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It is January 22, 2025. I'm one of your hosts, Ann Mazinga. And I'm one of your other hosts, Chris Walton. And we are here once again to discuss all the top headlines from the past week making waves in the world of omnichannel retailing. And joining us today for their first appearance of 2025, we have Kelly Carey and John Clear of the Alvarez and Marcel Consumer and Retail Group. Kelly John, this is your this is your second duo like appearance on the Omnitok Retail Fast 5.
We're excited to have you, Kelly. I'd love for you to start with a little bit of your background and your current role at am. Great, thanks, Anne. Hi everyone. I'm Kelly Carey. I am a director with the Alvarez and Marcel consumer and Retail Group. I've been with the group for going on six years now, which is crazy to say, really focusing on our beauty and apparel clients within the team.
So I've spent time both in consulting and in industry working with multibillion dollar beauty companies and I'm excited to talk about some fun headlines in that space today. Oh yes, we've got some for you, Kelly. We have some for you. I cannot wait to hear your thoughts. John, let's have you give the audience a little bit of your background and your current role at A and M. Sure. Thanks for inviting me back. I wasn't sure it was definitely going to happen after as the Irish change out.
It was touch and go. I can imagine. I can imagine. So yeah, My name is John Clear. I've been with the A M consumer and retail group for three years. Actually next month I'm a senior director here in the team and so I work a little bit on the other side of the retail equation than Kelly. So my, my focus is really on grocery or food retail, so grocery, mass, drug, convenience.
Prior to joining A and m, I spen 10 years working in the grocery industry as a, primarily as a merchant with a company called Lidl. So I really kind of bring the, the industry background to what CRG do and hopefully a little bit of that industry operator expertise to give a bit more nuance when we're engaging with the teams as we go through our processes.
And I love how he said that just a company called Lidl, which I think we learned at nrf, is like the fourth largest retailer in the world or the fourth largest conglomerate in the world. The retail conglomerate in the world. So yes, John, it's great to have you. Every time. John, you're my go to for grocery insight. Whenever I don't know anything, I'm always like okay, what does John think about this? So it's great to have you back. That is a risky strategy, Chris, but.
You'Re telling me it's worked so far? It's worked so far. So we'll keep rolling with it until it does us wrong, John, we'll keep going. All right, well let's, let's jump to the headlines. Let's get to it. All right. And well, I'm excited because the wait is almost over. Manifest is just weeks away. Don't miss your chance to learn from and connect with top minds transforming the future of supply chain and logistics. And also if you're interested with Ann and myself too, we'll be there.
You know you can, you can meet us too. It might be a draw. It might be a draw for some of you folks. Secure your spot among the best of the best and register before prices increase on Friday. So two days January 24th and you can still save $600 off the regular retail conference price. You can register now by going to manifest. Vegas.com save with omnitalk. That's/save with Omnitok.
All right, in this week's Fast5, we've got news on Target cutting its go to market timeframe from seven months to eight weeks. Burlington's new small store growth plans. Sephora's massive store redesign of its entire fleet. Walmart's partnership with Rebag to sell the likes of Fendi, Chanel and many, many more high end luxury brands. But we begin today with other exciting news in the world of robotics. Ann? Yes, big news.
Chris and team Symbotic has struck a deal to expand its partnership with Walmart. According to the Wall Street Journal, Symbotic will take on a $520 million program to develop an automated delivery platform for Walmart stores while also agreeing to buy the retail giants advanced systems and robotics business.
Walmart will fund a development program that aims to leverage Symbotics artificial intelligence enabled robotics platform and will seek to enhance Walmart's current online pickup and delivery fulfillment systems and design new systems. Symbotics said that if performance criteria are met, Walmart is committed to buying and deploying systems for 400 accelerated pickup and delivery centers at stores over a multi year period. John, you're Mr. Grocery here. We're going to you first.
Why would Walmart ink this deal with Symbiotic and what do you think it says about Walmart's approach to delivery? Yeah, so this is actually, it's great because it's like the only grocery topic we have almost a grocery Jason and it's still not quite there today. So I'll do. Right, right, right. And I do have to just before I start, give a shout out to my brother David who works for a company called Auto Store who are also in the robotics space.
So I was able to get a good insight from him last night on and the kind of information on this deal. So that's super helpful for me. Competitive intelligence, I love it. Yeah. I'll try and be careful what I share. Right. He was yeah on the gossip side of things but I'll try and keep it factual here.
Right but, but I do think generally speaking if you look at it first of all from like the industry lens one of their key kind of accelerants, enablers over the last number of years has been this focus on technology. So throughout their organization they're super focused on technology.
They've they already have an existing deal with Symbotic on like large scale DCs and automation of their DCs which has been successful and the way I would kind of position that is Symbotic have been pushed very hard by Walmart to improving up their game which has then driven Symbotics growth over the course of that time.
If you take this as a separate piece then this is a little bit more focused on their what I think used to be called MFCs but people have slightly away from the turn MFCS I think because there's been some difficulties in getting that off the ground. And so maybe not to get into too much detail but Walmart acquired Alert a number of years ago to bring them in to do this work and now they're effectively spinning that work back out to Symbotic.
And so the way I would read that is they brought it in house, maybe found that it was more complicated than they expected to make this work with their own internal capabilities because it's complicated process and what they're really doing is I think doubling down on automation as a key pillar for their growth by going to an industry leader in the space and saying to them we want you to recreate the success you've had on large scale distribution centers to MFCs.
