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December 27, 2010





  • Facebook has now become the leading driver of web video traffic behind none other than Google taking over the #2 spot from Yahoo according to a recent Video and Media Industry report from Brightcove and TubeMogul. While certainly notable, so too is the gap between the top spot and Facebook’s new post, which refers 9.5% of all video traffic compared to more than 50% for Google.
  • Don’t be surprised when asked to present your driver’s license when making holiday returns this year. According to NRF’s latest return fraud survey, retailers lost nearly $4Bn to fraudulent returns last year and approximately $14Bn per annum. This added step is far from fool proof, but one thing is for certain – return lines will be longer this year as a result.
  • With 50%+ deals more rule than exception the day after Christmas, it appears that some retailers are extending offers into the week given disruptive storms along the east coast yesterday/today. In fact, some deals may get even better as retailers look to recover lost sales for those still looking for a deal.


Post Christmas Demand Strong Despite Storm - Even as concerns remain over the consumer mood in 2011, retailers have entered the last leg of the holiday season — the week between Christmas and New Year’s — expecting another wave of spirited shopping and feeling good about the outcome so far. And that’s particularly true in apparel and accessories. This past weekend, retailers and analysts concluded those categories performed the best during holiday 2010 after several years when the sector lagged in favor of electronics and toys. Skyrocketing online and mobile shopping, robust gift card sales, tax cut extensions, rebounds in luxury goods and men’s wear, and free shipping of online orders also spurred sales growth this year.  No doubt, Sunday’s storm blanketing the Northeast and mid-Atlantic regions and reaching 10 to 12 inches in some locations deterred traffic at many malls and put a dent in sales. Yet the blizzard did little to dampen the mood. The day after Christmas is traditionally one of the biggest volume days of the year, leading to a bustling retail week characterized by returns and exchanges, gift card. “The day after Christmas is a very important day,” said Brendan Hoffman, president and chief executive officer of Lord & Taylor. “It looks like today [Sunday] is starting out strong. Maybe people were getting out early to beat the snow, but the storm will certainly affect the malls. You can’t control the weather, but we’ll get through it. Up until today, we were up double digits. I don’t know what the storm will do, but the customer has been continuing to respond. This season, gains were across the board. For Lord & Taylor, it’s been the best Christmas in a number of years — five years for sure.” <WWD>

Hedgeye Retail’s Take: Largely considered a Top 5 shopping day for retailers (and #2 last year), it appears that sales early in the day were strong as usual before shopping ceased. While sales activity will be aided by increasing temps over the next few days, the storm will undoubtedly leave its mark on season ending sales, the extent to which remain unknown for now.

Adidas Outdoor to Launch Stateside at OR Next Month - Adidas is preparing to roll out its outdoor collection in the U.S. market — an initiative it first embarked on five years ago with limited success. This time around the effort is part of a worldwide push and a seven-year business strategy. Building on the outdoor category’s strength in Europe, where Adidas has been sold for the past two years, the athletic brand plans to unveil the new collection at next month’s Outdoor Retailer show. Adidas Outdoor has also made inroads in Asia and in Russia, under the guidance of Rolf Reinschmidt, senior vice president and global head of operations for Adidas Outdoor. The Stateside debut in stores is slated for July. “We knew we had to earn our way,” Reinschmidt said. “We are approaching the market from a different product focus and with a deeper integration into the outdoor community. Growth will come from doing things right and not through heavy advertising and marketing.” Adidas Outdoor is expected to be sold in 350 to 500 domestic retailers, as well as through Adidas’ seven freestanding stores and its Web site, he said. The U.S. market will have about 90 percent of what is sold in Europe. The label should face off against competitors such as The North Face, Arc’teryx and Salomon, Thomsen said. <WWD>

Hedgeye Retail’s Take: What’s notable here is Reinschmidt’s specific commentary regarding the brand’s success riding on the authenticity of the product, not the marketing spend behind it (a la Easy Tones). While the company proved successful in the later over the past year, authenticity requires a polar opposite approach and one that’s considerably slower to materialize. We’ll see what the response is out of OR (Jan 23-26).  

