November 25, 2019: Teen’s luxury wishlists, Warby Parker’s move into contacts, Tupperware and holiday pop ups.

No time for news? We’ve got you covered. Welcome to the Retail Rundown, your go-to weekly podcast where RETHINK Retail teams up with industry experts to deliver the top trending news stories in retail.

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Hosted by Julia Raymond

Researched, written and produced by Gabriella Bock

Edited by Trenton Waller

TRANSCRIPTION

Julia Raymond:
Hi everyone. Today we’re joined by Laura Heller and Trevor Sumner. Laura is an industry insider and columnist at Forbes. She’s also a regular speaker and panel moderator at industry events and conferences like Shoptalk, CES and Commerce’s Next and a former editor of Retail Dive. Trevor is the CEO of Perch, a recognized leader in in-store product engagement, marketing, interactive retail displays and augmented reality. Laura, Trevor, thank you both for joining us today.

Trevor Sumner:
Our pleasure.

Laura Heller:
Yeah, great to be here.

Julia Raymond:
Great to have you. We have some good brands in the mix. Warby Parker, Tupperware, Macy’s, Kohl’s, and we’re going to jump right in to talk a little bit about Louis Vuitton as well. So I think parents might need to resize their budgets or rethink their budgets. This holiday season, a new survey was just released from Piper Jaffray and you will see names like Apple, Nike, Louis Vuitton on teenagers wishlist. In fact, Apple was the top listed consumer brand for teens this year with Air Pods earning the top spot for the most desired product. In addition to that, Nike’s number of mentioned more than tripled from last year’s survey, which is probably a result of their brand sneaker collaborations with dozens of athletes, designers, celebrities and social influencers. So they’re making a wave as well. And the interesting brand that came up is French luxury retailer, Louis Vuitton. They took third place among surveyed teens.

Julia Raymond:
And so it might be… The popularity might be related to Louis Vuitton’s, a campaign for school teens, which targets teen shoppers and also includes sponsored e-sports events and has been attributed to growing their social media presence by 35 million new followers. So with that, I wanted to pass it to Trevor because nearly half of us consumers are saying they’d consider giving used apparel and handbags as a present this year. And I wanted you to know, do you see these teen targeted campaigns like Louis Vuitton is doing, actually creating that space for new luxury products or is the resale market going to eat into their sales?

Trevor Sumner:
I think it’s a little bit of both. I think… I take a look at this a step back and where we are in America, right? And clearly there’s trends to sustainability and that’s where I think the secondary market, I think it’s going from 24 billion to 64 billion in the next 10 years. So it’s clearly becoming massive. I think it’s likely to erode more into fast fashion and the department stores, just because of the price point. But overall to me the U S is in this interesting state where we have this barbell where the luxury market’s doing very well and the discount market’s doing well, and that has a lot to do with the hollowing of the middle class. We have to recognize that 12.3% of Americans live in under the poverty line.

Trevor Sumner:
78% of people are living paycheck to paycheck. So where I do believe secondary market is certainly increasing in popularity because it gives access to new products. I don’t know that it’s going to be Louis Vuitton, right? I think the Louis Vuitton buyer is already in that luxury market segments.

Trevor Sumner:
Do I think Louis Vuitton and others are going to be very effective marketing luxury because we have a greater disparity between the rich and the poor as ever. And there’s a lot of money to be spent in the top end of the market. Absolutely. And introducing that to Gen Z and to teens to bug their parents that they want more out of Louis Vuitton, LVMH, etc. I think that will be effective. Will the secondary markets crate a wave of new access. I’m a little bit more skeptical of that. That said, there are a ton of great services out there that are flourishing from models like the real real or threat up to even rental models like village locks and several of the other ones. So again, I focus on the macro level economic issues and I think for the majority of Americans it’s not going to make a dense, but in the luxury market, you don’t necessarily have to make a big dent for have to create success.

Laura Heller:
I agree with you on a couple of points. You don’t have to make a big dent to have success there. I mean, part of the value of a luxury brand like Louis Vuitton, particularly in something like a handbag is the rarity, right? The scarcity of the product. So they only make so much in order to retain their value. The secondary market is a really interesting kind of component to all of this and the rise of the online resale programs are… I think really fueling the popularity with younger shoppers. If you pair that with the online exposure, the influencers, the social media platforms, millennials in particular are showing a big affinity for these brands. Less so Gen Z for some interesting demographic reasons. But I really think that the millennial market, the access to the secondary market and the ease with which they can acquire these products these days on a secondary market is a pretty great thing for luxury brands.