And because it's obviously a key pillar for what they want to do particularly using their stores as fulfillment notes. Right. They haven't quite got that off the ground in the way that everybody was expecting. I think that it the structure of the deal is also very interesting. So it's being quoted as symbolic of bought it for $200 million. But when you go below the surface Walmart are going to pay them 500 million.
There's 230 million guaranteed at closing there's 100 stores that they're guaranteed. So it's a very low risk deal for Symbotic that I think will hopefully clean up some potential issues that Walmart have had internally. And for me it's kind of another example of Walmart betting on innovation to continue to grow their performance because I mean Chris I know you're a big fan of Doug McMillan, but it has been a huge success over the last number of years of how much they've grown.
And I think this is just another signal of them continuing to double down on, on what they've seen work so far. Yeah, I mean Chris, how much do you think too with John saying like how much of this plays into probably the acceleration that Walmart has seen with delivery with grocery in the last couple of years, like that's causing a lot of strain on their systems, I'd imagine. So what are your thoughts here on this investment and what John had to say?
Yeah, I mean I gave John a shout out at the beginning and John followed suit very well and got the great competitive intelligence here. I mean, I think, I think. And your question's dead on. I mean I think, you know, Walmart plays the long game, you know, as well as anyone right now. And I think that's really what you know, Doug McMillan the team are doing here and David Gugina, the head of supply chain too. The, the, the, the wrap.
I would put on this in terms of what John said is like, and I keep thinking about, and we were talking about this even before we got on the show today, I keep thinking about the, the fabric save a lot experience that we saw in Brooklyn, New York and, and just how easy it was to plug into a community that you don't previously serve. Right.
And, and we saw Uber drivers coming in there left and right and all this thing was, was stood up on an Uber eats marketplace for save a lot and they were doing business out of it. So, so if I'm Walmart, I think I'm in the two angles I would add here to what John said is I'm, I'm, I, I like this move, number one. But I'm thinking, I'm thinking about these two things.
I think number one, I'm thinking about how do I extend Walmart plus because I've been, I've been successful extending my demographic. I can reach higher incomes. It, it brings the robotics play into the cities like we saw with fabric and save a lot. So I think that's a piece of this.
But the other part of this that I think is really interesting that talks about their strategy relative to others is Walmart can't really take the sortation center approach that like Target is taking because of where their stores are located. Their stores are very rural based. So to get that same day delivery efficiency they have to go to robotics and they have to go to robotics in the store. Itself via micro fulfillment.
So that's the key thing here and I think that's what separates Walmart in terms of how they're thinking about the landscape relative to Target and even like Amazon too in terms of their approach. So, so honestly I, I can't stop thinking about the potential here that if Walmart cracks the code on this, this is why it's a great investment.
If they crack the code on this over 10 years, like Walmart could have a very profound presence in the biggest cities in America in a way that they just don't have right now. Yeah. And with an income demographic that they just don't have in those cities. So that's the play here. Yeah, I agree, Chris. I mean, I think the thing is that this will also in the long run help Walmart keep prices low, which is exactly the driver that you're talking about.
Like you think about, you know, the Save A Lot example. If I'm going on a marketplace and I'm just buying eggs, like Save A Lot popped up as the cheapest place to buy eggs. And you know what, I don't really care where I'm getting which retailer I'm getting my eggs, but if I get served up three options and that's the cheapest, I don't care if they have a physical presence or not, that's where I'm going to go.
And I think that's what this keys in on here, that Walmart will be able to do things more efficiently. They're eliminating the bottlenecks of manual picking from their, their process like you said to you know, ship from store and this is something that you know, will just continue to develop. They'll keep learning from and be able to serve more people. But jump back in, Chris.
Well, no, I just wanted, I wanted, I just wanted to point out because I think you're dead right, like just because you were there with me. How many people did Save A Lot have working that, that facility too? Like they need two people to facilitate two people, two pickers. We saw more Uber drivers coming in than there were in the time, in the three hours we were there. Yeah, yep. And picking all things. Like again, I think that's the key thing. Like fresh frozen ambient.
There was no manual labor associated with the picking process. It was all coming to those two individual baggers and that was it, that was all they needed. But Kelly, any last minute thoughts here to close us up? Definitely excited to see where it goes. I think that the, the Save A Lot example is a great one. If they can start to get that kind of scale, it'll be really interesting. The city play that you mentioned is, is one I'm excited to see play out as well. Right?
Yeah. To save a lot's doing serving 2 million customers with a 7,000 square foot warehouse. I mean I think you're dead on, Kelly. We gotta, we gotta see where this, this allows Walmart to go. I would add maybe just one final thing on like around the topic of the like the reduction of manual labor is that the, the basket economics of like home delivery for grocery just doesn't stack up right.
So if we've done some recent work where you compare the grocery basket with an apparel basket for home delivery and like the differences is so stark because everyone's losing money in grocery and so that's why there's such a shift to kind of brick and mortar. And actually interesting because I know we touched on before we talked that Robert Yosef from the Schwartz Group mentioned that 94% of sales in Germany are still brick and mortar.
It's somewhere in the high 80s in the US of how much sales and grocery are still brick and mortar. So people still want to go to stores and this is a key way to enable that to still have pickup and then maybe there's some component of last mile delivery. But they have to make the economics of the basket make sense and Walmart are ahead of the curve on that versus Yep.
Yep. The other point I'd say too, it's cool to see MFC is getting talked about again and like, you know, and team like it seems like they kind of died off for a year and we're all kind of like going why did this happen? Like this seems like a good idea that we need to still figure out to John's point, because the economics don't work. But so it's great to see. All right, headline number two, this is a potentially fun one.
