Last week, the U.S. Department of Commerce released ecommerce numbers for the holiday-heavy fourth quarter in 2019, rounding out retail data for the year. U.S. merchants reached $601.75 billion in online sales last year, up 14.9% from $523.64 billion in 2018, and the web’s share of total retail sales hit 16.0%.
To help bring the numbers into focus and better understand the ecommerce landscape for the year, it’s worth a look back at the big headlines in retail in 2019.
Ecommerce bankruptcies and acquisitions of 2019
There were some big shake-ups in retail last year. Here’s a recap of bankruptcies, mergers and acquisitions.
16 retailers filed for bankruptcy in 2019, and more than half of them were acquired by other companies seeking to salvage troubled companies.
Discount shoe chain Payless ShoeSource Inc. (No. 462) shut down its online operations as it liquidated its U.S. and Puerto Rico stores and, in February 2019, filed for bankruptcy for the second time in two years. But in January 2020, the company emerged from Chapter 11 and announced a new executive team that will focus on global operations in Latin America, currently its largest business unit, and elsewhere.
FullBeauty Brands Inc. (No. 105), a women’s plus-size apparel retailer, filed for bankruptcy in February 2019 and set a record for the shortest U.S. corporate bankruptcy after a judge approved the company’s restructuring plan less than 24 hours after the merchant filed for Chapter 11. FullBeauty executives cited competition online from Amazon, Kohl’s Corp. (No. 24) and Walmart Inc. (No. 3)—all of whom have entered the plus-size clothing market—as the reason for the company’s financial trouble.
Fast-fashion apparel chain Forever 21 (No. 115) filed for bankruptcy in September 2019 after struggling to transition its appeal to Generation Z shoppers, who are shifting away from mall-based shopping to ecommerce and opting for edgier streetwear brands. In February 2020, several companies announced they are jointly acquiring the teen retailer and will continue to operate its U.S. and international stores. Authentic Brands Group—which owns Barneys New York (No. 197), Aéropostale (No. 261) and Nine West (No. 290)—and mall owners Simon Property Group Inc. and Brookfield Property Partners LP cut a deal for $81.1 million to keep Forever 21 afloat. The new owners plan to expand the company’s international presence.
29 retailers were acquired in 2019, and several made big waves in the retail industry.
In late November, luxury giant and Louis Vuitton owner LVMH (No. 20) purchased jeweler Tiffany & Co. (No. 179) for $16.2 billion—the largest retail acquisition of the year among those where selling prices were disclosed. The deal is LVMH’s biggest ever and could help the French company compete against Richemont Group (No. 35) by adding to its stable of high-end labels such as Bulgari jewelry, Christian Dior fashion, Dom Perignon Champagne and Cognac. Rival Richemont’s jewelry business includes Cartier and Van Cleef & Arpels.
The Tiffany takeover is anticipated to expand LVMH’s access to U.S. luxury shoppers while giving the iconic American brand more reach in Europe and China. Combined web sales for the two companies neared $4.541 billion in 2018, according to Digital Commerce 360 estimates.
Japanese cosmetics group Shiseido Co. bought digitally native beauty brand Drunk Elephant for $845 million in October. The move is expected to help Shiseido appeal to younger consumers in the United States and adds to its portfolio of prestige skin care brands, a key growth area for the company in recent years as consumers have shown willingness to spend on higher-priced beauty products. Drunk Elephant is a favorite among the millennial and Generation Z set given its nontoxic ingredients and Instagram-friendly packaging, and the brand will likely be able to scale its business with access to Shiseido’s resources and manufacturing.
Other big health and beauty conglomerates also have been on an acquisition spree as they target the younger market by nabbing upstart brands. In November, Estée Lauder Cos. Inc. (No. 49) agreed to buy the remaining two-thirds of Have & Be Co., the South Korean owner of cosmetics line Dr. Jart+ and men’s grooming brand Do The Right Thing, that it didn’t already own for about $1.1 billion. According to Estée Lauder, the acquisition will expand the company’s reach in the Asia-Pacific region.