Laura Heller:
I mean, we see Rebag, which specializes in handbag resale launching what they call the Clare app. And this tracks the prices of luxury handbags in real time on your phone. That’s not a product that’s being targeted to boomers or even Gen X like myself. Millennials are really sort of in their sweet spot right now. Younger shoppers, Gen Z, much less so. They’re a little less interested in luxury and a lot more pragmatic. These were kids that grew up during the great recession and formed their financial worldview during that. And so they’re going to gravitate towards different things. But I do think that luxury, the willingness to buy secondhand and by the way, received gifts from the second hand market. And I see this firsthand with the millennial in our household who just is over the moon with her Louis Vuitton that she got from a consignment shop.

Trevor Sumner:
Yeah. I think the other interesting trend I would add to this is just around personalization and scarcity marketing. I think one of the reasons you mentioned Nike from a brand perspective, they’ve done a tremendous job with their drops on their sneakers app on Thursdays, Fridays and Saturdays with very limited edition touch sneakers that are specific sizes and styles that are hard to find. And so because that’s scarcity, people will pick them up and then they put them on the secondary market as such as stock X and other places. And we’re certainly seeing that kind of throughout in the kind of personalization being a very big trend. And so you know what you have is limited access. It’s no longer a mass market, which means that in order to get your hands on it you have to get a little bit creative about the different sources and see the things that are on the real real or stock X or other different places.

Trevor Sumner:
And a whole secondary market industry has come about because of that, because of that scarcity marketing as middlemen and resellers that’s different than traditional retail. So I think part of what’s driving that market awareness or even kind of those trends as a teen are I want the personal one, I want these specific LeBron. So you really can’t just go to Macy’s or even the Nike, you have to find them on the secondary market. So it’s an exciting time to think of that, that connection to the product as a more personal one.

Laura Heller:
I think the collaborations are really important, especially for Nike and that does appeal to the Gen Z shopper, the younger shopper, and it’s a more accessible price point and there’s a lot of availability for that age group. And for the parents in terms of holiday gift giving. One thing that was, I was struck by when we were talking about these brands and their popularity for the holidays, what do all of them have in common? There is no Amazon distribution point for that.

Julia Raymond:
Mm-hmm (affirmative).

Laura Heller:
Nike just pulled their products from the Amazon platform. Louis Vuitton is not selling there and continues to fight a battle over fakes in that availability in online marketplaces. And I think that it’s a pretty interesting thing and I’m curious to see how it’s going to play out in the holiday numbers. I mean, it’s just three brands. Let’s not get carried away. I think that Amazon’s not going to have a great holiday, but when we see these trends and we see the effort that the brands have put into building their brands and where it’s going, I think that, this is sort of a result of that.

Julia Raymond:
Absolutely. And I love the comments you both made about scarcity marketing because it seems like this is a really impactful tactic for personalization and one we might not have seen in the past with a brand like Nike necessarily. I think the scarcity marketing has been used by luxury brands, but now we’re seeing Nike and I wonder if other brands will start to pick up on this that we wouldn’t expect.

Trevor Sumner:
Yeah. And I think traditionally it’s been used to driven margin on products. Now it’s being driven to create customer loyalty and community, which is extraordinarily powerful. It has a lot to do with identity. I mean, I would even argue that the reason that the new Air Pods are so successful is that they’re a slightly different shape than the old air pods. A lot of Apple’s marketing is about identity. When they did the iPods originally, it wasn’t about the feeds and speeds. It was about people who had white headphone cords and were dancing similarly, everybody wants the new air pod, not because it’s got noise cancellation.

Trevor Sumner:
Although, I work in an open office and certainly could use it and I’m excited about that. But I’m a fan boy. I want to have the new Air Pods. I want people to know I have the new Air pods. It is a kind of identity service and so this is how we express ourselves. Fashion is a form of artistic expression and identity and so the scarcity marketing tactic and really plugging into identity is kind of critical not just to build margins and profitability which these companies have done very well but also to build communities that can then be monetized so that you see these kind of brand feedback loops about why these brands themselves are so valuable.

Julia Raymond:
Certainly in that I think drives back to Laura’s point about none of these brands and I know it’s just this one survey but none are on the Amazon platform and Amazon’s been criticized a little bit for the fact that they don’t offer a lot of brand equity opportunities for sellers there, so really great points from both of you. I’m going to hop onto the next topic. We’ll dive into Warby Parker. They announced some big news just a last week and they’re launching it’s first line of daily contacts called Scout. So this is a three month supply of lenses. They are costing $110 and they come an innovative space saving flat packs that are sustainable, these 80% less packaging than other leading lenses.