Target has said that it has cut its go to market timeframe from seven months to eight weeks, according to Retail Dive. Rick Gomez, the chief commercial officer at Target, told an audience last Monday at the National Retail Federation's Big show conference that Target has shortened its go to market cycle to eight weeks down from 27 weeks for specific trending items so they can reach shoppers faster.
Quote, not everything is in eight weeks, Gomez explained, but the things that are trending and that we're seeing that are going viral, that we want to be in market ahead of the competition, we've created an operating model that enables us to do that, end quote. John, we're going to go to you again on this one. Are you buying or selling? Target's announcement of cutting its product lead times from seven months to eight weeks.
And what, if any, impact will it have on Target's overall business performance? Yeah, I mean, to answer the first question, I think I'm a hold right now because I'm not quite, to be honest, it's, it's, I don't know, it's kind of, it's, it feels like a very exciting announcement, right? We're going to do stuff in eight weeks and we cut it down from seven months.
And like all those numbers sound great, but I'd have a couple of like first of all concerns about impacts this could have on Target operationally. Right. So the first thing is that historically means historically over the last number of years, Target have mentioned inventory issues a lot in earnings calls, right. That they've had too much inventory of the wrong items, they've gotten hit by markdowns. It's driving some of their underlying underperformance.
I only see this exacerbating that issue, right? If you're, if you're changing and saying, hey, this is a big deal and we're going to go after it in eight weeks, but you choose the wrong thing, suddenly you've got a ton of like quote unquote trendy inventory that actually nobody wants, which is not probably going to solve Target's underlying issue.
And if they currently have forecasting issues at a seven month lead time, I don't see how that's suddenly going to get better in an eight week lead time. So that's my first kind of operational concern I would have from a, from like kind of a merchandising ops perspective. The other thing I would say is like, I don't think that this gets at Target's underlying problem of underperformance, right? So we know that they're constrained on basically price.
I mean, is the big issue that the stick that's being used to beat Target all the time having a trendy, I think, bow, that is one of the examples that they use. Having a trendy bow in time for holiday seasons is not going to change that. There's a little bit of maybe additional incremental sales you can gain, but I don't know if it's going to change it. The other thing is eight weeks I was trying to think through in the year, right, where eight weeks could actually be helpful for you on a trend.
And so if you see a holiday trend, it's probably going to come in maybe Mid October to early November, you're already past the holidays at eight weeks. If you see a back to school trend, which I thought was maybe the closest I could get, you might see it in June and you hit stores in September. But we all know in real life, in retail, back to school is done by September. Right. You're into Halloween. So I don't see how this actually helps them from that perspective.
And the final point I'd have is like eight weeks is still way behind the market leaders of like real quick turn. So Zara is two to. Two to four weeks. Right. And so that's kind of our benchmark. It's not the exact same model, but I still think it doesn't think it brings it quite there. So it's actually funny. Having started from a hold and then work my way through those three points, I'm probably on a not buying situation. I just don't see how it trends to their actual. Solves the problems.
And I think that the thing that Target's always been known for is kind of storytelling, building a brand that tells a story that you can rely on, that's consistent that you know what you're going to get. Yes, there's some kind of trend on trend moments that they've had, but it's not their usp. So I, I think it sounds great, but I don't know what it's driving at to solve for for them. Kudos to you, John, because I was gonna, I was gonna hammer you over the head with.
So you're a hold on this, huh? But no, you, you switched me, I. Think, with me on my feet, Chris. Yeah, right. You switch mid diatribe. All right, so. And the other part too, that you know, that we, you didn't mention was if depending on the, the degree to which you try to do this, it's going to have a sizable impact on your product margins as well. Like incredibly sizable. Yeah, Kelly, so I was going to bring you in on this now. So, so what's your take? Are you, are you equally skeptical?
Not as skeptical. More skeptical. What do you think here? I'd say I'm, I came in maybe less skeptical. And John has, has fully talked me into the, the selling as well margin was exactly where my mind went when I read this headline. One to eight weeks. Like John said, not as fast as your competitors in the apparel space are doing. If that's really who you're looking to play against. They, they talked about cherries and, you know, I'm, I'm seeing cherry pajamas for Valentine's day. So I get it.
I. I've seen the trends, but if you're really looking to do it that fast, I question how much of that development they're actually doing internally with their merchandising team versus going, you know, to the market, buying from a vendor, and you're going to lose margin on that. So if they're to figure that mix out effectively, they could run the risk of buying a lot of more expensive product that they're trying to push for trend.
And then to John's point, you know, if it's the wrong trend or you missed the sale, not only are you inventory bloated, but you also have less profitable inventory on hand. Right. And the other point that you bring up to Kelly is you're probably not doing this through your own brands, which has always been a pillar of Target strategy as well, if you're trying to chase this type of business. But. And at the end of the day, too, isn't. Is it what he's describing just good, good merchandising?
Like, you're always trying to capture the trends and get products in as quickly as you can, right? Yeah. I mean, I'm not a merchant, but I've spent the last 10 years with you, and we've interviewed plenty of merchants at this level. And that was the first thing that I saw when I heard this. I was like, isn't this just what you're supposed to do as a merchant, like, capture the trends and figure out what makes sense for Target to invest in? But Chris, I think. I think they're hitting.
There's a bigger issue here. Like, I don't think this is an issue for Target. Target. I mean, Kelly, I'm not going to go to you and John on this one because I don't think you're probably buying a lot of your clothes or fill in items at Target. But like, Kelly, do you feel like. I feel like Target's already hitting on the trends. Like, if you need something like that's been Target's cachet all along is that they have great products that that's on trend at a lower price.