Under pressure to turn its business around, Coty Inc. agreed in November to pay $600 million for a majority stake in Kylie Jenner’s trendy beauty brand, Kylie Cosmetics (No. 177). Kylie products were first sold exclusively online before Ulta Beauty (No. 91) stores began carrying the brand in late 2018.
Things didn’t work out as planned for Schick’s parent, Edgewell Personal Care Co., as it aimed to revamp its nearly century-old razor brand with the acquisition of Harry’s Inc. (No. 201), a hip maker of shaving supplies. Edgewell abandoned plans to buy the direct-to-consumer disruptor in a proposed $1.37 billion deal after the Federal Trade Commission sued to block the move on antitrust grounds. The failed deal could have implications for big companies that sell consumer packaged goods and hope to snag young, digitally native rivals endangering their market share.
Edgewell and Procter & Gamble Co. (No. 669) operated their respective Schick and Gillette brands of men’s razors as a “comfortable duopoly” for years, according to the FTC. Product prices jumped without a corresponding change in costs or demand, the agency argued, but with Harry’s entry into the market, the CPG conglomerates were forced to drop prices and develop new products. If Edgewell bought up Harry’s, competition again would be effectively eliminated, which the FTC said harms consumers. Harry’s expanded its direct-to-consumer business with retail chain partnerships—starting with Target Corp. (No. 16) in 2016 and now selling at Walmart.
Here’s a roundup of some of the big news and trends that emerged last year.
- Amazon increased pressure on other retailers with 1-day shipping
Amazon spent nearly $2 billion in 2019 to offer Prime members free 1-day shipping, forcing much of the ecommerce industry to catch up. Walmart began rolling out free 1-day shipping in a few markets in May, and Target rapidly increased its push to offer multiple same-day fulfillment options. - Buy online pick up in store had a good 2019 holiday season
Retailers’ buy online pick up in store (BOPIS) programs were especially successful last year. With a shortened holiday period leaving six fewer prime shopping days between Thanksgiving and Christmas, consumers turned to stores to fulfill online orders for last-minute gifts in greater numbers. BOPIS revenue for the season grew 35% year over year, according to data from Adobe Analytics. In the week leading up to Christmas, BOPIS sales climbed 55% higher than the season average. The research firm bases its data on more than 1 trillion visits to more than 4,500 retail sites and measures transactions from 80 of the top 100 U.S. online retailers ranked in the Top 1000. - Curbside pickup programs surge in 2019
In other omnichannel developments, curbside pickup ramped up in 2019 as big names reaped the benefits of earlier investments in the initiatives. Walmart, Target and Nordstrom Inc. (No. 18) have offered curbside pickup for at least a year and continued to roll out the programs in 2019, with Walmart expanding grocery pickup to 2,700 locations. In Target’s third quarter, the retailer’s sales volume fulfilled through curbside delivery grew more than 500% year over year. While a portion of the growth was driven by the addition of more than 800 new curbside pickup points, the retailer said more than half of the gains stemmed from mature locations. Fulfilling online orders through curbside pickup is more cost-effective for Target than traditional shipping methods, the mass merchant said. - More digitally native brands open brick-and-mortar stores
In a reverse retail trend, as retail chains are shuttering stores, an increasing number of digitally native brands are turning to physical stores to capitalize on brand buzz, grow sales and learn more about their customers. In the last year, retailers like mattress brand Saatva Inc. (No. 164) followed in the footsteps of eyewear maker Warby Parker (No. 168), which started selling direct-to-consumer on the web and now is a full-fledged retail chain with locations across the country. Saatva opened its first store in December and aims to open a dozen or more stores in major markets over the next couple of years and up to 20 locations in the subsequent few years, according to executives. Lingerie brand Adore Me (No. 389) began opening bricks-and-mortar stores in 2018, and its fleet hit six locations last year. And in August, bedsheet brand Boll & Branch (No. 433) secured $100 million in funding from a private equity firm to expand its physical footprint from one location to more than 10 stores in the next few years. The retailer said its current physical store, which is “very profitable” and generates millions of dollars in annual sales, gives consumers the chance to touch products—an important experience when shopping for bedding. Additionally, Boll & Branch’s in-store average order value is about two to three times higher than that of purchases made online, executives say. - Happy Returns eases the hassle of returning online orders
