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July 20, 2020: Home improvement sector sees sales boost, Amazon unveils its Dash Shopping Cart, American Eagle launches ‘Unsubscribed’ brand.

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Hosted by Julia Raymond

Written and produced by Gabriella Bock

Edited by Trenton Waller

 

TRANSCRIPTION

Julia Raymond:
Hi everyone and welcome back to the show. Today, our guests include Ethan Chernofsky and Christina Cooley. Ethan is the vice president of marketing for Placer.ai, where he helps businesses unlock the power of location analytics. Prior to Placer, Ethan was the director of corporate marketing at SimilarWeb and the vice president of Headline Media.

Julia Raymond:
Christina Cooley is the practice lead of At-Home Intelligence at J.D. Power, where she oversees several annual syndicated studies providing benchmarks for both manufacturers, brands and retailers. Ethan, Christina, thank you guys for joining today.

Ethan Chernofsky:
Julia, thank you so much for having me.

Christina Cooley:
Thanks so much for having me.

Julia Raymond:
I’d like to start off the show by taking a deeper look at the home improvement sector. This has been booming during the pandemic while some retail categories are fighting to survive, retailers like Home Depot and Lowe’s have seen a major boost. As many Americans stayed home to help flatten the curve, first-quarter sales at Lowe’s rose 12.3% and for our competitor Home Depot, sales rose 7.5%.

Julia Raymond:
Last month, Home Depot CEO, Craig Menear highlighted the company’s dedication to digital innovation, which allowed the retailer to quickly adapt to shifts in consumer needs, preferences and behaviors. Christina, I wanted to turn this to you first. Based on your research, what can we expect from home improvement shoppers in the months to come?

Christina Cooley:
Yeah. Thank you, Julia. It’s been very interesting the last several months watching the home improvement retailers. They’ve been in a very unique position during this pandemic. And as we know they’ve been deemed, for the most part, essential and I think they’ve really tried their best to kind of serve in that role. At J.D. Power and Associates, we really try to be kind of that voice of the customer. So we’re going out, we’re serving consumers about various experiences and then trying to provide that information back to the industries and in this case, the home improvement retailers.

Christina Cooley:
And we’ve seen some interesting data, maybe not so surprising, but definitely interesting over the last several months. We did a poll survey coming into the pandemic and saw a few trends there. If, for example, we know that some homeowners are looking to put up a new home purchase. So they came in to maybe second quarter thinking they were going to buy a home and about 11% of those are saying, “No. Probably not the best time.” Yet they’re staying home and they’re making really important purchases.

Christina Cooley:
So we’ve seen about maybe 40% or so have been buying pretty major purchases, definitely a lot of appliances, consumer electronics and just looking to kind of better set themselves up to be able to stay at home. And the home improvement retailers have really kind of [inaudible 00:03:50] that need. And we think that’s going to continue to be the case definitely in the short term.

Christina Cooley:
Some of the other things we’ve seen is that more customers are taking on home improvement projects during this time and we think that’s also going to continue it. It was really interesting overall, we saw about half of consumers are considering a home improvement project. And within that group, there was about 10% who hadn’t considered one, but now that they’re home, they’re taking something on.

Christina Cooley:
So there’s been this increased demand for the home improvement retailers to really kind of meet that need and help customers to not only do what they need to do within their homes, but to really kind of support and help them get through this difficult time. And we’ve seen some of those projects being painting, right? So it’s not that all of a sudden more customers are needing to paint, they just have more time to paint. And so painting’s been a big project.

Christina Cooley:
Another one has been starting a garden or landscaping projects. So we’ve seen some very specific home improvement areas really peak during this time. Again, it’s as much about meeting a customer need as it is providing just the general consumer an opportunity to take advantage of this time and do something positive that can kind of balance out some of the negative things that are happening.

Julia Raymond:
And there’s definitely been an uptake in curbside pickup as well for these improvement retailers. Ethan, are you seeing some of these same things? I know you are based in Israel in Tel Aviv. Some of the numbers that Christina mentioned, 40% of people are buying major appliances. I think you said 11% are no longer looking to maybe buy a new home, they’re staying in and sort of creating gardens, maybe installing a pool and doing things to spruce up their home while we’re kind of on quarantine. But what are you seeing Ethan?

Ethan Chernofsky:
So as a location data provider, where we’re looking at is that are those foot traffic patterns across the US and we’re seeing that same thing. So we definitely saw a surge with brands like Lowe’s in April already seeing massive increases in traffic. And Home Depot seeing huge increases year over year in traffic on a daily, weekly and monthly basis. But the wider space is seeing that growth and there’s two really interesting things that are happening. So the first is, when you think as a whole sector, it seeing this resurgence of 20% year over year as a wider category.