Would you agree with that, Kelly? I would agree. Yeah. You know, go to any store, back to school, you're gonna find something, oh, cute. Do I need this? No. Does it kind of hit the mark? For the moment, yeah. Ah, interesting. Yes. Right. So I think, like, to me it's really. This really is like throwing tech at a problem or an investment at a problem that they don't need to solve. Right now, I'm giving a quick plug for our show. Fashion's missing middle.
Like we were going, we, we have Target in the plan because they are serving people at a price point where you can get affordable on trend. Fashion like this is not an issue. And if they miss one bow trend or they miss one cherry trend, like they still have plenty of other assortment that people are already going there for. I think they need to find a new problem to solve. Yeah. Okay, so I, I mean I agree with all of you and I think I'm going to be the most skeptical one here.
I mean I, I, I, I, I actually question how much investment is actually really even being put into solving this at the end of the day because I think it's, I think it's code for pure window dressing at a large industry conference when you have nothing else substantive to talk about. That's what I think. I mean, come on, you're, the things you're sell, you're selling on stage are buying into cherries and bows at the hot, you know, around the holiday season.
I mean, come on, like that's going to have no material impact on your business. It's just what Target always is trying to take credit in the media for something that you should already be doing. Anyway, to your point and your point and about, you know, why do you really go to Target and Kelly too, like it's the things you, you don't expect to find. It's not necessarily that you want to go find the thing that's going viral on TikTok.
It's the things that just surprise and delight you every single day. So I don't know, it's. Once again we've talked about the old adage and you and I talk about this quote all the time. Honesty is not synonymous with truth. From the Departed, my one of my all time favorite movies. It's not synonymous with truth. And, and that's, that's what they're doing here again. So I don't know. I, I'm glad we all feel the same way about this relatively.
All right, well, let's move on to headline number three. Burlington is taking aim at Ross stores and TJX with a smaller store format. According to the Wall Street Journal. Unlike Burlington, whose locations were historically the size of department stores, Ross and TJX brands have always operated smaller format stores.
Burlington's gradual downsizing accelerated under the leadership of their current Chief Executive, Michael O'Sullivan, who joined the company in 2019 after 16 years at Ross, where he ended his tenure as president and chief operating officer Burlington, which has 1103 stores today, plans to open about 100 net new locations and relocate a couple dozen annually through 2029. The company believes it will eventually grow to 2,000 total stores. O'Sullivan said. John, one more time right to you.
Does the American consumer need more smaller format Burlington stores? Yeah, I'll, I'll give my kind of quick pitch and I think Kelly will probably have a bigger perspective here as well. But my, my feeling is yes, I think Burlington is, is like they're, they have consecutive quarters of double digit growth. So like they are really moving forward in this trend of like off, off price fashion.
The other thing that I, that really drew me to this is, and it's a little bit linked to our conversation with Target previously is no, what do great retailers do consistently that bad retailers are like, don't do? And that is turn inventory. And Burlington turn inventory. And a smaller format for me will only accelerate how good they are at that already because they know what they need to do. They don't need to stuff stores with, with products that people don't need.
They don't need to buy inventory. And I think it's going to accelerate their turns. That's my first kind of thought when I looked at this. The other thing is that we see consumers enjoy smaller stores now. They prefer a smaller convenience store they get in and out of and you can still have a aspect to that without then needing a department store site. So, so for me I see like literally zero downside to this for Burlington. I think it's a smart play. I think it's going to financially make sense.
It also it's them listening to their customers. And so I would kind of be really interested to see the impact because I don't see a negative. Yeah, I agree with you, Kelly. Where do you land on this one? Are you thinking that the smaller store format is the way to go? I, I do think the smaller store format is a good way to go for them.
And in particular looking at the types of real estate that they're moving into, it's, it's not just smaller format but I think they mentioned, you know, former Big Lots, former Bed Bath and Beyond. So they're moving into these spaces where people are, you know, it's a likely the demographic they're looking for Bed Bath beyond, they have HomeGoods.
So people are looking for this broader assortment which has also been a big effort of theirs over the last few years to ditch the coats only merchandising, branding. And I was really surprised to find out Coats are only about 5% of their sales nowadays. Which, yeah, surprised me. I didn't know. But I, I do think smaller format, the locations they're choosing will be good for them. And I just agree.
I think that discovery and kind of treasure hunt aspect that they're looking to bring and emulate like the other off pricers can be really overwhelming in a big space. You know, there's stuff everywhere. You don't know, are you taking the store quadrant by quadrant. So that smaller format is just giving you a tighter space to actually find things to buy. So I'm excited to see where this goes. Right. And to, to John's point too.
I think it up allows you to update the inventory more frequently, giving people a reason to come back time and time again. Maybe more frequently than just going to buy the coats for, you know, winter time or back to school stuff or like those key moments where you might go in there. Now it's kind of getting more of that cachet that TJX and Ross have too. Chris, what about you? What do you think about this? Are you ro going small format? Well, I gotta tell you guys, with all respect, I. With all.
To all three of you, I 100% agree with you. I 100 agree with all of you. You're trying to. I think I was trying to trick you. Yes, I think, I think it's a great move. And the reason I would call it similar to what everyone was saying, but the one point I would make here would be the macroeconomic tailwind is at their back in terms of, of how people are shopping. People are showing a propensity to. We just had placer on our.
We just interviewed Placers Ethan Chernofsky yesterday for an upcoming webinar and he told us about how people are willing to make extra trips to stores where they can find products they can't find anywhere else. And that's what the treasure hunt's all about.
