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R3: REQUIRED RETAIL READING

September 9, 2010

Several moves again this morning by Amazon – this time on the technology front. One, a demand based pricing technology, another providing cross merchant purchasing flexibility using one’s Amazon account…these guys remain ahead of the curve. 

RESEARCH ANECDOTES

- The introduction of next-gen Checkout is the latest technological advance from Amazon and one that will greatly streamline the purchasing process and, importantly, avoid the pitfalls associated with redirection. Customers will now be able to make purchases on other merchant’s sites using their Amazon.com account. Not only should this enhance customer retention, but also help to increase conversion.

 

- In a rare sign of denim vitality, Van Heusen mentioned that its fall order book is up a healthy 10%+ in the category contrary to what we’ve heard from other retailers. What’s notable here is the price point, which at $59-$79 at retail puts CK jeans right in the middle of the void that has typically existed between $50 or less and $100+ premium brands that have reported the most significant weakness.

 

- With companies embracing the move towards ‘greener’ more sustainable processes, consumers should start to expect these efforts to become more apparent in the form of product packaging. With cost, originally one of the gating factors, no longer an issue (it’s actually cheaper now in most cases), change itself now appears to be the primarily deterrent for retailers. While only a small percentage of Amazon’s products come in “frustration-free packaging,” expect other retailers to follow suit as consumers become accustomed to ease of green.

OUR TAKE ON OVERNIGHT NEWS 

Amazon Tunes In a Deal for AimeStreet.com - Amazon.com Inc. has made another acquisition and this time the deal is meant to bolster the biggest online retailer’s digital music business. Amazon acquired AimeStreet.com, an online music store and social media site featuring independent artists. AimeStreet.com featured a unique pricing model that used a software algorithm to set pricing on recordings by independent artists based on demand. The more times a recording was downloaded, the more the artist could charge up to a maximum of about $1.  <internetretailer.com>

Hedgeye Retail’s Take: More important than the brand and its content is the technology behind this one – online demand driven pricing. The model sounds almost auction-like, but could prove effective in accelerating inventory turns across other categories as well (think Zappos). Certainly meaningful given the sheer volume of SKUs Amazon runs through its model daily.

Reebok Launches NFL Maternity Collection at Pea In The Pod - Reebok has partnered with A Pea in the Pod to offer an NFL maternity collection, with Elisabeth Hasselbeck, co-host of ABC's The View as the face of the line. <sportsonesource.com>

Hedgeye Retail’s Take: Only a day after the NFL indicated they might open up its apparel licenses to bid, Reebok broadens its net - this one could start to get interesting (and potentially expensive for Reebok) if not resolved quickly.

 

Gap Links With Valentino - Gap is celebrating its arrival in Italy by partnering with one of the country’s most famous couture houses — Valentino. The company will today reveal that the House of Valentino has created a capsule collection of women’s wear for the brand that will bow in late November to coincide with the launch of Gap’s flagship on Milan’s Corso Vittorio Emanuele. The collection has been designed by Valentino’s creative directors, Maria Grazia Chiuri and Pier Paolo Piccioli, using “iconic Gap pieces” as its basis, the company said. Stylist Karl Templer, who works closely with Gap and Valentino, introduced the two brands.  <wwd.com/retail-news>

Hedgeye Retail’s Take: This is a notable partnership for GAP – best known for its khakis and white shirts. To say that GPS has struggled to gain traction and relevance with its designs of late would be an understatement. Even with Valentino as an ambassador, Italy will likely prove to be a challenging market to penetrate given its fashion bias.  

 

UGG Steps Up NYC Presence - Ugg is spreading out across New York. The shearling boot brand is planning to open its third Manhattan location on Oct. 28, at Madison Avenue and 59th Street. A VIP kickoff event is also in the works and will be hosted by Vogue. For her part, Ugg Australia President Connie Rishwain said the company has high hopes for the new concept store. <wwd.com/footwear-news>

Hedgeye Retail’s Take: Just in time for the holiday season. With practically every brand now offering their own version of ‘the shearling boot,’ dedicated retail stores should play in important role in driving demand for new models that will undoubtedly be made exclusive at UGG branded stores.

 

Sales Tax Amnesty Falls Flat - North Carolina invited 450 web retailers to join a program that would forgive uncollected taxes, but only 27 signed up. The state could go after the other merchants for taxes, interest and penalties tied to past transactions. Only 6% of invited online retailers have taken up North Carolina on its offer to forgive uncollected sales taxes in exchange for a promise to remit taxes later. Retailers who signed up do not have to worry about the state trying to collect sales taxes, penalties or interest for online purchases made by North Carolina residents prior to Sept. 1. <internetretailer.com>

Hedgeye Retail’s Take: With the Delahunt Bill introduced July 1st and many states already passing the Streamlined Sales and Use Tax Agreement (SSUTA) the day that online retailers have to collect taxes is quickly (on a relative basis) becoming a reality. Interestingly, with only 6% of retailers stepping forward on the sales tax amnesty offer in North Carolina there appears to be significant disparity between perception and reality.