Ethan Chernofsky:
And that’s not just Home Depot or Lowe’s, it’s also the Pier 1s and the AtHomes and the Tuesday Mornings, obviously some of these guys are closing as well, but really filling that need. But what’s incredible is, what we saw initially was this lightning in a bottle moment of that sector’s normal seasonality happening between March and May. The fact that we were in home and we had time, like Christina mentioned. The fact that we were at home and realized the things we hated about our home, like Christina mentioned.

Ethan Chernofsky:
But then what’s crazy is that when you think about that last week that we have data for, which is the week from July 6th to 12th, we’re seeing Home Depot traffic up 22.4% and Lowe’s up 30.3%, and this is deep into the summer. So I think Christina is dead on of, we certainly expected this sector to do very well. So when we spoke about already in March, we did not think that it would do this well, this long.

Julia Raymond:
Absolutely. And Ethan, because you have a unique perspective at Placer.ai with your location analytics, what is the mall traffic looking like since things have reopened? Is it a bit pitiful?

Ethan Chernofsky:
It’s not pitiful. I was discussing it with a colleague today and it’s like asking a really amazing NBA player like, “Why aren’t you scoring 30 points a game like you were before when you have a broken arm and a broken leg?” And so they’re doing as well as they can. And in fact, when we look at a lot of these malls, considering the self-imposed restrictions, considering the limitations on hours, it’s actually pretty impressive. And I think it’s a real sign of the resiliency of consumer demand. And I think it should give us a lot of optimism for, when we can finally get to that real recovery period and start moving past the pandemic, how quickly that space will rebound.

Julia Raymond:
And I like your points about seasonality. You said it’s usually March to May, that’s the hot time. Well, less hot actually, if we’re talking about the weather, but that’s the time to go get your stuff, do your projects. And you said, look, we’re in mid-July and traffic is still up year over year way higher than it was. I think you said 30% for Lowe’s and 20% for Home Depot, that’s huge.

Ethan Chernofsky:
It’s enormous.

Julia Raymond:
It’s enormous. There are some categories that are doing way better than others, so good for Home Depot and Lowe’s. I would like to see a little bit more on the digital side. Are there any initiatives that either of you think maybe benefited home improvement retailers during the pandemic?

Christina Cooley:
I can jump in here with our Home Improvement Retailers’ Satisfaction Study. You definitely see that digital is playing an increasing role on specific home improvement. But even beyond that, I think we see it as a more general trend. It’s really simple and interesting with consumers, we find that more and more, they’re going online first as they’re shopping and researching either the products or projects they want to take on. And that’s really going to be focused around trying to figure out pricing and budget and the specific kind of product features they’re looking for.

Christina Cooley:
But also using it as a way to kind of validate the route they’re going down in terms of looking at ratings and reviews and so forth. Specific to home improvement and some of these other larger categories, they still want to get in the store though, right? So it’s really on the retailers. It’s really [inaudible 00:10:25] opportunity to use their website and to digitally kind of bring that customer in, provide them the information they need, kind of set them up and then drive traffic to the retail store itself.

Julia Raymond:
Mm-hmm (affirmative). Absolutely. And potentially rearrange some of the store format eventually, not just because of COVID, but because there’s increasing curbside pickup orders and things like that happening. So interesting stuff, Christina Cooley practice lead of AtHome Intelligence at J.D. Power. Thank you for coming on the Rundown to talk about the home improvement sector.

Christina Cooley:
Thank you.

Julia Raymond:
All right. Switching gears, Ethan, I am going to jump a little bit into the newest news from Amazon with you. So just a few weeks after it retired at Dash Wand, Amazon unveiled a more groundbreaking Dash product, perhaps the most groundbreaking yet. This time the gadget will be in stores rather than at home. Last week it announced it’s smart shopping cart. This allows you to shop in-store without ever having to go to the checkout queue. So the cart has cameras in it with sensors and a scale, and it automatically detects what you drop in. So there’s no scanning, nothing. You just pick the item off the shelf, put it in the cart and if you to put your purse or your jacket into the cart, there’s a button that will allow you to do that as well. So it knows.

Julia Raymond:
And at the end of the trip, the cart will tally your total and charge your credit card linked to your Amazon account. So there’s a special line that you get into with your cart to just walk out of the store. And the initial debut of this technology will be at the LA Supermarket that Amazon is opening later this year, probably next month is what I’m hearing. So what is the benefit of a smart shopping cart versus Amazon’s just walk out technology that we see and their Go stores and the other grocery store they launched in Seattle.