So, you know, I think similar to what we've seen in terms of success with Sprouts and Trader Joe's, getting that extra trip in the grocery space, O'Sullivan appears to have found a smaller footprint that he thinks works in that same vein to get that extra trip from people and is scaling the prototype. So like we talked about in the last headline, this is just good merchandising. And so, yeah, I mean, ultimately I think it's going to work. Yeah, I mean it's the.
If you look at some of the images of some of these prototype stores, they look better, they look more inviting. They're more organized. Like the whole shopping experience is so much better for this off price shopper, which I think is, you know, just to close with. Again, Kelly's point of people are going back to these spaces where they expected to see Bed, Bath and Beyond. And it's almost like they're rediscovering Burlington in these same environments.
Like, I didn't know Burlington had home goods. Like, and. But you're going in there with a similar visual shopping experience. And I imagine that the savings that they're getting from consolidating real estate will help them continue to expand that and roll that out to newer stores. Yeah, great point. And the other trend that's happening here is people are more. More and more people are shopping off price retailers. Right. That's another macroeconomic trend that's happening.
And so there's probably room for a new entrant in this space too, if not a new entrant, but a more substantial determination to go after that business, I think, you know, to be that third or even that second or first player over the long run. One final point on this, I think to give Burlington some more props is kind of. It's a really good example of them witnessing things happening in a macro retail environment that they can take advantage of. Right.
So we mentioned they're taking bed bath, big lot stores, so they see that there's real estate they wouldn't have normally gotten access to. And then they've thought, well, actually we already. We also think we can be a consumer centric, make a consumer centric decision that takes advantage of that opportunity. So it actually kind of satisfies two needs at the same time. It's really, really clever play, I think overall from them then.
Yeah, 100. Yeah. And for all those retail executives out there, the one thing I've Learned in my 25 years of covering retail now is I'd rather work for a company that's pushing, going with water downhill than trying to push water uphill. Right. You know, and the company is pushing water uphill, like Macy's, et cetera. It's a tough game. All right, Headline number four. Sephora plans to redesign its entire North American store fleet according to retail dive.
Sephora is in the middle of the largest capital project in its history wherein it is redesigning every store in its North American fleet. Artemis Patrick, president and CEO of North America, told an audience at the National Retail Federation's Big show conference on Monday of this past week. Some stores will, quote, get major redesigns and some will get minor. Patrick said of the project, which launched last fall. The beauty retailer has over 700 stores in North America.
Sephora has brought changes like modular fixturing and new checkout pathing to 111 of those stores over the past few months. And as a result, key performance indicators like transactions, productivity and sales are all up when compared to the control group. Kelly, what do you find most intriguing about Sephora's plan to renovate its stores as part of what retail dive calls its quote, largest capital project in its history. Yeah, lots of big headlines dropping at NRF big show last week.
You know, I think the thing that was most interesting to me about this, you mentioned it, Chris and Artemis Patrick talks a little bit more about it in, in the the article, but she cited one of the leading factors of the redesign in effectively making a more affordable fixture structure for their brand partners. That was kind of one of the the leading things. She said. We're not a cheap date to sell in Sephora.
We don't want our partners building these expensive fixtures that, you know, the deal doesn't work out and, and they don't see the, the full benefit. So this was super interesting to me for two different reasons. The first is the tone and tenor of it is very different from what we see from Sephora typically.
So internationally they 2023, 2024 were years spent doing huge reinvestment on their flagships, taking historical buildings, renovating it as a very kind of luxury experience and leading with this cost play just sounds and feels a little bit different from what we see in the international markets. And then additionally it to me kind of suggests a bit of a shifting power dynamic between Sephora and its brand partners.
Having spent a lot of time more on the manufacturing side of the beauty business, you know, you'll do what you gotta do to, to get placement in Sephora and typically there's, you know, they have the upper hand in those negotiations. It's more expensive, but you need to be there and they have the market share.
So to hear them really being proactive about how to make the experience more affordable for their brand partners just kind of signals to me that they're thinking ahead about where the retail market might be going in the US And Ulta hasn't seen, you know, a great couple quarters in the last few quarters. But you know, are there other tides that they're concerned about whether it's E Comm where they're trying to shift some more attention to their brand partners?
So I thought that was really interesting and there are a lot of other great things that they're doing, which just seemed like smart retailing to me from store of the future, really making a metrics based approach to the redesign. So I think there's more to it than just this kind of brand cosplay. But that was what really stood out to me. Yeah, that's really interesting. I never thought about that.
You know, is it, is this kind of an attempt to, you know, keep the cachet, make it easier for the brands to come into the stores and elevate the experience and play up on the brands that you really want expect to get from Sephora. And what do you think? I mean, I love Kelly's points. I hadn't thought about those. For me, this was a strictly operational Play. Like number one, there is 100% benefit to making your fixtures flexible.
Especially in a space like Sephora where they're getting people to come in there, they want to make sure that people, they can do events in there. When there's a new beauty brand launch, they're bringing in a new brand. Like the flexibility of this fixturing that Artemis was talking about I think is going to be critical to them being able to convert that store to work as hard as possible as needed on weekends, you know, for big launch events.
I think that's, that's where the real trouble is right now. But for me, the best thing about this whole thing, I love Sephora. I love the associate help there. I hate the line. Sometimes I've had to even leave because you have this younger demographic that's coming in. They're each paying their, you know, their s a crew of six people and they're each paying individually. Like it's taking too long.
