Amazon Prime’s U.S. membership growth ran into a brick wall last year. As recently as 2021, Prime was still growing rapidly in its home market. The program’s domestic subscriber count jumped from around 118 million individuals at the outset of the Covid-19 pandemic in March 2020 to 147 million in March 2021 and 170 million by March 2022, according to survey data collected by Consumer Intelligence Research Partners. However, Amazon Prime’s domestic subscriber base appears to have peaked in December 2021. Since then, attrition has led to flat …
Private Equity Owners: Not Always Toxic for Retail
A spate of bankruptcies has plagued the U.S. retail landscape over the past decade. During this time, private equity firms have come under scrutiny due to a slew of bankruptcy filings by private equity-backed retailers: most notably, Toys R Us. A stimulus-powered surge in consumer spending caused the pace of retail bankruptcy filings to slow dramatically in 2021 and 2022. However, 2023 is set to be a much tougher year as consumers rein in spending and financial markets tighten. That could lead to another round of bankruptcies among retailers …
Winter Arrives for Ecommerce Darlings
Just a year or two ago, many people believed that the Covid-19 pandemic had sparked a massive, permanent acceleration of ecommerce adoption. This thesis became the conventional wisdom among executives at pure-play ecommerce retailers and other companies that stood to benefit from ecommerce growth. These rosy forecasts haven't panned out, though. Many consumers have returned to their pre-pandemic shopping habits over the past two years, favoring brick-and-mortar stores. High inflation and a shift in spending priorities away from merchandise …
Target’s FAO Schwarz Partnership Is No Game Changer
Target has been one of the biggest winners in the toy business since the 2018 liquidation of Toys"R"Us. The demise of the only sizable national toy chain enabled discounters (led by Walmart, Amazon, and Target) to extend their growing dominance in toy sales. That said, a disappointing holiday performance in 2019 taught Target that success has to be earned. An omnichannel partnership with a relaunched Toys"R"Us (under new ownership) failed to meet expectations, as Target's toy sales remained flat during the 2019 holiday season relative to …
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Even When It Loses, TJX Always Wins
Off-price retail leader TJX faced a big test after the Covid-19 pandemic swept the globe in 2020. Like other discretionary retailers, it was forced to close its stores for weeks (or months, in some jurisdictions). Meanwhile, mass merchants like Target stayed open, enabling them to capture discretionary sales. Even after TJX reopened its stores, customer traffic initially remained well below pre-pandemic levels. Many consumers continued to shift discretionary spending to ecommerce or mass merchants to minimize the number of shopping trips …
The Share Buyback That Killed Bed Bath & Beyond
When Tritton took the top job in late 2019, the iconic home furnishings destination desperately needed a reinvention. The former Target chief merchant rapidly implemented long-overdue strategy changes. While one could quarrel with some of his decisions (e.g., abruptly changing Bed Bath & Beyond's product sourcing strategy and initially prioritizing merchandising changes over supply chain modernization), most of his plans made sense. Unfortunately, the supply chain snarls of 2021 and plunging demand for home furnishings in recent months …
Behind Amazon’s Thorny Profitability Problem
To nobody's surprise, the Covid-19 pandemic gave Amazon a huge market share boost. So far, the ecommerce giant has been able to maintain most of its pandemic share gains even as consumer shopping patterns have started to normalize. However, the combination of surging costs and slowing growth are taking a severe toll on profit margins. The rising pressure on Amazon's core ecommerce profitability raises serious questions about the financial sustainability of its business model. Red Ink Piling Up for the Retail Business In late April, …
Macy’s Beats Back Activist Attack
Last fall, investment fund Jana Partners launched an activist campaign at Macy's. The fund aimed to double Macy's share price by separating the department store's growing ecommerce business from its physical stores. Jana Partners portfolio manager Scott Ostfeld estimated that Macy's digital operations could be worth $16.8 billion: far more than the entire company's market value at the time. Macy's management took this suggestion seriously. Rather than rebuffing Jana Partners, CEO Jeff Gennette told investors in November that Macy's had hired …