Julia Raymond:
So customers can go get fitted for lenses and select stores where the brand has a lot of optometrists in many stores. They’ve tripled the number of optometrists and cofounder and co-CEO. Dave Gilboa told the press that they’re really excited to be a one stop shop and he cited that nearly half of their customers already wear contacts in addition to the glasses they purchased from Warby Parker. So Laura, I wanted to pass this on to you. Is Warby Parker’s venture into contact lenses the next natural step for the brand and will this expansion get them to greater profitability or do you think there’s too much competition from literally the dozens of other internet contact lens sellers?

Laura Heller:
It’s absolutely the next step. How successful this will be really remains to be seen. I mean this is a logical next step. It’s a surprise that they hadn’t done it sooner. It’s not unlike the strategy that Walmart and target have. You go into buy your laundry detergent and you come out with a new coach or a TV or a new bedding, right?

Laura Heller:
So you go in to try and a Warby Parker frame, you realize they have contact lenses. It’s the replenishment model, the consumables that they get. And so that’s a great business for them to tap into what they’re offering that’s differentiated besides the packaging is unclear. And so how big of a foothold they can get into the market is a real question mark. I mean, I was a little surprised one that they hadn’t done it earlier and two, that they were now not so much of a leader in it. They’re not really disrupting it. They’re following. And that’s a bit of a concern if you’re looking at the brand longterm.

Trevor Sumner:
Yeah, well look, I think this does make sense. As you mentioned, about 40 to 50% of their customers wore contact lenses. And if you actually look at the contact lens market, it is the fastest growing segment in the eyewear industry, right? So it’s about a $5 billion market growing at 12% but the fastest in that segment and about a third of the prescription market. So ignoring that market I think was a mistake and like you said it seems a little late comparatively. So I think part of this is looking at enterprise value. So recurring revenue streams are valued at somewhere between six and 10 X revenues, whereas one time revenues are one to two weeks. So, unlocking a regular stream and point of contact. Well, it’s pretty critical not just because it’s a predictable stream of revenue and orders, but also because you get that frequent touch point of the clients.

Trevor Sumner:
That’s why a lot of the industry is fighting over grocery right now. It’s because everybody goes to the grocery store once, two, three times a week. So if you have that touch point, if you have that data, you’re in a remarkably powerful position. So I think this certainly it makes a lot of sense. What I like about Warby Parker is their branding, their connection to the customer, the way they look at personalization. That’s early feedback is that Scout does admiral job and wearability of the context which can be difficult. Really minor defects can cause quite a bit of an irritation. It is my understanding I have… Lucky enough to have good vision and not have to deal with a lot of that. But I also think that Warby Parker, will compete with the online only guys would through the power of stores where we’re seeing direct to consumer.

Trevor Sumner:
It’s very powerful. The kind of moving to stores, whether it’s Warby Parker who actually sells more eyeglasses in store than they do online or you see Casper, Madison Reed, all these direct to consumer brands who are now opening stores because they need that touch point with the customer. I think that provides Warby Parker a definitive or defensible position against the online only guys. Now, the question you asked is, well, how do you go, against Target and Walmart and some of these other guys who are increasingly looking at their own private label brands and services and as they’re starting to integrate health more vertically kind of integrated into their stores and their service footprint. I think it will be interesting to see whether this is… Where they fit in that kind of luxury personalization play or whether the value is really if you have to buy that many contact lenses now on a regular basis, are you just looking for the cheapest option that doesn’t irritate your eyes, in which case a Target, a Walmart may have some advantages. And in mass market consumerism.

Laura Heller:
Yeah, I mean there’s no obvious play here where a consumer would be like, I’m wearing Warby Parker contact lenses. Nobody can see them they’re not identifiable to the public. So it has to be a good value. It has to be a good product and it has to have an element that makes the shopper feel good about what they’re buying. And maybe that’s where the packaging innovation comes into play, right?

Laura Heller:
And at the very least that’s something that would be visible if you were poking through somebody’s medicine cabinet. Not saying that I do, but it might look kind of cool on a countertop, but it really, it’s a nice component to their business. It’s pretty necessary to growing revenue and keeping that contact with the customer. As Trevor points out and also in terms of driving traffic to their stores as they continue to build out their retail network, that becomes even more critical as they’re adding optometrists. To have people coming in and visiting. You walk past all the display glasses, displays, optometrist in the back of the store. All of those things are very similar to, again, a mass merchant like you. Where do they put the milk in the back of the store, get you to go past everything else?

Julia Raymond:
Mm-hmm (affirmative). I do wonder because they do have a really great brand loyalty in physical stores that, as Trevor mentioned, bring in more revenue than their online model. But if they already have customers who are wearing contacts and they’re already on probably a subscription with another service provider. So I just wonder because of the lack of visibility, no pun intended, with the contacts not being branded or be Parker, is there. Is the switching costs going to make sense for consumers and how quickly will they get on board?