And so for me, I think the key item in this article is that only 25% of transactions are happening on mobile devices with the associates right now. And I think if you start to enable every associate, every transaction, if I just want to get out and get that thing that you helped me find, I think we're going to start to see significant increases in, in transactions and basket sizes once they enable that, you know, for all the associates.
And you can kind of skip that snake if you're just kind of snake line if you're just trying to come in and get something quickly. So I, I think smart operational decisions here for Sephora that are going to continue to pay dividends in the long run. Yeah, that was what the article highlighted. For me that was most interesting too was how they're thinking about checkout and it was very light on the details in there.
But I think you're hitting on points that, you know, especially when you talk modular fixturing, you could, you could apply modular, modular setup designs to your checkout process too. So you can scale it up, scale it down across the seasons. You know, lots of different ways you could do this. Mobile enabled. John, what do you think though? Any final words here?
Yeah, I mean, my first thought is I think this is a great example of the kind of benefits of CRG because Kelly had a totally different perspective than I have. She's got obviously way more detail and understanding and the points that she made around the dynamic between Sephora and the brands is something I never thought about.
But actually I think now looking through the information with that lens, it kind of makes a bit more, more sense to me because honestly, when I was looking at it, I, I think what I wrote down when I was writing my notes is that I felt like it was kind of a nothing burger. I was like, yeah, okay, we're, we're updating our store fleet and it's our biggest ever capital investment.
But I can tell you if I did my capital investment now versus 10 years ago, it's always going to be my biggest ever capital investment. Right. It's way more expensive. So I felt a little bit like it was an announcement for NRF that they put some buzzy language around.
And, and the other point was I know that Kelly mentioned they're using a metrics based approach, which is great, but I don't know if anybody here has ever redesigned a store where the sales didn't go up because you've got all this extra attention, you've got all the extra staffing. Once you pull that out, your sales normally revert to the mean. Right. So it's.
So for me it felt a little bit like we're doing all this work and we're going to change trajectory, but once you went below the details, I didn't quite get it. However, I think the checkout points also stood out to me because I think if you can make that easier to get out of the store. Obviously I'm not like a high Sephora shopper, but my wife is. And so like she has talked before about how difficult it is to get in and out of the store and I think that would be a big thing.
But, but more operationally, I'm actually more excited by what Kelly says about the connection with the brands because having done some work in the drug space, getting the fixtures changed over by your brand partners is a massive lift for everybody. And if you can make that Smoother. That also then feeds into the, the idea of being more on trend and more relevant if you can make that happen quicker.
So I can actually see a much bigger benefit from that now than, than I kind of originally thought. Absolutely. Yeah. Those are great points, John. You know, it's, it's funny to me too when I think about the psychological dynamics of doing this show too is like when I first read the headline I was like, yeah, I feel like John does.
But then you go and you think about who's the leadership team, you know, what pedigree do they have behind them, what performance has the company exhibited in the past? And it gives us a little more license to accept what Sephora is telling us and be a little more optimistic about it as well. So it's interesting as, as we review these headlines each and every week.
Well, let's stay on fashion, beauty and luxury and talk about headline number five, which is Walmart selling Chanel, Fendi and Prada. And yes, you heard that right. According to Yahoo Finance, Walmart is making a big push into the luxury market and has tapped resale platform Rebag to attract wealthier shoppers.
Starting January 16, the retail giant will offer over 27,000 pre owned high end items on its online marketplace, including coveted pieces from brands like Chanel, Fendi, Prada and Louis Vuitton. The move follows the viral success of the work in a dupe made working ad Hermes Birkin bag and marks a significant step in Walmart's resale business.
Rebag's catalog will include luxury handbags, watches, jewelry and accessories ranging from smaller items to iconic pieces like the Birkin bag which can cost tens of thousands of dollars. Additionally, there will be a hundred items sold exclusively to Walmart customers, the company confirmed to Quartz in an email. Kelly, on a scale of 1 to 10, how much do you like Walmart's partnership with Rebag?
And do you think customers will actually come to Walmart's website to purchase items from the likes of Chanel? I'm really excited to hear what you guys score this as well. I spent a long time on this. I started in the middle and then I started to shift up. So I'm gonna give this an eight. Okay, nice. I'm gonna give it an eight. I like it for a couple reasons. I like it the most for Rebag, but I'll, I'll talk about why I like it for each partner.
So you know, Walmart over the last couple years has been really trying to grow their marketplace and increase their SKU count. So from that Regard I think this is a really smart move because they're immediately getting access to a ton more SKUs. Whether or not someone's actually going to go think to buy a Chanel bag at Walmart.
If I'm Google searching for a Chanel bag now, Walmart is getting visibility clicks from shoppers who would probably never go there for Chanel and maybe never go there ever. So I think it is is an interesting way for them to get access one to more SKUs and to potentially new consumers where they've already been starting to attract more of this, you know, higher household income type of consumer.
Love this for rebag because the luxury secondhand market has been growing a lot and I, I've actually been familiar with the company for a couple years through social media advertising which is a really expensive way to acquire customers and they're still not the biggest name in this market. So they've been starting to dabble in partnerships.
They're also partnered with Bloomingdale's which I think is honestly not as good of a partnership as the Walmart one because you have people who would be going to Bloomingdale's to buy these bags full price and right, you know, they have an option to buy secondhand. But I think this is a quirky but really interesting pair for them to also just get a lot of visibility to their brand and also reach a younger luxury consumer who will only buy secondhand.
A lot of the growth of this market has been driven by millennials, Gen Z who you know, through social media have a lot of visibility to these brands that they've never been able to participate in and now they're looking for ways to do that affordably. So I think I also just love Walmart like using the virality of the work in to now launch this totally new luxury platform I think is genius. So great point. I wonder how intentional that was. So it was seated. Yeah, yeah, it could have been.