 

(if you are interested to read more on this topic, please contact to inquire about our e-Commerce Black Book released last month).

Import Cargo to Rise 16% in September - Import cargo volume at the nation’s major retail container ports is expected to be up 16% in September over the same month last year, but 2010 has already hit its peak and numbers will decline through the remainder of the year, according to the monthly Global Port Tracker report. <sportsonesource.com>

Hedgeye Retail’s Take: With inventory levels coming out of 2009 lean and heeding supplier warnings of 2H constraints, retailers ramped orders driving cargo traffic to unsustainable levels in the 1H. Needlessly to say, a gradual decline in 2H traffic is to be expected.

 

Mayor Bloomberg on Fashion - New York City Mayor Michael Bloomberg offered an impromptu address on the state of the industry and its future by discussing how New York City’s overall environment affects shoppers, Seventh Avenue manufacturing and how Friday’s festivities could rev up shoppers’ interest. The mayor said NYC has had record-breaking tourism figures. Despite being in a worldwide and national recession, New York City is on track to meet Bloomberg’s goal of bolstering tourism to 50 mm visitors in 2012. For 2010, the final tally should be about 45.5 mm , a slight gain compared with 2009, Bloomberg said. Emphasizing how shoppers’ spending is intrinsically tied to the overall environment, Bloomberg noted that real estate, stores and restaurants are showing signs of improvement. In addition, the city’s unemployment rate for July was down for the seventh consecutive month and (at 9.4%) is lower (by a hairline) than the national average (of 9.5%,). <wwd.com/business-news>

Hedgeye Retail’s Take: A little pep rally ahead of Fashion Week is no surprise given how meaningful tourism is to the city. With events more staggered over the course of the week than in years past, it will be interesting to see how many fashion goers that usually opt to attend the New York show stay local to their international markets this year as a result.

Live TV Losing Younger Adults - Millennials and younger Gen Xers now report spending well under half of their video viewing time watching live TV, turning instead to online sources such as Netflix and other timeshifted options. <emarketer.com>

Hedgeye Retail’s Take: Live television adverting is starting to look much like newspaper did 10-15 years ago. Retailers and brands will have to continue to evolve towards online and mobile channels to capture customers. Interestingly, street-side and interior billboards are also seeing a resurgence in demand as technology enables these mediums to advertise ‘smarter’ with profiling capabilities as already seen in Japan.

R3: AMZN, GPS, Reebok, DECK, Online Sales Tax - 1

Total Apparel Group Faces Liquidity Crisis - Total Apparel Group, the U.S. master distributor for FIFA and FIFA licensed product in the U.S. and North American licensee for Kappa and Robe Di Kappa, released its results for the last two years and also indicated it is going through a liquidity crisis. The company has not reported its public-figures since it was founded in 2008. <sportsonesource.com>

Hedgeye Retail’s Take: Recall just last week that the China Dongxiang Group Co., a Chinese footwear company and owner of the Kappa sportswear brand in China, announced that they were looking to buy European and U.S. brands – sound like a fit? Total Apparel Group should be expecting a call…

 

US Senate Introduced Industry-Backed Bill to Protect Fashion Designs - US Sen. Chuck Schumer (Democrat-New York) introduced in early August new legislation to strengthen copyright protection for fashion designs, with the support from both the American Apparel & Footwear Association (AAFA) and the Council of Fashion Designers of America (CFDA). <fashionnetasia.com>

Hedgeye Retail’s Take: Passing these bills is arguably the easiest step in the process, enforcing it is a whole other issue. As in most industries, smaller little known designers most often at risk of someone ripping off designs are typically capital constrained.

South Africa Deals With Wage Disputes - As South African president Jacob Zuma visited China last month to court investors to his country, Chinese companies were closing 85 apparel factories they own in Newcastle in the province KwaZulu-Natal because of a wage dispute. The factories employ about 8,000 workers who produce an estimated three million garments a month. Zuma is under fire because his three-day trade mission coincided with a strike by an estimated 1.3 mm South African civil servants — nurses, health and education workers and police — who are demanding higher pay. Workers are seeking an 8.6% boost. <wwd.com/business-news>

Hedgeye Retail’s Take: Bangladesh is certainly not alone though South Africa accounts for far less of the global apparel export market.