Laura Heller:
Good question. No answers. The acquisition costs here could be higher than they expect and could sort of eat in, at least in the startup phase of this. It’s going to be interesting to see what kind of promotions we’ll have to run or will they run or is the brand strong enough just to fuel this on its own?

Julia Raymond:
Certainly. You both had really good points on that and I’m jumping into our next brand, which is not the sexiest but it’s pretty interesting. So Tupperware has a new holiday pop-up and it’s not your grandma’s Tupperware party. They launched an interactive holiday popup in the Soho neighborhood of New York last week and it features Instagrammable installations and product demos. And this comes with a slew of other brands that also launched popups. We hear about them all the time. So earlier this month, Kohls launched their interactive pop-up in conjunction with Snapchat. I was at a nearby Soho location and Macy’s and unveiled its winterized version of story. So these popups are coming during the holiday season and all these brands have seen a hit in sales. So I wanted to pass this to Trevor and just ask, although sales are top of mind right now during this year’s shorten shopping season, are popups the right tool to help struggling legacy brands and brands like Tupperware attract new customers in 2020?

Trevor Sumner:
Like any tool in your toolbox, they can be used very well or very badly. We see people spending a lot of money on popups. And the argument against is what is the value that you’re getting out after because of a limited period of time. If you look at the cost of production, fabrication, design, getting the space, putting it all together to only tear it down a month or two later, it certainly questions as to what the value you get out of it. Certainly there are models like Story at Macy’s, which effectively is a new, a theme every two months and increase the sense that there’s a new reason to come into the store on a regular basis because there’s a new theme and you know, whether it’s show fields or neighborhood goods or others who are very often kind of changing the dynamic and the narrative.

Trevor Sumner:
I think that’s great. But part of this, I feel a little bit has jumped the shark, right? This notion of Instagrammable moments and, and will it work? Sure, but we’re seeing that getting people to engage with these wonderful tiny little rooms that are upside down or little chairs or things that I want to just go in and take a funny picture. Actually, don’t get me to engage with the products very deeply, right?

Trevor Sumner:
And so I think where this becomes more powerful is in this notion of product engagement, marketing and how you leverage these things to truly educate customers, get them to engage with products in a in a deeper way and build that brand. And so when I look at the success, it’s really again, about community building, brand building and product education. And I think way too many people are caught with a, Hey, let’s just do a flower wall that looks really beautiful so that we get a bunch of people to take pictures or those types of things. I think it needs to be more sophisticated. I think it’s great test for direct to consumer brands to start interacting with physical retail and understanding what their customers want and test merchandising before they make bigger commitments. But just doing a pop up for popups sake. Sure. Maybe during the holidays, but I tend to think that if you spent that money actually fixing your retail experience that probably has a higher ROI for the future.

Laura Heller:
Yeah. Listen, I think it’s going to take a lot more than a popup or with Instagram aspirations to help Tupperware, right? This is not a great brand story for them. This is a company that has their stocks at 52 week low. Their CEO just abruptly left after less than a year on the job… A pop up isn’t a great thing for Tupperware. It’s not going to help them that much other than just getting some free marketing. When people stop in to take pictures. I think it’s gotten great headlines. People are kind of excited about it. But does that translate to some kind of bigger marketing initiative or a turn in Tupperware’s fortunes? I’m pretty skeptical about that. The thing that was pretty-

Trevor Sumner:
I would challenge you there as to what’s the value of their media, right? So they, they have a Soho location, they spend a ton of money and when you search for Tupperware, pop up the number one articles from plastics today.

Trevor Sumner:
Then you’ve got Homeworld business, there’s no tier one, right? And I think, that’s where this was novel before years ago. But like you said there, it’s Tupperware it’s hard to get excited about that unless you do something really groundbreaking. And I feel like if you look at it, they’ve clearly spent a ton of money on design, on fabrication, making it look really, really nice. And I think it fell flat.

Laura Heller:
Agreed. Completely. And I would challenge with the Ttory, story at Macy’s as well. I see where they’re going with it. I understand what they’re trying to do. The first iteration or two has been a little lackluster. I don’t see a lot of great results from that pop up. And Kohl’s is the same. I mean, they’re having a terrible time right now. So if we’re looking at, again, the common thread between these examples, is that these are brands that are on the losing end of sales at the moment. Popups have been used effectively, there is no question and they’re going to continue to be used effectively. I’m very excited to see what Target and Toys R Us can do together during the holiday season. And there’s still a long runway ahead I think for story to maybe get it right and create a little more enthusiasm and generate more sales opportunities than they have so far.