Yeah, it could have been, could have been because I. You can now no longer find a work in bag. Oh no site that. That came right down. Hermes has pretty good track record at at lawsuits with anti copyright infringement. So yeah, I'm excited to see where this goes. Would, would love to hear your thoughts too.
Yeah, I mean Kelly, I think you bring up such a good point and we've said this the last couple weeks, like this is a search game now and I think from people finding things on social media, I'm bringing in Google Lens again because that's what I do all the time. When I see a bag that I like. And now, you know, Walmart's going to be the first one that shows up when I find that bag, whether it's through search, through typing in Fendi handbag.
Like this is now a consideration that many people would not have made before. And I think Walmart's biggest issue right now, which again, Kelly, I think you bring in the validity and authenticity that Rebag brings to this partnership because I think that's the biggest challenge that Walmart will have here is that yes, I see a fendi bag on Walmart.com 1.
This is weird because I didn't expect that it would be there, but now I have Rebag's name attached to it so that I know that actually this is going to be an authenticated bag. This is the same thing. It's just at a place where maybe I'd never considered, you know, shopping for this type of thing before. So, John, I'm going to bring you in here too. What are your thoughts on this? Are you gonna buy your wife a chanel bag on Walmart.com? Well, hold on. And what, what's your grade first?
I want to know. One to ten. Where are you? Are you eight? Kelly was eight. What are you. Oh, I'm, I'm a ten on this. I think it's brilliant. Yeah, yeah, I think it's total, total brilliant move, John, where, what are you grading? And are you going to buy your wife a bag? So I want to know this. And she might, if she's lucky, she'll get a handbag at some point. I guess I don't have a great track record. This does, this does make it easier for me to up my game there.
Yeah, I mean, I would agree and say, yeah, I think it's a 10 for me as well. I mean, I, honestly, from, I, I think Kelly's perspective, kind of looking at, from everybody's view is a really good way, I think. And I don't see a downside for anybody. I was a little bit more focused on my first view on the kind of Walmart piece of this and I, I literally don't see a downside to this for Walmart.
I mean, I mean, people can say it's quirky, but they have, I think like 150,000 sellers on their marketplace. They sell a ton. They compete directly with Amazon on this. So why not get into this space? So that's my first piece. The other thing is, and Kelly touched on it, I mean this, the resale market is massively driven by Gen Z, even particularly more so than millennials. Gen Z, I think I looked it up.
43% have said they bought a secondhand item in the last 12 months and 83% say they are interested in buying a secondhand item. So like the, the penetration of interest in this space is huge. And the final piece I'd have is it again goes on to this topic of Walmart doubling down on growth strategies. And for me it's a growth strategy in two directions.
So one is trying to capture even more of that 100k plus household that we already know is shopping more with Walmart and has been over the last 12 to 18 months. So that's the first point. The second point is now entering and attracting more attention from those, the aforementioned, like Gen Z's, right? Which is not a space where Walmart traditionally attracts a lot of customers. And you really kind of people age into Walmart I guess is the way to put it.
So if they can attract those earlier, obviously you get more sales over the life cycle of that person. And I think it's, it's just very like it, it's low risk, it's high rewards and also it generates some clicks at this moment, right? It's like, oh, Walmart are selling Fendi. What? Like it's very easy marketing play at this moment for kind of not a lot of downside. And it's just, for me it's just so interesting to see all the different ways that Walmart are innovating.
Like they're doing it in like super like basic ways in grocery with private label. They're doing it in automation, they're doing it in high end luxury. I don't think anybody is touching as many pieces as they are at this moment, which is interesting. I love that point, John. And I think you hit on too the importance here of they're not just doing this partnership with Rebag. It's not just a design partnership and poof, it's gone.
It's all of the things that they're doing around it, working it to be present at New York Fashion Week. Like they're really working to establish this audience and build this audience, you know, 365 days a year. But Chris, I'll let you close it out, give us your grade and then explain why. Yeah, or the Walmart rebrand overall that they just announced a couple of weeks ago too. Right.
And you know, I think the other point I make too John, like, like before I get my grade is like I think it potentially democratizes resale too because it potentially actually makes it available to all those older generations in a way that they were not able to, you know, view it or take part in it before too. But I'm, I'm, I'm Spinal Tap on this one. I'm dialed up to 11 on this.
I mean, I think, and the reason I say that is because I did something yesterday that I never in my life thought I would be able to do. I'm, I'm, I'm serious when I say that. Like, I typed Fendi into the search bar and I got 25 pages of results. That's insane. I never would have expected to do that. And the, the only, and the, here's the cool thing about this.
To me putting my merchandising hat on, the only Walmart customers that will have this experience are those that are searching for it, those that want it. It's the perfect example of extending your reach digitally without alienating your customer base or your business model because you don't have to dedicate your space in the store to slow turning high priced items that could be too unaffordable for those people that can't afford them. But this gives you that customer base.
So I think it's just a masterclass on digital retailing. And try, I mean, here's the other thing. And because I took a page from you on this one, try searching for Fendi at Target and let me know what you find. My hunch is it's going to rhyme with a big fat donut. That's what's there. There's nothing there. And so Walmart's killing it on every angle. And to John, to your point, the scale at which they're doing this too is just so impressive.
Yeah, it's coming from every department out of that retailer right now. All right, you guys, let's, let's close it up and go to the lightning round. Kelly, you get question number one. Walmart not only is dominating all of our retail headlines today, but they're also requiring employees to return to the office in Bentonville this month.