Other web-based retailers with few or no stores are partnering with retail chains and vendors like Happy Returns to help ease the hassle of returning items ordered online. The returns management vendor allows customers to make in-person returns with immediate refunds at more than 700 locations around the country—such as “return bars” housed in all Paper Source (No. 1583 in the Next 1000) stores, a pilot program through 80 Sur La Table Inc. (No. 293) spots and a test at more than a dozen Cost Plus World Market (part of Bed Bath & Beyond Inc., No. 69) locations.Southern-inspired clothing brand Draper James (No. 1737 in the Next 1000) cut return costs and increased conversion after linking up with Happy Returns in January 2019 for its physical drop-off points. Shoe brand Rothy’s (No. 343) began working with the vendor in 2018 for returns processing and started using additional Happy Returns software in 2019. Since then, the number of shoppers opting for an exchange rather than a return and refund has increased 33%, return rates have declined and conversion has increased, executives say. Amid growing interest in its services, Happy Returns raised $11 million in the spring to hire more sales staff and add capabilities to its software. - Nike removes stops selling on Amazon
In November, Nike Inc. (No. 33) announced it will pull its products off of Amazon and cut ties with the marketplace. As part of a pilot that began in 2017, the athletic apparel and sneaker heavyweight joined Amazon’s brand registry program and sold directly on the site as a wholesaler rather than allowing unauthorized third-party merchants to dictate how unsanctioned or fake Nike products were listed and priced. Brands have long struggled to decide whether to reject Amazon outright as a dangerous competitor or play ball by officially listing their own products on the platform in exchange for more control and greater access to customers and data on purchase behavior. Nike reportedly struggled to crack down on unauthorized sellers without much help from Amazon, and official Nike products had fewer reviews than other third-party listings, leading to worse positioning on the site.Sandal manufacturer Birkenstock (No. 2128 in the 2019 Digital Commerce 360 Next 1000) and mobile phone accessory brand PopSockets LLC (No. 781) had previously ditched Amazon because of similar hassles. But analysts say the departure of Nike—perhaps the marquee name in Amazon’s brand registry program—could spark fears of other brand partners that might be prompted to make a similar exit. IKEA (No. 37) has since followed suit after ending a pilot program that launched in 2018. - Product rentals pick up steam
A new business model continued to pick up steam in 2019, with more retailers offering product rentals. Apparel chain Urban Outfitters Inc. (No. 45) launched a rental clothing subscription service called Nuuly last summer. For $88 a month, shoppers can rent any six pieces from more than a thousand SKUs across its Urban Outfitters, Free People and Anthropologie brands as well as others. The service includes free 2-day shipping and returns plus laundry and dry cleaning services. Bloomingdale’s (part of Macy’s Inc., No. 5) also announced that the department store would launch its own rental service in September. With myList, shoppers can receive four styles at a time and swap out boxes as frequently as they want for $149 a month and purchase items they liked in a try-before-you-buy move.Nuuly and myList join the ranks of other apparel retail chains that had previously launched clothing rental options: Ann Taylor (part of Ascena Retail Group, No. 82), Express Inc. (No. 103) and New York & Co. Inc. (No. 202). The global online apparel rental market could reach $1.9 billion by the end of 2023, according to estimates from Research Nester, a market research consulting firm. According to analysts, rental clothing appeals to younger shoppers, who are cost-conscious and care about sustainability. - Sales for Amazon Prime Day 2019 jumped 71%
The fifth annual Amazon Prime Day sales event from July 15-16 was record-breaking, according to Amazon, and Digital Commerce 360 estimates Amazon sold $7.16 billion worth of goods globally during the 48-hour period. This was up 71% from the $4.19 billion sold during the 36-hour sale in 2018. Although Amazon doesn’t disclose total gross sales, the company said more than 175 million products were sold in 2019 compared to 100 million in the previous year. Amazon also reported that sales of products from its marketplace sellers crossed $2 billion, an increase from Prime Day 2018, when marketplace sales “far exceeded” $1 billion.
Bloomberg contributed.
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