BANKRUPTCY

DTCs Won't Partner With Just Anyone

As the coronavirus has sent a record number of retailers to bankruptcy court, we’ve focused on the massive stores that filed: Neiman Marcus, J.Crew, Lord & Taylor, and numerous others. 

Our focus today? The DTC and designer brands stocked by bankrupt retailers.

Ol’ reliable → unreliable

For years, wholesale deals guaranteed sales growth with a legitimacy boost on top. 

• Hero Cosmetics founder Ju Rhyu told Retail Brew she entered wholesale deals spanning Forever 21, Neiman Marcus, and J.Crew sister brand Madewell to reach new consumers while gaining brand cred.
• Designer footwear and accessories brand Loeffler Randall has appeared in several retailers in addition to its DTC channel, including J.Crew and Barneys (RIP). “When your product is displayed next to [...] a global mix of the best designers in the world, it creates a healthy sense of competition and keeps you evolving,” VP of Global Sales and E-Commerce Jessica Peek said.  

Wholesale was also a shortcut to overcoming online retail’s biggest limitation, said Oui the People founder Karen Young: the “immediacy and discovery of brick and mortar. That's not easy for the average brand to solve without opening doors of their own.”

Some wholesalers' benefits are moot now. When department stores and specialty retailers went under, retailers suddenly changed their payment terms and canceled orders. 

• “In many cases [the retailers] are also operating on reduced staff or finding out information just before we are,” Peek said. 
• Rhyu said that retailers haven’t communicated whether her brand’s inventory is stocked in stores that will close in bankruptcy proceedings, or what will happen if it is. 

New rules 

Exposure isn’t satisfactory payment, so DTC brands are developing new methods to evaluate potential partnerships:

• The financials-first approach: Rhyu said retailers with even a moderate chance of filing for bankruptcy are no longer a partner option. For example? “We had an opportunity with Macy’s and I punted on that,” she said. 

• The patient approach: Young said her brand will remain 100% DTC through the end of 2020. “The retail bankruptcies have definitely made me more cautious, and we'll be exploring distribution from a perspective of key partnerships, where it makes sense and where it fills in a missing gap for us,” she said. 

Looking ahead…stores will eventually reopen for good—and when they do, said Sharma Brands founder Nik Sharma, the prospect of experiencing an item in person will make retail partnerships attractive for DTC brands again.

Bottom line: DTC brands will prioritize financial security over brand affinity in future partners. “I’m a lot more focused on essential retailers,” Rhyu said, “because I know they will be open no matter what.”

REAL ESTATE

Can Amazon Find Fulfillment in the 'Burbs?

Potentially. Amazon is in talks with Simon Property Group to convert some Simon malls’ anchor tenant properties into fulfillment centers, the WSJ reports. 

Sign of the times: JCPenney and Sears stores are Amazon’s targets for Simon-leased distribution centers. Talks began before the pandemic, but Amazon’s best earnings ever and the department stores’ financial woes probably sped up the conversation.

Let’s not get ahead of ourselves

Adding fulfillment centers to mall directories would guarantee a reliable tenant for Simon and shorter delivery routes for Amazon. And as the Emerging Tech Brew archives remind us, Amazon will spend whatever it takes to crack last-mile delivery.

But cutting the weakest links from the Simon directory won’t happen overnight. The two companies will have to work around...

• Construction hurdles: Amazon will need to convert multi-story spaces designed for casual browsing into picking and packing lines. Then there’s all the parking lot space that’ll be reallocated for loading delivery vans.
• Lost customers: Malls usually opt for gyms or housing—destinations that theoretically drive foot traffic—when they repurpose old anchor spaces. Replacing a department store with a distribution center may deprive smaller mall tenants of customers when they need them most.

SPONSORED BY CORDIAL

Subject: Mobile App Messaging for Email Marketers

Dear email marketers,

We hope this finds you well. 

Now that we’ve cleverly gained your attention by employing the familiar trappings of your preferred channel, allow us to call your attention to something even better: Mobile App Messaging.

Mobile apps are a way for your most loyal customers to quickly access your brand. And as you know, email is one of the most efficient and cost-effective ways to reach your audience. Why not use your email skills to meet those loyal fans where they are?

So says Cordial in their new write-up, “The Email Marketer’s Guide to Mobile App Messaging.” In their guide, you’ll find key strategies and advice for email marketers from mobile app marketers.

Cordial’s trusted by big names like REVOLVE, who’ve used these strategies to connect with customers through their app.

So if you want to boost your brand’s marketing like REVOLVE did,

Read this guide from Cordial.

E-COMM

Unpopular Package Surcharges

UPS hit retailers with a porch pirate bomb on Friday evening. This holiday season, the delivery giant will hike surcharge prices for consumer shipments to offset costs from the coronavirus era’s e-comm surge. 

From mid-November until mid-January, UPS will charge an additional...

• Up to $3/package for ground shipments
• Up to $4/package for air shipments

The policy targets retailers that ship more than 25,000 packages per week, which brings a pod of Retail Brew regulars to mind. Even retailers with their own logistics networks will feel the pinch: Amazon has a massive delivery service, but it’s also UPS’s largest client. 

We were warned. In May, FedEx limited shipments for retailers when a crush of orders clogged its networks. And after UPS reported consumer shipments rose 65%+ YoY in Q2, CEO Carol Tomé said price increases were imminent to manage demand. 

Now what? Retailers in the UPS network have two options: pass the costs off to consumers by eliminating free shipping, or trim another cost center to absorb the new shipping fees. Either way, retailers’ digital solution to coronavirus store closures creates fresh challenges.

WHAT ELSE IS BREWING

• McDonald’s is suing former CEO Scott Easterbrook. Allegation: lying during a company investigation into Easterbrook’s behavior.
• Family Dollar and Dollar Tree reversed their COVID-19 policies (again) to require masks at all U.S. stores.
• Glossier is laying off its 200 store employees.
• Retail profits won’t return to pre-pandemic levels until at least 2022, Moody’s analysts say.
• Target and Shake Shack could buy up coveted NYC commercial real estate as rents decline, Bloomberg reports.

SURVEY SAYS

Retailers are currently debating whether and how their multimillion-dollar corporate HQs will reopen. So on Friday, I asked how you think retailers should adjust. Here’s how you voted:

@Retail_Brew

Hottest reader take, courtesy of Tamar Weinberg: “I've been remote for 13 years. It's legit doable and more retailers need to embrace it.” Managers, hear that?

To chime on future stories...make sure you’re following us on Twitter and Instagram.

SWAPPING SKUS

Online...TikTok was supposed to be retailers’ next big social opportunity. Can they still tap into the platform during a potential ban or acquisition? (Vogue Business)

Offline...you can still go to trunk shows—but only if you’re vacationing with the one percent. (Footwear News)

ICYMI

Catch up on the Retail Brew stories you may have missed.

• Corporate Retail’s WFH Future
• What Retailers Should Expect This Back to School Season 
• Ralph Lauren Hopes to Win the Kids Over With...Bitmojis?