New Flash-Sale Jewelry Site Launching in 2011 - Ajaline, a fine jewelry flash-sale Web site set to launch on Feb. 1, wants to adapt a model crafted by online retailers such as Gilt Groupe and Rue La La. Co-founder Meeling Wong, a former president of John Hardy, said she is curating Ajaline.com to cater to brand concerns about how items will be sold. Only three to five will be featured each week, and each flash sale will be open for three days, with a 24-hour preview. Discounts will range from 30 to 70 percent off retail, with prices from $500 to $50,000. The first sales will spotlight designs from Buccellati, Lagos and Temple St. Clair. Fine jewelry has been slow to embrace e-commerce, but Wong said she tells companies, “You guys think you can control the Internet. You can’t. You can control where you are and the way you’re presented.” <WWD>

Hedgeye Retail’s Take: A natural extension of flash-sale pioneer sites that have incorporated jewelry offerings, but not in any consistent way – this isn’t just a me-too concept. Given Wong’s experience and more importantly connections within the industry – Ajaline will likely have more popular and desirable brands than exist in this channel currently.

Cost Excerpt from Interview with WRC's CEO Joe Gromek - "I would suspect 2011 will continue to be an excellent year for intimate apparel, and consumers will continue to be back in the shopping malls. But one of the challenges in 2011 will be in terms of rising costs.…We will pass along 70 percent of rising costs through a combination of price increases and product expense reduction and margin out as good or better.…We are positioned for the first half of 2011, but we have not gone to market yet with fall 2011. We’ll do that in January. The second half will be the challenge." <WWD>

Hedgeye Retail’s Take: The fact that the company expects to absorb some portion of impending cost increases in the 1H of 2011 is more forthcoming than what we’ve heard from most in retail on the matter.

Polyester Yarn Prices on the Decline - Indian spinners have already further slashed the yarn prices by around Rs 8 per kilogram over the last few days, hoping to stop the government’s imposition of a ceiling on polyester yarn exports. Members of the textile body urged the Textile Ministry to put a ceiling on polyester yarn exports in the same way as it was done for exports of cotton yarn to make the domestic market stable, following the unprecedented hike in polyester yarn prices after November. The members also asserted that the demand for synthetic yarn, by textile manufacturers, particularly from China and Pakistan after the shortage of cotton supply, had raised the export orders from the country. <FashionNetAsia>

Hedgeye Retail’s Take: With cotton prices escalating sharply during the 2H of 2010, the halo effect across alternative materials was to be expected. Still, on a relative basis, these materials will lead to greater use of alternative materials in 2011 as producers look to mitigate cotton cost inflation.


Shoe Alliance Formed in Wenzhou - The first Chinese Footwear Cooperative Alliance has recently been established in Wenzhou, the shoe production capital of China. The alliance, which was jointly launched by Aokang Group and some 50 shoe companies, aims to build an industrial and trading chain operation model for footwear, similar to retailers Gome and Suning in the household appliance sector. Aokang Group said the alliance urges shoemakers to work together to create a franchise store brand for footwear, adding that further cooperation and investment will be needed to be discussed. Although Wenzhou is known for shoemaking, competition has been getting more intense, causing Wenzhou shoe producers to look for ways to create a new outlet channel. <FashionNetAsia>

Hedgeye Retail’s Take: It’s a start, but the beginning of a long and costly road to pull together resources in an effort to stem production outflows to inland and neighboring alternatives. While these efforts may prove successful in the long-run, the question is just how long it will take the alliance to make a meaningful impact on the decision of companies actively looking to shift resources elsewhere.

Social Media Continues to Climb - Email marketers have been warming up to social media for the past year, using social elements like “share with your network” and buttons to connect with brands on Twitter and Facebook in email campaigns. Email and social media also go together in another way: They are the top tactics marketers worldwide expect to increase budgets on in 2011. According to a November 2010 survey of business executives around the globe by StrongMail, nearly two-thirds of companies will increase spending on email marketing, and 57% will put more dollars toward social media marketing. Search took a distant third place with 41% of respondents indicating they would spend more. Budgets will be increasing, but the biggest challenge for email marketers will be a lack of resources and staff—the same problem affecting social media marketers. Email and social will continue to get closer as more marketers integrate the two channels with each other. More than a quarter of respondents said they had already formulated and implemented a strategy for making email and social work together, and another 43% plan to make efforts toward integration in 2011, though some are more prepared than others. <emarketer>

Hedgeye Retail’s Take: A clear indicator of how companies value the social media channel – it stands at #2 behind only email marketing.

R3: ADI, WRC, Facebook, and Snow - R3 1 12 27 10