And to welcome them back, they just opened a brand new designed campus which features a fitness center, a store layout center, an amphitheater, a daycare for up to 500 children, among many other things. I want to know, Kelly, what would you want included if A and M was designing a new headquarters for you? Great question. I would certainly take all those things that, that Walmart's setting up for their employees, the two that you didn't mention. Which out. Adam. Sucker for a luxury fancy coffee.
So if there's free Lattes, you know, you'll keep me in the building for, you know, an extra hour on both ends of the day and then I'm gonna go. Doggy daycare. Yes. Those of us who are not in the, the child population, doggy daycare would go a long way. They might even have those things. I think they ran out of space in the article. Who knows? Who knows? Yeah. They probably do, knowing them. Yeah. All right. All right, John, this next one I picked out just for you.
A Waymo Taxi recently got stuck in a never ending roundabout near the Phoenix Airport, a la European vacation, as our resident European on this show. And for those interested, my first roundabout experience was in Ireland. What recommendations do you have for us Yankees here in terms of navigating a roundabout effectively? First of all, before I ask the question, did you watch the video of the guy in the Waymo Taxi? It's crazy.
And he's like on the call with the customer service being like, how do I stop this car? It's like running a circle. So it's like you should look it up. He also works in AI, which is kind of funny. So just as. Oh, that's hilarious. Really? Oh, my God. Yeah. Yeah. So he was like, I've never taken one of these again. So my recommendation for, for roundabouts, which I mentioned to you guys already, is a little bit of a passion of mine. I treat it like a four way stop sign, Right.
So when you come to the roundabout, you stop, you see where other people are coming from. And then if there's nobody coming, you go. If you're turning right, you indicate right. If you're going to the other side of the roundabout, you're indicating left. It's a four way stop sign with a circle in the middle. That's all you need to think about. Don't over complicate it. Yeah. Yet Americans can't figure it out. Yeah, I know. We're still, we're still working on it.
John, you get question number three as well. According to a Wallet Hub study, Florida was just named the best state in the United States to start a business in in 2025. If you were to start a business in Florida this year, what kind of business would it be? Yeah, I was kind of torn on this one, to be honest. I had two different ideas. So I'm going to put them both out there. Okay, we'll take them. One is like an alligator based, like boutique.
So they sell like alligator skin handbags and all that kind of stuff. Right. Which is kind of like sustainable local. But the Other one, the more I thought about is, like, what's synonymous with Florida, and it's like, old people. I mean, to be kind of blunt. So what you really want is kind of a, like a theme park for older people. So kind of like Disneyland, but for older people. So, like, gentle roller coasters, you know, like a track where they can go around on their. On their golf simulator.
Yeah, exactly. Or a golf simulator. But it's like, I think that's what they're missing in Florida, and I think you'd make a lot of. Like, amusement park rides that are like a massage chair. Yeah. Gentle rollers for people's hearts, you know, that's what you're looking. Yes. Oh, my God. Oh, my God. And the alligator store. I could definitely sink my teeth into that. All right, Kelly. Last one.
Liquid Death's pit Diaper, priced at 75, is reportedly flying off shelves following a viral bathroom incident at a recent San Francisco concert at $75. And as an esteemed retail consultant, do you think the pit diaper is underpriced? Overpriced, or properly priced? You know, I was sad to Google pit diaper. That was a wild visual to start my day. But it is worth do, though. It is worth the dude. Yeah. Doing it. Proceed with caution. I would say appropriately price.
If it's flying off the shelf, you know, keep going with it, guys. You know, a diaper, I had to look this up to see, you know, what is just a regular diaper cost nowadays. It's. It's probably double the cost of a adult diaper. 30 pack. So it's definitely expensive, but, you know, it's got the chains, it's got the pleather, and people will spend a lot of money for that kind of rave gear. That's not my. My personal shopping space. But I think as long as they can ride this high, keep doing it. 75.
I think it's right price. No reason to raise the price. Get any more margin. And I could see you wearing one of these because you're a frequent concert goer. What do you think? Could you could, like, can we see you wearing one of these at a future. No. I am too old. I This. I am too old for this. I'm not in the pit anymore. I am. I am. I am paying the extra money for the VIP tickets with their own bathroom. Chris. I am. I'm so beyond pit diapers. Maybe back in my 20s, but.
And the pit diaper appears to be, like, worn as pants as well. You know, it's kind of under your clothes. It is. No. So it's for the bold of heart, for sure. I'm going to be. I'm going to be going away from the people wearing pit diapers. Let me just tell you that it's not going to smell great. I have a feeling you're too old for the pit. All right, on that note, happy birthday today to Linda Blair, Gabriel Mock, and to a woman with timeless beauty, the always captivating Diane Lane.
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And we have over 100,000 subscribers to our YouTube channel now. Yes. Thank you everyone. Thank you to everyone for that. And if you still haven't joined the party to watch our weekly fast five through the best medium out there, go to YouTube.com omnitalk retail. Kelly, if people want to get in touch with you or anyone at the A and M Consumer and Retail group, what's the best way for them to do that?
If you guys want to get a hold of us, please find us at our website at Alvarez and marcel-crg.com you can also find us on LinkedIn, Alvarez and Marcel, Consumer and Retail Group, or feel free to reach out to John and myself directly on LinkedIn. Thank you both for being on our show this week. It was a great show, very informative, very insightful. Always a pleasure having you both on.
And so until next week, on behalf of John, Kelly, Ann and myself and everyone at the A and M Consumer and Retail Group and all of us here at Omni Talk Retail, as always, be careful out there.