Ethan Chernofsky:
I mean, so the assumption is that there’s something about the Go stores that was more difficult to replicate. And so they’re using this either as an option that can be complimentary. So in each store they can figure out which one technically is the most effective solution or that the Amazon kind of Go-style requires certain limitations, maybe on the space or maybe on what that indoor experience needs to look like. And that going cart allows them to have the ability to serve both of those options effectively.

Ethan Chernofsky:
But I think that sometimes we get so excited about the Amazon-style experiences from a technological perspective, but it’s so important. And I think we’re going to see this as they start really launching these stores in the coming months and years, they have got to provide something that feels authentic and interesting to come into a store. Convenience is important, but if we’ve seen anything from COVID it’s that we want to have an experience that we feel like is authentic and we can connect with.

Julia Raymond:
And I think that’s a good point because we had Anne Beall of Beall Research on the podcast a few weeks ago. And she said that the curbside is so popular because customers want to feel some sense of normalcy without taking the risk. So going to get it feels like you’re running an errand, it feels more normal and things like that. But I do wonder, the technology does seem really similar and as you said, maybe there is a benefit and it’s not just a complimentary type of technology. Because do you think, and we’re just kind of guessing here, but do you think that they’ll roll these carts out and have also regular carts and buggies that are not digitally enabled?

Ethan Chernofsky:
That’s a great question. I don’t know. Generally, Jeff Bezos does not message me when he has these ideas, but I think he should. I assume that they would have one type that either goes on or off. Because otherwise, that’s going to create a more confusing experience of like, I walk into the store, am I taking the right cart? Am I going to the right lanes? I want to enjoy my experience. And I, as someone who loves going to the supermarket, I enjoy it. When I’m in Florida, I love walking into a Publix, I do think shopping is a pleasure there. And I want to see my produce I want to-

Julia Raymond:
You’re pandering to me, Ethan. You know I love Publix. Publix all the way.

Ethan Chernofsky:
Oh my God. I did not know that, but we’ll have our edition where we just laud Publix for being awesome. But even for me it was Wegmans growing up in Pennsylvania and these experiences are so fun and interesting and you enjoy them. It makes you excited to buy the food. It makes you excited to then go cook the food later on. And so I think they have to make it streamlined and I think they’re smart enough organization to figure out how to do that.

Julia Raymond:
So you think probably not, they won’t give customers the choice. It will just be a fully equipped store if you had to guess, because of not causing confusion with customers. That’s an interesting take.

Ethan Chernofsky:
Yeah. It’ll be fully equipped but you’ll have the ability to turn it off and on. So if I want to go, they’ll have some form of like old school checkout or some for… That would be my assumption.

Julia Raymond:
And I will say, I noticed, so our Rethink Retail advisor, Ricardo Belmar posted about this news topic last week on LinkedIn. And I know someone commented and said, “It’s going to be super complex to keep track of the carts. And these are going to be, assumably, very expensive carts.” Who knows, $25,000 a cart or more and over 2 million shopping carts are stolen each year. So there could be a problem there with potential theft and just the complexity of the execution I think might be a challenge.

Ethan Chernofsky:
Agreed. Agreed.

Julia Raymond:
Well, we will move on to the next topic. So this came a little bit earlier this month and it’s American Eagle Outfitters. They’re an apparel company they’ve been around for a while now and they launched their newest sub-brand, which is based on sustainability. It’s coming soon to the Hamptons and it’s called Unsubscribed. So this will have apparel and accessories from third-party brands and its own private label. And Instagram account for Unsubscribed describes the new brand as “Consciously made slow fashion. We believe in being kind to ourselves to each other and the world, nothing more, nothing less.”

Julia Raymond:
WWD reported that Unsubscribed will release two collections per year and will have a website solely for the purpose of hosting on-brand content. I will note prices start around $5 for accessories and go up to over $500 for a dress. Ethan, what do you think of American Eagle’s decision to forego e-commerce and instead sell its Unsubscribed products from a single store?

Ethan Chernofsky:
I love it. I would say that I would subscribe to this, but, whatever. Forgive me for saying that. But I think it’s a fantastic idea. I think it’s also that they’re going to have other brands in it. It’s so on-trend, this idea of kind of direct to consumer brands and product-oriented companies expanding their retail footprint offline. Because of the experience they can provide, because it’s high conversion, because it creates really good brand awareness and marketing opportunities. I think this is something we’re going to see more of and I think American Eagle is doing something really smart.

Julia Raymond:
I think they are too. Our team looked up some interesting statistics because Gen Z is actually really passionate about sustainability. And there was a First Insight study from this year that found 73%, so almost three in four Gen Z, said they’d pay more for a sustainable item. And 10% of them said they’d pay a premium price which $500 a dress, I think, for people in the Gen Z category that is pricey. I will say there were some critics I saw on LinkedIn and they said, “American Eagle is using its new conscious forward sub-brand as a guise to make up for lost sales.”

