and Dolce & Gabbana.    
• Founder and CEO Patrick Herning told Fortune that 90% of designers 11 Honoré stocks are making extended sizes for the first time.
• It also plans to launch a private label brand early next year. 

To convince brands with a 1, 3, 5 mentality to get on board, 11 Honoré assists vendors with pattern-making and grading for extended size garments. The company told BoF that its revenue grew 100% quarter over quarter in the first half of 2019. 

Second, an investor tour

What Twitter business gurus call “core values” brought Nordstrom and 11 Honoré together. Unlike its department store peers, Nordstrom started expanding its size offering in 2016 and stocks its full size run in the same section in some stores. In 11 Honoré, it sees an access point to an untapped luxury customer and brand marketing gold.

Looking ahead...11 Honoré is using its new funding to follow Nordstrom into personal styling services. To start, it’s partnering with the department store to host trunk shows in Atlanta, Chicago, Detroit, and other cities. Later, 11 Honoré plans to open standalone stores.

Why it matters: Plus-size items account for only 0.6% of all online luxury purchases, per Edited Retail data cited by Fortune. That isn’t for a lack of interest; it’s for a lack of SKUs. After watching 11 Honoré’s expansion, similar sites—or designers considering in-house launches—could follow. 

GROCERY

Walmart Delivers on Its Grocery Promises

As Amazon plants seeds for its new IRL grocery brand, Walmart’s Q3 earnings suggest it’s already reaping a big harvest online. 

Walmart’s quarterly revenue jumped 2.4% to $128 billion, and net income rose 92% to $3.3 billion. Same-store sales increased 3.2%—and with some Vitamin C from its grocery segment, U.S. e-commerce sales grew 41% YoY. 

Walmart’s gone all-in on grocery delivery initiatives in recent months, including...

• Expanding curbside grocery pickup to 3,000 locations
• Introducing free grocery delivery at 1,400 stores
• Piloting direct-to-fridge delivery in three markets 

One downside: Grocery is Walmart's bread and butter, but the segment has low margins compared to home goods or apparel. That's why CEO Doug McMillon is dumping Miracle-Gro on Walmart’s other online offerings. “Our strength is being driven by food, which is good but we need even more progress on Walmart.com with general merchandise,” he said.

+ While we’re here: Walmart has reopened its El Paso, TX, store that was the site of a mass shooting in August. Head of U.S. Stores John Furner said Walmart hasn’t noticed “backlash” from the gun policy it implemented in response.

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EXPERIENCE

Burberry Welcomes Tencent to the Trenches

Burberry inked a partnership with Chinese tech giant Tencent to open a “social retail” store in Shenzhen, China, next year. Here’s what we know so far: 

• Tencent will power the Burberry store with tech it said “blends social media and retail to create digital and physical spaces for engaged communities to interact.”
• Burberry shares rose as much as 9% after the announcement. Shareholders seemed to hear a winning Powerball number when all I heard was PowerPoint jargon.

What I missed on a first glance: Burberry was an early adopter of Facebook and Instagram, but those platforms are banned in China. Meanwhile, Tencent owns WeChat, China’s leading messaging app with over 1 billion monthly users. Partnering with Tencent opens up Burberry to an audience that has missed out on its Instaclusive content and sales. 

My takeaway: Luxury retailers are entering mainland China to reach customers who a) aren’t shopping abroad because of a weak yuan and b) can drop $3,000 on a trench without checking their credit score first. Burberry hopes infiltrating Chinese consumers’ social media feeds will help it compete for their attention and foot traffic.

WELLNESS

Peloton's Correcting for Its Initial Public Slaughtering

Peloton is reportedly developing two new pieces of fitness equipment. Current Peloton bike owners responded: “Great, but when will the music catalogue have something other than late-seventies Swedish disco?” 

Sources told Bloomberg the company’s working on 1) a cheaper alternative to its $4,000 treadmill and 2) a rowing machine. Neither product has a release date, but Peloton shares rose nearly 9% Wednesday following Bloomberg’s report. 

Variety is the spice of bikes

More than 500,000 people stream Peloton's classes, but shares have declined around 11% since its September IPO—it's hard out there for an unprofitable company. Offering a budget edition of its pricier equipment could allow Peloton to pedal toward profitability while leaving the studio door open for new users. But it also has the potential to dilute the exclusivity of its brand.

By the way, Peloton is currently suing Echelon Fitness for selling a “copycat” version of its $2,245 stationary bike for $999 and ripping off its logo, among other alleged offenses. If Peloton can’t beat ’em in court, it can imitate its imitator.

WHAT ELSE IS BREWING

• U.S. retail sales increased 0.3% in October, but spending in some categories declined.
• Rent the Runway is expanding its partnership with Nordstrom to include new products and shared inventory.
• Aldi is the latest grocer to offer nationwide beer and wine delivery. 
• Brooks Brothers is reportedly considering a sale. 
• Shoptalk will have an all-women speaker lineup for the first time in 2020.
• Gucci has opened a luxury customer service center in Jersey City, NJ.

CLOSING THE LOOP

On Wednesday, I asked if you’d invest in the e-commerce return funnel startup Loop Returns. Of the readers who voted, 62% said they’d invest and 38% said they’d pass. Here are the best comments: 

• “This is the perfect example of someone selling picks and shovels to gold miners. This could be a very big business.”
• “If it turns out to be useful and valuable, Shopify will do it itself. + They already built their own inventory facility. It’s a matter of time before it offers the ‘Shopify easy return and recommendation for exchange’.”
• “Assuming I can return the shares if they don't fit…”

P.S. I share polls, quizzes, and follow recs on Retail Brew’s social channels—even on days when I don’t send a newsletter. I know you’re an opinionated bunch, so follow Retail Brew here to chime in on our next discussion.

FRIEND OR FAUX?

Let’s see how closely you’ve watched this week’s news. Which of the following retail headlines is bogus? 

1. Costco stores will remain open for 24 hours straight on Black Friday. 
2. Carl’s Jr. is altering its marketing strategy to make it less sexy.
3. Harrods is limiting visits to its in-store Santa Claus to customers who meet a spending requirement.
4. DSW is opening an NYC pop-up that doesn’t have merchandise.

I’m off to spend the next 48 hours camped in front of Disney+. But this isn’t goodbye: It’s see you on Wednesday—Halie.

FRIEND OR FAUX? ANSWERS

No, Costco stores will not be open for 24 hours straight.