Laura Heller:
But I just think that it speaks this rise of what we’re seeing in retail, which is retail as a service, which are these companies that can help create the popups and incubate new brand stories inside of retailers the way b8ta is doing with the Toys R Us brand inside of Target and the way some of the mall operators are experimenting with in terms of using a vacant space to host popups and create that kind of excitement. I think those are two different kinds of stories about the pop up phenomenon. But both have pros and cons.

Trevor Sumner:
I wholeheartedly agree with you. I think it’s a lot about community, right? And so, when you talk about Toys R Us with Target. Toys R Us, still has a wonderful brand. I don’t want to grow up, I’m a Toys R Us kid or Khol’s partnering with Snap to build that community or to kind of hijack the community and make it part of their popup. I think that’s where things become much more interesting and successful. And I think that’s what made Story so special when it was a single location with the community around it.

Trevor Sumner:
And so where Macy’s has to move is for Story, not just to be a pop up that changes every two months, but also a community that they leverage, that they nurture and create a reason. So, some of the events that Rachel used to do at their Chelsea store, how do you replicate that at scale so that you have a reason that people come in, but the launch of Story is a bigger deal. It’s a celebration, it’s a part of a local community. And that’s what made Story special. And that’s certainly harder to scale, especially across geographies. But I have a lot of faith in Rachel Shechtman and what the team’s doing there and they’re just beginning that journey of building those kind of micro local communities.

Julia Raymond:
Certainly. And as Laura mentioned, it’s reflective of the larger evolution as retail as a service. And I think someone on the show the other day said, when you have a pop up, you’re either driving sales or you’re driving engagement. When retailers try to do both, that’s when it fails. Do you guys agree with that?

Laura Heller:
I know that, listen, retail is a business that sells goods and services. I think that if you’re not thinking about how that translates into sales, you’re probably behind the curve. I think that one way to do that is to consider what that popup is doing for your business. Is it free marketing? Okay, great. That’s one avenue to monetize that or to attach a dollar value to it in terms of your operational expenses.

Laura Heller:
But what are you doing with the information? Are you learning from that experience inside of your own company? Are you capturing customer data? Are you seeing what products people are interacting with inside that environment? If you’ve got young shoppers coming into a Tupperware store, are they just doing it to take pictures? Are they making fun of things? Are they interacting with things? Are they giving you feedback? Positive feedback, and are you taking that and iterating new products or new marketing ploys to go along with that? Because it really is all about taking the data and then turning that around in some way. So it’s sales, it’s monetization, it’s return on investment, be it what it will. It is not just a creative effort for the sake of a creative effort. It can’t be.

Trevor Sumner:
Yeah, I agree with that. And I think part of the challenge in retail is these very broad based words like experience, engagement. How do you measure these things? So I think often it’s an umbrella to cover four things that really weren’t actually successful. We believe that engagement for engagement’s sake doesn’t necessarily make sense. You can bring a bunch of people into your store to do yoga classes, but they’ve never looked at the products. If they never engagement’s not focused at the product level, then what are we doing here? Right? What is the purpose of this? All of these techniques in the end are to develop either a relationship with the customer that leads to sales or sales directly. And so whether it’s data acquisition, whether it’s feedback on merchandising and marketing or whether it’s sales directly, at the end of the day it’s about marketing the products and understanding why that brand and those sets of products are the place that you want to go into the place you want to buy.

Trevor Sumner:
So I’m always wary of people who say, Oh, we drove a ton of engagement. It reminds me of kind of back in the early days of advertising, if that’s like five 10 years ago online of people measuring success by their cost per impression or their share of voice or these metrics that didn’t really mean anything when you absolutely could measure cost per clicks and cost per acquisition and end up sales. Anybody who came to you and said, Hey, we’re measuring this campaign on CPM immediately you just stop the meeting, right? Similarly, I think, you know, broad, Oh is great at engagement. Like, okay, maybe?

Julia Raymond:
Right, right. It reminds me of the saying, I think if it’s not measured, it’s not managed-

Trevor Sumner:
Correct.

Julia Raymond:
And retail is about sales.

Julia Raymond:
Mm-hmm (affirmative) absolutely. And it’s something that we might see new KPIs for in the future for how retailers are measuring in store engagement, especially between the customers and the products and the salespeople. So a lot of really great things and Laura and Trevor, I really appreciated you guys coming on the rundown today. A lot of good stuff and I can’t wait to have you on the show again.

Trevor Sumner:
Awesome. Thanks you so much.

Laura Heller:
Thanks for having us.