Julia Raymond:
Do you think there’s any truth behind this sentiment or do you think that American Eagle is being authentic?

Ethan Chernofsky:
I don’t think I care because I think both can be true at the same time. I think many brands are both interested in selling products because they are companies and that is what they are supposed to do. And at the same time interested in caring about the world. And if they can find areas where there is overlap, they will do so. And I think we should be excited that people consider those considerations as opposed to doing something just for the sake of profit and ignoring everything else. So I think we have this tendency sometimes to troll brands because their actions aren’t good enough or pure enough for us. But the reality is they can be good companies and doing good things and we should be excited about that.

Ethan Chernofsky:
A great example is even now in the recovery when we saw Walmart, Target, Costco. All these brands in self-imposed restrictions, when in theory they could have driven crazy amounts of product and ridiculous amounts volume during this period even more than they did. But they self impose those restrictions because there this sense of corporate social responsibility. And so we can be cynical about it but I think there are times when we can take a step back and realize that, yes, companies are interested in profit but they can also do good things as well.

Julia Raymond:
Mm-hmm (affirmative). That’s a good sentiment. And I think this positioning reminds me of, I don’t remember the name of the boutique, but it’s in Colorado up the mountains and they sell skorts and athleisure type wear and I think some ski gear, but they make it at their shop. So it’s handmade, it’s very sustainable, it’s local, it’s pricey, but they don’t sell online at all. And you have to usually wait in about a 30 to 40-minute line, this was pre-COVID, obviously, but their sales were booming. And I’m wondering if this is a similar approach by not having an e-commerce presence. Does that make it more enticing for people to go check it out in person?

Ethan Chernofsky:
I think so. I think it’s how is it done? When you look at Nike as an example, Nike’s offline experience is so interesting that it pulls people into stores. And as a result, they’re looking to expand by about 200 stores over the next few years. And so if there is this experience that people are drawn to and they can understand more importantly, who are the types of people that really connect with this?

Ethan Chernofsky:
And so not just what does the first location do? But if the first location succeeds, where does number two go? Where’s number three? How do you expand this out? How do you orient it towards different markets? It could be a really exceptional model. Whereas, again, you could swing and miss and that doesn’t mean that this process is wrong it just means it wasn’t necessarily executed to perfection.

Julia Raymond:
And this kind of goes back to your core, which is location analytics. Do you think location will become even more important because of the pandemic, in terms of where retailers choose to open a new store or tracking traffic in general decide where to close stores even, things like that?

Ethan Chernofsky:
A thousand percent. I think this process of the optimization of a retail footprint is something that we were already seeing happening with the smartest and best brands in 2019 and 2018. So clearly it’s something that’s going to continue. The other piece though, that I’ll say to this is, I think we’re about to enjoy this really exciting wave of more direct-to-consumer and more product-oriented brands expanding their retail footprint. And what that means is not every mall is the same, not every mall is a Macy’s and an MTMs and the things we’ve come to expect for a mall, but they can all have this different vibe and feel.

Ethan Chernofsky:
Which means from a location perspective, you can really target the audience you’re trying to reach and you can create a more differentiated mix so that if we decide to go to the mall one weekend, we can go to another mall the next weekend and have a fundamentally different and interesting experience. And that could be better for the entire retail landscape.

Julia Raymond:
Mm-hmm (affirmative). And making it more of an entertainment hub in a sense, and giving people a reason to experience retail and go out versus just shop online.

Ethan Chernofsky:
A hundred percent.

Julia Raymond:
And what do you think about Kanye partnering with Gap? Did you hear about this?

Ethan Chernofsky:
Yeah. That was the one you expected, right? Everyone thought a few years ago, it’s going to be Kanye and Gap that’s going to come together. But it’s really interesting we know what Kanye did for Adidas. We know the boosts that it gave them. And so the question is, will this boost that that Gap is seeing in the short term sustain itself? Because if so, and this is a game-changer, this is, obviously his wife is considered the queen of influencers. The idea that the king could now be her husband is pretty amazing.

Julia Raymond:
Watch out Beyonce and Jay Z, it’s quite the power couple. I was just shocked a little bit because it’s a 10-year deal. I mean, that seems a bit long.

Ethan Chernofsky:
I know. It’s COVID though. Is the world’s going to exist in 10 years? They’re like, “Whatever, we’ll try it. We’ll see what happens.”

Julia Raymond:
Oh my gosh. That’s so true. Well, I really appreciate it you joining today, Ethan, from Placer.ai and hearing from you and earlier from Christina, it was a joy to have you both join.

Ethan Chernofsky:
Thank you so much for having me. It was great to be here.